At a critical juncture in the biotechnology landscape, a company known as Pige Biotech has once again initiated a public offering, sparking interest among investors and market watchers alike.

This latest prospectus unveils the company's core focus on the research and development of innovative pharmaceuticals, yet notably, it has yet to bring any products to commercializationThe destination for its anticipated IPO is the Hong Kong Stock Exchange, supported by investment entities such as Lenovo Star, YuanSheng Venture, and Junlian Capital.

During the peak of the innovative drug boom, Pige Biotech had previously filed for a listing on the Sci-Tech Innovation Board in ChinaHowever, regulatory scrutiny, particularly surrounding its fluctuating valuations, led to the termination of that attemptDespite a shift towards pursuing a domestic listing, market conditions ultimately steered the company towards seeking a listing in Hong Kong, illustrating the myriad complexities and historical nuances of the biotechnology sector.

The winds of change are often subtle yet powerful.

Pige Biotech's current IPO saga began on the Sci-Tech Innovation Board, coinciding with the waning phase of the innovative drug craze.

In 2021, the company submitted its IPO application targeting the Sci-Tech Board but underwent two rounds of inquiries, only to find its listing status ultimately terminated the following year, marking a premature end to this initial public offering venture.

Regulatory feedback at that time indicated concerns that the core product remained non-commercialized was only one component, but its abnormal valuation raised flags with the regulators.

Diving deeper into the company's origins, Xu Min, a graduate of Xiangya Medical College, initially honed his skills in a hospital setting before attaining further education in the United States, earning a position at Columbia University before returning to China in 2008 to establish Pige Biotech, with a laser focus on innovative drug research for metabolic disorders.

From 2015 to 2018, the company surged through multiple rounds of financing, eventually hitting Series E funding, boasting a post-investment valuation leap from $117 million to $432 million, significantly buoyed by investment from Tian Shi Li

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However, by 2019, their valuation experienced a downturn, settling at approximately $31 million.

In response to this downturn, regulators demanded an explanation regarding the correlation, or lack thereof, between funding valuation fluctuations and the company's research advancementsPige Biotech cited progress in its primary project, PB-119, which was in phase II clinical trials aimed at type 2 diabetes treatment; details on the subsequent valuation decline, however, were scant.

Interestingly, while Tian Shi Li was investing, the two parties entered into a Product Commercialization Agreement, which stipulated that upon advancements in their primary products, the company was obliged to notify Tian Shi Li of their desire to confirm exclusive commercialization rights under equal terms.

In its inquiries, the regulatory body raised questions about this arrangement, to which the company responded that it was a standard business transaction, not fraught with hidden dealingsHowever, before pursuing a listing in Hong Kong, Pige Biotech terminated this agreement, citing shifting strategic priorities within Tian Shi Li.

2023 saw Pige Biotech contemplating a return to the IPO sceneCICC released three guidance reports regarding the company's IPO, noting three key issues: the need to solidify business development strategies, advance financial reviews, and conduct specialized shareholder audits.

Surrounded by monumental shifts in the landscape.

Pige Biotech's aspirations for public listing appear increasingly tangled within a shifting business climate.

One of the most significant changes is within the capital markets

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Even with a lack of profitability, the company faces tightening listing requirements for firms in its positionThe once easy flow of capital has turned into a narrow channel.

Furthermore, the bubble surrounding innovative drug valuations has burstBy 2023, the company’s latest round of financing yielded a post-money valuation of approximately $5.6 millionWhen they initially aimed for the Sci-Tech Board, the company sought to raise approximately $3.57 million and targeted a valuation exceeding $15 billion.

Crisis in cash flow compounds this transformationBy August 2024, the cumulative loss stood at a staggering $1.53 million, with cash and cash equivalents scraping just $37,000. In 2023, the negative cash flow from operating activities reached $317,000. Without swift and effective financial interventions, the company may find itself unable to meet its basic operational expenses.

Notably, Pige Biotech's prospectus boasts the statement "sufficient operational funding to support current business over the next 12 months," an assurance driven by the company's assets, valued at approximately $2.67 million as of August 2024.

This implies that the company relies on liquidating its assets for operational sustainabilityThe marketplace has observed the extensive ties between Pige Biotech and Tigermed, a major player in the industry.

In 2019, Tigermed participated in Pige Biotech's financing via its subsidiary platformThe following year, Tigermed emerged as the primary supplier for Pige Biotech, accounting for an astonishing 42% of procurement

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Further, Tigermed injected additional capital into the company, amounting to $7.3 million, subsequently paving the way for its Sci-Tech Board ambitions.

As of the first three quarters of 2024, Tigermed reported revenues of approximately $705 million, with a net profit of $131 million, marking respective declines of 10.32% and 56.72% year-on-yearDespite this contraction, the company continues its expansion by acquiring a 40.565% stake in Guanhe Pharmaceuticals.

Another stakeholder capturing attention is Tian Shi Li, which also anticipates significant changes in 2024. Notably, China Resources Sanjiu confirmed plans to acquire stakes in this entity, leading Tian Shi Li's governance to shift from the Yan Xijun family to a new control structureThe potential implications for Pige Biotech’s ownership under new shareholders warrants close observation.

Did they miss the opportunity to capitalize?

Had Pige Biotech pursued a Hong Kong listing earlier, their financial destiny may have unfolded quite differently.

The prospectus outlines that the company’s flagship product, PB-11, is a long-acting GLP-1 receptor agonist primarily indicated for the frontline treatment of T2DM (Type 2 Diabetes Mellitus) and obesityCommonly referred to as a weight-loss drug, its implications are significant in the current market.

In 2023, semaglutide, developed by Novo Nordisk, surged in popularity, triggering a frenzy around the "weight-loss drug" narrative

During this period, global revenues from the drug exceeded $20 billion, while China raked in approximately $6.12 billion.

Simultaneously, Pige Biotech had also submitted its application for PB-119. Additionally, the company is advancing several other candidates in clinical stages, including PB-718, PB-1902, and PB-722, aimed at managing obesity, reducing liver fat, treating constipation, and addressing congenital hyperinsulinemia, respectively.

Had Pige Biotech aimed for a listing on the Hong Kong exchange now, they might have cruised along the wave of interest in weight-loss drugsYet, the reality is that time marches on, and the company has yet to achieve product approval and commercialization while the enthusiasm for related concepts has rapidly declined.

As of today, there has been no homegrown GLP-1 formulation approved in ChinaIn contrast, imported alternatives have gained traction, with the oral semaglutide making its debut in January 2024, alongside Eli Lilly's tirzepatide also launchingDue to overlapping indications, competition is intensifying, particularly as trial results indicate that tirzepatide outperforms semaglutide in weight management.

While imported products flourish, domestically, Pige Biotech is still in the R&D phaseBy the first eight months of 2024, the company had incurred a loss of approximately $287,000 with R&D expenses tallying about $107,000.

Even as a handful of enterprises successfully navigate their path to capital, market reactivity remains notably tepidFor instance, Jiuyuan Gene, closely linked with Huadong Medicine in the development of GLP-1 formulations, is set to list on the Hong Kong Stock Exchange in November 2024, attracting major investments from Alibaba and Fosun

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