Highlights of the Interim Results as of June 30, 2023:

  • Revenue reached RMB1,142.2 million, representing a year-on-year increase of approximately 3.0%
  • Gross profit amounted to RMB406.0 million, representing a year-on-year increase of approximately 17.7%
  • Adjusted Non-IFRS net profit amounted to RMB146.1 million, representing a year-on-year increase of approximately 64.2%

HONG KONG, Aug. 29, 2023 /PRNewswire/ — On August 29, 2023, Viva Biotech Holdings Group (“Viva Biotech”, “the Group” or “the Company”, stock code: 1873.HK) announced that during the period ended June 30, 2023 (the “Reporting Period”), the revenue of the Group during the Reporting Period increased by approximately 3.0% from RMB1,108.7 million for the corresponding period of last year to RMB1,142.2 million; and the gross profit increased by approximately 17.7% from RMB345.0 million for the corresponding period of last year to RMB406.0 million. The Company’s adjusted non-IFRS net profit increased by approximately 64.2% from RMB89.0 million for the corresponding period of last year to RMB146.1 million. This was mainly attributable to the investment income from successful exit of portfolio companies as well as the positive contribution from the changes in CDMO product structures.

In addition, during the Reporting Period, the Group successfully entered into SPA agreements with strategic investors Temasek and HighLight Capital for raising a total of nearly US$210 million, and the financing planned to be completed in the second half of 2023. While providing the Company a solution to repayment of convertible bonds, the introduction of strategic investors will contribute to our corporate governance, business operations and investment and financing plans, and generate strong synergy in terms of strategic development in the long run. This will strongly support the company’s long-term development and the implementation and continuous advancement of its integrated strategy.

CRO Business Continued to Grow with an Attractive Outlook

During the first half of 2023, the Company’s revenue from CRO business increased by approximately 8.7% from RMB406.0 million for the corresponding period of last year to RMB441.3 million. The slower revenue growth in the first half of 2023 compared to previous years was mainly attributable to the impact of global biopharmaceutical investment and financing slowdown on innovative drug R&D investment, as well as a strategic adjustment of our EFS business. Overall, despite the challenging external conditions, the Company has managed to maintain a trend of steady growth.

The Company’s order backlog amounted to approximately RMB973.0 million, representing a decrease from the corresponding period of last year. Although the growth rate of backlog orders has been somewhat affected by the slowdown in global biopharmaceutical investment and financing, as well as the strategic adjustments in the EFS business, it can be foreseen that in the future, as the global biopharmaceutical investment and financing market gradually warms up, the Company will also strengthen its BD team, optimize innovative online and offline marketing activities, proactively implement the integration strategy for biological and chemical segments, and establish active presence in emerging technology platforms to fuel sustainable growth of its CRO business.

As of June 30 2023, the Company had delivered more than 56,128 protein structures to our clients, approximately 7,203 of which were newly delivered in the first half of the year and conducted R&D on over 1,892 independent drug targets, 14 of which were newly delivered in the first half of the year. Currently, the Company maintains a leading position in the industry worldwide in the field of protein structure analysis. In addition, we seek to maximize the value of existing customers through the synergistic development of biological and chemical segments while continuing to step up the integration of digital marketing and our business development team. Besides, the Company will continue to tap into emerging technology platforms. As of the end of the Reporting Period, the Company has newly established a covalent compound library and a molecular glue screening platform. Besides, the Company will apply the in-depth learning functions of CADD in design of macromolecular drugs, such as antibody structure prediction and prediction of feasibility of antibody development.

The cumulative number of clients served had increased to 1,314, including the global top ten pharmaceutical companies (by reported total revenue for the first half of 2023), and revenue from the top ten customers accounted for 26.9% of the total revenue. Clients of our CRO business are geographically diverse, of whom those from overseas contributed approximately 86.5% of our total revenue, representing a year-on-year increase of approximately 12.4%, and those from mainland China contributed approximately 13.5% of our total revenue, representing a year-on-year decrease of approximately 10.5%.

During the Reporting Period, our utilization of synchrotron radiation source reached 1,020 hours. The Company established long-term cooperation with 13 synchrotron radiation source centers around the world, which are distributed in 10 countries/regions, i.e., Shanghai, China, the United States, Canada, Japan, Australia, the United Kingdom, France, Germany, Switzerland and Taiwan, China, thus guaranteeing uninterrupted data collection all year round.

