In November, the weight reducing version of semaglutide, also known as "Novo Nordisk", was officially launched in China.

Simeglutide belongs to the GLP-1 (glucagon like peptide-1, a naturally occurring peptide hormone) receptor agonist class of peptide drugs, and Ted Pharmaceutical (Zhejiang) Co., Ltd. (hereinafter referred to as Ted Pharmaceutical) is a company in the related field. After its expiration in May 2024, the company has recently submitted another application to rush for listing on the Hong Kong stock market.

According to the prospectus, Ted Pharmaceuticals claims to be the world's third-largest peptide focused CRDMO (Contract Research, Development, and Production Organization), providing discovery, research, development, and manufacturing services in the pharmaceutical and/or biotechnology industry on a contractual basis. However, the performance of Ted Pharmaceuticals, which is currently in a hot spot, is not satisfactory. In 2023, the company experienced a decline in both revenue and profit.

The reporter from the Daily Economic News noticed that Zhongpeptide Biochemical Co., Ltd. (hereinafter referred to as Zhongpeptide Biochemical), an important subsidiary of Ted Pharmaceutical, was once "sold high and bought low" by the company's shareholders. In 2015, it was transferred to the outside world for 2 billion yuan, and in 2020, it was bought back for more than 700 million yuan. In this transaction, the counterparty who suffered losses was listed company Xinbang Pharmaceutical (SZ002390, stock price 4.41 yuan, market value 8.572 billion yuan).

High dependence on major clients

Ted Pharmaceuticals mainly provides CRO (Contract Research Organization) services, namely peptide NCE (New Chemical Molecular Entity) discovery and synthesis; And CDMO (Contract Research, Development, and Production Organization) services, namely the development and commercial production of peptide CMC (part of the chemical, manufacturing, and control, evaluation of therapeutic drug characteristics and their manufacturing and quality testing processes). The company's services mainly focus on providing customers with APIs (active pharmaceutical ingredients) rather than drugs.

As of June 30, 2024, the Ted Pharmaceutical project pipeline includes 1046 ongoing CRO projects and 332 ongoing CDMO projects. According to the prospectus, the company strategically focuses on pipeline construction in the GLP-1 field. As of the final feasible date, the company has collaborated with 7 clients on 9 NCE GLP-1 molecule development projects, developing oral and/or injectable GLP-1 molecule products.

Simeglutide, which is currently on the rise in the market, is also involved in Ted Pharmaceuticals. According to the disclosure, as of the latest feasible date, the company has successfully submitted the drug master file for the development of semaglutide to the FDA (US Food and Drug Administration) for filing.

The performance of such a company in the midst of the trend is not satisfactory. From 2021 to the first half of 2024, Taide Pharmaceutical achieved revenues of approximately RMB 282 million, RMB 351 million, RMB 337 million, and RMB 197 million, respectively; The profits are approximately RMB 80.278 million, RMB 53.98 million, RMB 48.905 million, and RMB 50.567 million, respectively. It can be seen that the company's revenue in 2023 has declined year-on-year; Profit will continue to decline in 2022 and 2023.

Regarding the year-on-year decrease in the company's profits in 2023, the prospectus of Ted Pharmaceuticals mentioned multiple factors, including the decrease in the company's 2023 revenue and the increase in sales costs.

Ted Pharmaceuticals stated that the decrease in revenue in 2023 is due to a decrease in average revenue per customer. Upon further investigation, the main reason is that the company's revenue for three clients decreased by approximately 34 million yuan. These three clients had significantly reduced demand due to changes in their peptide drug development resources, plans, and cycles in the United States and mainland China.

The Daily Economic News reporter noticed that Ted Pharmaceuticals has a high degree of dependence on major clients. From 2021 to 2023, the revenue from the top five clients accounted for 36.5%, 44.8%, and 48.3% of the company's revenue for the same period, respectively. In the first half of 2024, this proportion even reached 56.2%, exceeding half of the company's revenue.

Overseas business revenue accounts for a relatively high proportion

Due to their significant therapeutic effects in lowering blood sugar and weight loss, GLP-1 drugs have become a hot topic in the pharmaceutical industry in the past two years.

According to the prospectus of Ted Pharmaceuticals, GLP-1 drugs have changed the drug landscape for treating metabolic diseases. Based on sales revenue, the global GLP-1 drug market has grown from $9.3 billion in 2018 to $38.9 billion in 2023, with a compound annual growth rate of 33.2%. It is expected to further grow to $129.9 billion in 2032, with a compound annual growth rate of 14.3%.

