In recent years, the synthetic biology circuit has exploded, and industry insiders are predicting the future of synthetic biology or the direct economic benefits of trillions of dollars per year to the world. However, due to factors such as “technical implementation difficulties” and “poor monetization,” the second-tier market performance of the global synthetic biology circuit fell far short of initial expectations: on May 13 this year, US synthetic biology company Ginkgo Bioworks received a delisting warning from the NYSE; the stock price of A-share synthetic biology leader Kaisai Biotech has dropped by more than 60% since its high in 2021.

In this context, the Hong Kong stock “first synthetic biology stock” Huahao Zhongtian Pharmaceutical-B (02563) had a different performance in its listing debut.

The Zhitong Finance App observed that Huahao Zhongtian Pharmaceutical was listed on the Hong Kong stock market for the first time. On the market, the stock rallied strongly upon opening. At one point, the intraday stock price reached a high of HK$25.95, an increase of 48%, up 62.19% from the issue price of HK$16. By the close, Huahao Zhongtian Pharmaceutical had an increase of 30% to HK$20.8, with a turnover of HK$69.5388 million, and a total market capitalization of HK$7.583 billion.

In the dark market transaction on October 30, Huahao Zhongtian Pharmaceutical closed at a price of HK$20.90, up 30.62% from the offering price of HK$16. Each lot earned HK$980 per lot without handling fees.

Another routine call back

Huahao's strong trend on the first day of its launch was not unrelated to its routine back-and-forth gameplay.

As we all know, new Hong Kong stock offerings are generally divided into international placements and public offerings. Among them, international placements are mainly aimed at institutional investors, while public offerings are for individual investors (retail investors), and public offerings are divided into Group A and Group B. Generally, international placements account for 90% of the number of shares offered, and public offerings account for 10%. However, if the public sale becomes too hot, causing the oversubscription rate to be too high, it will trigger a refund mechanism to “transfer” some of the internationally placed shares to the public sale. Put simply, institutional investors relinquish part of their chips to retail investors.

Specifically, there is a relatively fixed relationship between the rebate ratio and oversubscription: if the public sale subscription is 15 times at least 50 times, the public sale ratio will increase from 10% to 30%, 50 times at least 100 times to 40%, and if the subscription is 100 times or more, it will be refunded to 50%; however, if the placement is not full and the public sale is full and the public sale subscription is less than 15 times, the public sale ratio can be increased from 10% to a maximum of 20%, but a limit price is required.

However, the above is only normal. If the international placement itself is insufficient, then the sponsor has the right to make a refund without following the corresponding rules. For example, the oversubscription ratio is 50 times, but when the international placement itself is insufficient, the sponsor can “armotically” reduce the rebate ratio to 20%. However, the cost is that it is necessary to limit the price according to the price range.

Lowering the rebate ratio indicates that the company does not want to send out too many chips. At the same time, lowering the price limit will help increase the stock price after listing. If the two are combined, it is likely that the stock price will rise after listing.

Back to Huahao Zhongtian Pharmaceutical, according to the previous allotment results, the company sold 14.588 million shares globally, accounting for 12% of the public offering and 88% of the international offering; the four cornerstone investors, including Novotech SG, Baiyang Health, SilkyWater Absolute Return and Fortune Holdings, subscribed for a total of about 23 million US dollars (about HK$0.177 billion) of shares, accounting for about 64.13% of the shares offered. In terms of subscription capital, Huahao Zhongtian Pharmaceutical's current global sale raised about HK$0.196 billion.

Judging from the placement results, the company's Hong Kong public offering was subscribed 21.45 times, and the final number of shares on sale was 1.7506 million shares, accounting for about 12% of the total number of shares offered (after the right to adjust the size of the offering and reallocation); the international offering received 0.97 times the subscription and the final number of shares offered for public sale was 12.8374 million shares, accounting for about 88% of the total number of shares offered (after the right to adjust the size of the offer and reallocation).