Gross Profit from CDMO Grew Desirably with an Increasing Number of CMC Projects

During the reporting period, the group attached great importance to the strategic cooperation and synergistic effects with its subsidiary, Langhua Pharmaceutical. On one hand, it enhanced the capacity layout and business structure adjustments of the CDMO business. On the other hand, it focused on optimizing and redirecting the CMC business.

During the first half of 2023, Langhua Pharmaceutical’s revenue amounted to RMB700.9 million, representing a year-on-year decrease of approximately 0.3%; and its gross profit amounted to RMB208.1 million, representing a year-on-year increase of approximately 25.3%. The higher growth of gross profit than that of revenue was mainly attributable to CDMO product structure changes during the Reporting Period.

As of June 30, 2023, Langhua Pharmaceutical had served a total of 875 clients, with the top ten clients accounting for 62.1% of its total revenue. The retention rate of the top ten clients was 100%. During the Reporting Period, in respect of capacity building, our total available capacity has reached 860 cubic meters. In addition, Langhua Pharmaceutical is planning to build a new production capacity of 400 cubic meters in 2024 and 2025. Currently, the relevant ground work is under construction, and the selection and procurement process for certain equipment has started.  These capacity additions will provide adequate support to our future revenue growth.

CMC business witnessed an increasing number of projects, but remained in the profit ramp-up stage for new operations. 143 new drug projects have been completed or are in progress since the establishment of CMC. As of the end of the Reporting Period, the number of CMC R&D personnel had reached 129; and the CMC business generated revenue of nearly RMB25.0 million during the Reporting Period. Looking forward, the Company will further strengthen business development and introduction of high-quality CMC projects, leveraging potential internal project resources and enhancing costs effectiveness to achieve a break-even for CMC business. In addition, in terms of the number of customers, CMC customers secured through external business development accounted for nearly 78.0%, versus nearly 22.0% introduced from Viva Biotech; in terms of order value, CMC orders secured through external business development accounted for 37.0%, versus 63.0% introduced from Viva Biotech.

Achieve the Investment Income from Successful Exit of Incubation Portfolio Companies and Will Continue the Incubation Business Through the Establishment of Investment Funds in Future

During the Reporting Period, the Company successfully realized 5 investment exits or partial exits, two of which occurred subsequent to the Reporting Period, and received the relevant investment income. In addition, we added one start-up to our portfolio companies through a stock-for-stock deal. As of June 30, 2023, the Group had invested in a total of 92 portfolio companies. The portfolio companies are mainly from the United States, Canada, Europe and China. 67.0% of the portfolio companies are from North America and 26.0% are from China.

In the first half of 2023, 7 of our portfolio companies completed or were close to completing a new round of financing, raising approximately US$156.0 million in total. The R&D efforts of the portfolio companies were advancing smoothly, with the total number of pipeline projects reaching close to 217, of which 182 pipelines are in the preclinical stage and 35 pipelines in the clinical stage. So far, the Group has successfully realized 11 investment exits or partial exits, and may have nearly 11 potential exits for our portfolio companies in the next one to three years. In addition, the Company is proactively applying for a fund manager license in the PRC, with relevant work in smooth progress. We intend to conduct incubation business through the establishment of investment funds in future, so as to mitigate pressure on Group-level liquidity and the appropriation of funds.

Technological Highlights and R&D Breakthroughs

During the Reporting Period, the Group’s R&D spending was RMB76.7 million, representing a year-on-year increase of 87.5% from RMB40.9 million for the six months ended June 30, 2022. For our CRO business, we have built several core technological platforms, including: the PROTAC technology platform, protein production, preparation and structure research platform, Cryo-EM technology platform, membrane protein research technology, drug screening technology, bioassay platform, computer-aided drug design (CADD), medicinal chemistry, etc. During the Reporting Period, the Company newly established a covalent compound library and a molecular glue screening platform. The newly established library of covalent compounds has been synthesized through in-house design, containing 1000 compounds with a molecular weight range of 150-350Da. It has been officially made available for external use, suitable for mass spectrometry and cellular-level screening, and can provide sufficient compounds for subsequent activity validation. In terms of the molecular gel screening platform, the company has developed a comprehensive system for molecular gel screening, including ASMS affinity screening, followed by SPR binding kinetics studies and validation of ternary complex formation.

