On the evening of October 23, Heyuan Biotechnology released its third-quarter report for 2024. In the third quarter, the company achieved a revenue of 70.81 million yuan, a year-on-year increase of 32.99%, but realized a net profit attributable to shareholders of -76.42 million yuan. For the first three quarters of this year, the company recorded a total revenue of 184 million yuan, marking a year-on-year growth of 34.22%, with a net profit attributable to shareholders of -190 million yuan.

Improved Industry Environment Provides Growth Opportunities

According to public data, Heyuan Biotechnology’s main business includes providing Contract Research Organization (CRO) services such as the development of gene therapy vectors and gene function research for cellular and gene therapy foundational research. It also offers Contract Development and Manufacturing Organization (CDMO) services, including application for Investigational New Drug-Chemistry, Manufacturing, and Controls (IND-CMC) pharmaceutical research and GMP production of clinical samples for the development of cellular and gene drugs.

In its quarterly report, Heyuan Biotechnology disclosed new order amounts and the number of INDs. In the third quarter, the company supported clients in obtaining four IND approvals. By the end of the reporting period, new CDMO orders exceeded 250 million yuan, helping clients secure a total of 43 IND approvals across multiple countries, including 12 from the U.S. FDA.

Recently, market attention has intensified on the performance of biopharmaceutical companies, particularly leaders in various sub-sectors. Industry insiders believe that Heyuan Biotechnology's revenue growth in this quarterly report aligns with expectations. Although the company's profit remains under pressure, the market remains optimistic about a recovery and growth trajectory in profits moving forward.

An insider from Heyuan Biotechnology told the Securities Daily that in recent years, financing progress for CDMO downstream customers in gene and cell therapy has been relatively slow. However, leveraging its strong foundational advantages, the company has simultaneously explored multiple strategies and enhanced internal capabilities while navigating industry pressures and challenges. This includes leveraging its advantages in technology platforms, R&D investments, customer maintenance, project management, and execution; increasing efforts in new customer development and expansion into new fields, while also actively promoting cost reduction and efficiency enhancement to continually boost market influence and share.

Cellular and Gene Therapy: A Promising Growth Direction

Cellular and gene therapy is one of the most promising development directions in the biopharmaceutical industry, possessing significant growth potential and development space. As a leading enterprise in this field, Heyuan Biotechnology is expected to achieve high-quality development against the backdrop of gradual industry recovery.

“With the Federal Reserve's interest rate hike cycle gradually coming to an end, the primary market for healthcare is likely to see a revival in investment and financing activities. Additionally, some constraining factors for the U.S. biopharmaceutical sector may gradually diminish, leading to marginal improvements that will greatly drive the recovery of the cellular and gene therapy market in China. According to relevant data, the market size of cellular and gene therapy in China is expected to reach 2.59 billion USD by 2025, indicating substantial growth opportunities ahead,” said Wang Zhiqiu, a partner at Shenzhen Huadao Research Consulting Co., Ltd., in an interview with the Securities Daily.

Continuous Expansion into New Application Scenarios

In addition, the company is continuously expanding into new application scenarios, fully utilizing the leading technology and project service capabilities derived from its core business to layout and develop new businesses, such as regenerative medicine.

In April 2024, the company invested to establish a wholly-owned subsidiary, Heyuan Hemei (Shanghai) Biotechnology Co., Ltd. (referred to as "Heyuan Hemei"). On September 13, 2024, the company successfully held the inauguration ceremony for the “Regenerative Medicine Center” of Heyuan Hemei, marking a significant step in its strategic layout for cell therapy.

Heyuan Biotechnology indicated that Heyuan Hemei's main business involves providing high-quality, high-standard, and high-quality production services for stem cells, immune cells, and cell-derived products, as well as advanced intelligent cell storage services for partners and end customers. The subsidiary aims to expand the company's technical service domain into regenerative medicine to meet domestic needs for efficient and safe cell storage and production, especially in the popular fields of anti-aging and health.

Additionally, stem cells are a hot topic and frontier in today’s life sciences and medical research. Heyuan Biotechnology, recognizing the future potential of this new market, is strategically advancing into the storage and production of stem cells and actively building differential and first-mover advantages through advanced processes, production capacity, high-standard quality systems, and top-tier technical service teams to open up a second growth curve.

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