As mentioned above, under normal circumstances, Huahao Zhongtian Pharmaceutical's public sale subscription was subscribed 21.45 times, and the public sale ratio will increase to 30%. However, due to insufficient state allocations, the sponsor has the right to make a refund in accordance with the corresponding rules. As a result, the company started a sell-saving game, giving only 12% of the goods.

In addition, the difference between the upper and lower offering price of Huahao Zhongtian Pharmaceutical reached 37%, and in the end, the price limit was below. This sell-sparing gameplay plus a lower price limit means that an upward trend in stock prices after listing is a probable event, and this is certainly true now.

How long will the outstanding performance last after the “routine”?

However, Huahao Zhongtian Pharmaceutical's stock price increase did not stabilize above 30%. There was even a wave of stock price dives and narrowing to less than 25% at the end of the session. In addition, Huahao Zhongtian Pharmaceutical closed in a long shadow on the same day, causing the market to start worrying about the next day's rise.

And from that dayChip distributionAs you can see, the average cost is HK$22.1. The above is the chip concentration peak. The chip density peak blocks the stock price from continuing to rise. There were profit chips on the same day, but the ratio was only 28.17%. Secured chips accounted for a relatively high share. As the increase narrowed after noon trading, high-ranking chips were difficult to digest, putting some pressure on the company's subsequent rise in stock prices.

According to the Zhitong Finance App, the top five sellers of Huahao Zhongtian Pharmaceutical today were Futu Securities, Baosheng, Haiying, Fuchang, and China Merchants, which sold 0.042 million shares, 0.0374 million shares, 0.0294 million shares, 0.0252 million shares, and 0.0186 million shares, respectively. From the buyer's perspective, Huasheng was the largest buyer, buying 0.0668 million shares; BOCI was the second largest buyer, buying 0.045 million shares. Among them, Futu is the underwriter of Huahao Zhongtian Pharmaceutical's IPO, and Haiying Securities is its account manager and underwriter.

Judging from fundamental data, as an 18A company, Huahao Zhongtian has not achieved profit so far. The company's revenue in 2022 and 2023 was 32.82 million yuan and 66.64 million yuan (unit is RMB, same below), and losses during the period were 0.161 billion yuan and 0.19 billion yuan, respectively. In the first five months of 2024, the company's revenue was 28.56 million yuan, up 5.58% from the same period last year, and operating loss was 57.43 million yuan, down 31.14% from the same period last year.

The core products have been on the market for many years but have not been able to escape losses, which is not unrelated to medical insurance price negotiations. According to information, when the company's core product, Utedron injection, was approved for marketing by the State Drug Administration in 2021, the average sales price was 2388.71 yuan/bottle. It was included in the national medical insurance drug catalogue in 2022. The negotiated price officially came into effect on March 1, 2023, and the price of this product dropped by more than 60%.

However, thanks to the amount of medical insurance, the company's product sales have increased accordingly in recent years. According to the prospectus, in 2021-2023 and January-May 2024, the sales volume of eutidron injections was 29,750 bottles, 18,483 bottles, 90021 bottles, and 38,577 bottles, respectively.

Judging from the product structure and R&D pipeline, Huahao Zhongtian's current layout mainly revolves around Utidron injections. Among Huahao Zhongtian's core products and 19 candidate products, 16 are all based on the single active pharmaceutical ingredient Utidron, and there are 3 formulations in the company's product portfolio. Other candidate products such as BG22, BG18, and BG44 are currently in the early pre-clinical development stage.

Simply put, the weak profit performance and the development market only relies on a single core product, leaving Huahao Zhongtian Pharmaceutical with a certain degree of uncertainty about its future performance. Coupled with the poor performance of the global synthetic biology circuit in the secondary market, if Huahao Zhongtian Pharmaceutical wants to prove itself in Hong Kong stocks, it needs to continuously optimize its fundamentals and further enhance its own hematopoietic capacity while strengthening innovation.