Besides, the Company also provides services relevant to PROTAC drug R&D, and revenue generated in this regard accounted for almost 12.3% of total revenue from CRO business. Our services primarily include studies on protein preparation and structure, high-throughput screening of PROTAC molecules, kinetics, drug metabolism, pharmaceutical chemistry, Bioassay, CADD, etc. As of June 30, 2023, the Company had conducted research into over 50 E3 ligase structures and delivered more than 110 target protein–PROTAC-E3 ligase ternary compound structures. I It is expected that PROTAC business will add fresh impetus to the sustainable growth of CRO business in the future.

From the perspective of current progress of computer-aided drug design (CADD) platforms, CADD is based on physical chemistry models and empowered by artificial intelligence algorithms with the aid of supercomputing clusters and has been widely used in various drug R&D stages. Our Computational Chemistry Department has developed a series of advanced project-oriented algorithms (such as FEP) to resolve real-world problems. Comparing with traditional computational chemistry tools and commercially-available software packages, such implementations of the cutting-edge techniques better facilitates the progress of drug R&D projects. In addition to traditional small molecule drug design, the methods developed by the computational chemistry platform have also been applied to a broad range of drug modalities and have achieved breakthroughs through experimental validation such as antibodies, peptides, RNA therapies.

Staff and Facilities

As of June 30, 2023, the Group had a total of 2,271 employees, of whom the number of CRO R&D personnel reached 1,341. The Company has also accelerated the construction of office and laboratory facilities, including:

  • The Group’s new headquarters in Zhoupu, Shanghai with a total area of approximately 40,000 square meters has been put into full operation.
  • The incubation center located in Faladi Road, Shanghai has usable GFA of approximately 7,576 square meters, including 5,552 square meters of laboratory area.
  • The park with a total GFA of 64,564 square meters in Chengdu, of which 12,210 square meters of properties had been partially put into use as of June 30, 2023, including 10,800 square meters of laboratory area.
  • For the novel drug incubation center with a GFA of approximately 77,500 square meters in Qiantang New District, Hangzhou, we will consider several potential construction options in future.
  • A park in Suzhou with a GFA of approximately 7,169 square meters, including nearly 3,250 square meters of laboratory area.
  • Shanghai Supercomputing Center has been officially put into operation. Currently, it can support computer aided drug design (CADD) calculation, artificial intelligence in drug discovery (AIDD) related calculation, and crystal structure and Cryo-EM (Micro-ED) calculation.

Dr. Cheney Mao, Chairman and Chief Executive Officer of Viva Biotech Holdings, said, “With unique advantages in structure-based drug discovery (SBDD), the Company continue to increase the cross-promotion between biology and chemistry businesses and strengthen the construction of a one-stop drug R&D and manufacturing service platform, deepen the synergy between CRO and CDMO business, improve the capacity building for front-end projects to increase the funnel effect, accelerate back-end direction of customer traffic, and actively build an open cooperation platform and win-win ecosystem for biomedical innovators around the world.”

About Viva Biotech

Established in 2008, Viva Biotech (01873.HK) provides one-stop services ranging from early-stage Structure-Based Drug R&D to commercial drug delivery to global biopharmaceutical innovators. The Group offers leading early-stage to late-phase drug discovery expertise by integrating dedicated team of experts, cutting-edge technology platforms, and state-of-the-art equipment in X-ray crystallization, Cryo-EM, ASMS, SPR, HDX, CADD, and much more. The business covers all aspects of therapeutic strategies and drug modalities, including small molecules and biologics across the pharma and biotech spectrum. The experienced chemistry team, led by senior medicinal chemists and drug discovery biologists, provides services for drug design, medicinal chemistry (hit to lead and lead optimization), custom synthesis, chemical analysis and purification, kilogram scale-up, peptide synthesis and corresponding bioassays. With subsidiary Langhua Pharma, the Group offer worldwide pharmaceutical and biotech partners a one-stop integrated CMC (Chemical, Manufacturing, and Control) service from preclinical to commercial manufacturing. Additionally, Viva Biotech embedded an equity for service (EFS) model to high potential startups to address unmet medical needs.

As of June 30, 2023, Viva Biotech had cumulatively provided drug R&D and manufacturing services to 2,189 global biotech and pharmaceutical clients and invested in and incubated 92 biomedical startups. In the future, the Company will continue to strengthen its technological barriers and improve R&D and manufacturing service capabilities to provide high-quality diversified services to more startup innovative drug companies and mid-to-large pharmaceutical companies globally, benefiting patients worldwide.