Can Ted Pharmaceuticals join the industry in celebrating in the future? According to Frost Sullivan's information cited in the company's prospectus, the company is the third most peptide focused CRDMO in the world in terms of sales revenue in 2023.

However, as the third largest pharmaceutical company in the world, Ted Pharmaceuticals only holds a 1.5% market share. The company stated, "The top two participants in the global CRDMO market, with peptides at its core, each hold 23.8% of the market share, while the rest of the market is relatively dispersed, with the top three to six participants (including our company) each holding only about 1% of the market share by 2023

It is worth mentioning that in the past three years, Ted Pharmaceuticals' overseas business income has accounted for a large proportion of the company's revenue. In the increasingly complex geopolitical landscape, the risk factors in overseas markets cannot be ignored.

On December 7, 2024, the Military Committees of both houses of the US Congress released the final agreement text of the National Defense Authorization Act (NDAA) for fiscal year 2025, which did not include the Biosafety Act. However, the threat of legislative restrictions on Chinese biotechnology companies has not completely disappeared, and relevant bills may still be promoted through separate legislation.

The Daily Economic News reporter noticed that the United States is an important market for Ted Pharmaceuticals. From 2021 to 2023, income from the United States accounted for 35.3%, 37.7%, and 34.1% of Ted Pharmaceuticals' revenue, respectively. In the first half of 2024, this number will even reach 61.8%.

Ted Pharmaceuticals admitted in its prospectus that a large number of its clients are American pharmaceutical and biotechnology companies, and their service demands for the company are significantly influenced by the US government's attitude towards service providers in the Chinese pharmaceutical and biotechnology industry.

Two transaction prices attract attention

This sprint for listing on the Hong Kong stock market is not the first time that Ted Pharmaceuticals has been exposed to the capital market.

The history of Ted Pharmaceuticals can be traced back to 2001. At that time, Li Xiang, one of the current executive directors of the company, established Zhongpeptide Biochemical in China. In 2003 and 2005, the controlling shareholders of the company, Xu Qi and Li Xiangli (Li Xiang's younger sister), respectively joined Zhongpeptide Biochemical.

In April 2015, the listed company Xinbang Pharmaceutical announced the acquisition of all its equity from the former shareholder of Zhongpeptide Biochemical for a price of 2 billion yuan. After layers of penetration, more than 80% of the equity of Zhongpeptide Biochemical at that time was held by Xu Qi, Li Xiangli, and Li Xiang.

In the above-mentioned acquisition, the former shareholders of Zhongpeptide Biochemical made performance commitments for net profits of no less than 81.8229 million yuan, 106 million yuan, and 138 million yuan from 2015 to 2017, respectively. Although the annual net profit deviates from the commitment, the total net profit of 332 million yuan achieved over three years has generally met the performance commitment.

The good times didn't last long. Since 2018, the business performance of Zhongpeptide Biochemical has been continuously declining. In June 2020, Xu Qi and Li Xiangli jointly established Ted Pharmaceuticals. Subsequently, Xinbang Pharmaceutical transferred 100% equity of Zhongpeptide Biochemical and its subsidiary Kangyong Biotechnology to Tede Pharmaceutical for a total of 750 million yuan. Among them, the transfer price of 100% equity of Zhongpeptide Biochemical is only 718 million yuan.

Selling for 2 billion yuan and buying for 718 million yuan, this transaction by Zhongpeptide Biochemical has been heavily criticized by the outside world. Regarding the significant price difference between the two transactions, Taide Pharmaceutical stated in its prospectus that from March 2015 to March 2020, Zhongpeptide Biochemical and Kangyong Biotechnology experienced various challenges in their business operations and development, including Xinbang Pharmaceutical's management strategy and development focus shifting towards providing medical services for its main business; Changes in the macroeconomic environment and overall social conditions, including rising labor, environmental, and operational costs in the peptide bio business; COVID-19 impact; And the changes in the industry status and competitive situation of in vitro diagnostic reagent business.

As disclosed by Xinbang (Pharmaceutical), for the year ended December 31, 2018, it recorded a goodwill impairment loss of RMB 1.537 billion related to the business of Zhongpeptide Biochemical and Kangyong Biotechnology. Taide Pharmaceutical stated that the above-mentioned challenges faced by Zhongpeptide Biochemical resulted in a decrease in the cost of the acquisition in 2020 compared to the cost of the acquisition in Xinbang in 2015.

Regarding the issues related to the Hong Kong stock listing, on December 20, 2024, the reporter called Ted Pharmaceuticals, but as of press time, there has been no response.