After setbacks in the Sci-Tech Innovation Board, they are now gearing up for an IPO on the Hong Kong Stock Exchange: How likely is PegBio's bold bet on GLP-1 to succeed?

On February 23, Pegasus Biopharmaceuticals (Suzhou) Co., Ltd. (referred to as "Pegasus Biopharmaceuticals") submitted an IPO application to the Hong Kong Stock Exchange.

Currently, Pegasus Biopharmaceuticals has not yet commercialized its products. It has a total of 6 drugs in research, with the GLP-1 drug PB-119 for type 2 diabetes treatment having submitted a listing application to the regulatory authority in September 2023, expected to be listed in 2024.

It is worth mentioning that in August 2021, Pegasus Biopharmaceuticals attempted to list on the Sci-Tech Innovation Board with the fifth set of listing standards. However, the IPO journey was voluntarily terminated in April 2022. Although there was another attempt at an A-share IPO, the company ultimately chose to move to the Hong Kong Stock Exchange.

However, the pipeline situation of Pegasus Biopharmaceuticals is not ideal.

On one hand, the fastest progressing drug in Pegasus Biopharmaceuticals, the GLP-1 drug PB-119, has a similar mechanism to the GLP-1 drug exenatide injection, which has poor sales in the Chinese market. Whether PB-119 can turn the tide with efficacy data remains uncertain.

On the other hand, out of the 6 pipeline drugs of Pegasus Biopharmaceuticals, 4 are related to GLP-1 drugs. With many pharmaceutical companies concurrently advancing clinical research on these drugs, the competitive landscape is deteriorating, posing significant risks.

The road to commercialization for Pegasus Biopharmaceuticals remains challenging.

Turning to Hong Kong after setbacks on the Sci-Tech Innovation Board

The IPO journey of Pegasus Biopharmaceuticals has been full of ups and downs.

In August 2021, under the sponsorship of Guotai Junan, Pegasus Biopharmaceuticals submitted an IPO application to the Sci-Tech Innovation Board. After two rounds of inquiries, the company withdrew its application materials in April 2022.

Regarding the withdrawal, Pegasus Biopharmaceuticals explained in the IPO application materials to the Hong Kong Stock Exchange that it was "based on our latest company strategy focusing on product research and development, we voluntarily withdrew the A-share listing application."

However, after this withdrawal, Pegasus Biopharmaceuticals did not give up on its A-share listing plan.

In December 2022, Pegasus Biopharmaceuticals engaged CICC as the sponsor institution, reinitiated the A-share IPO counseling plan, and submitted counseling record materials to the Jiangsu Securities Regulatory Bureau.

It was noted that as of January 2024, less than two months before the submission to the Hong Kong Stock Exchange, Pegasus Biopharmaceuticals continued to advance the A-share IPO counseling. CICC also submitted the fourth counseling report to the local regulatory bureau.

"During this counseling period, the counseling institution promptly conveyed the latest developments in the capital market issuance and review to the counseling object, assisting the company in planning the subsequent listing plan," CICC pointed out. "Comprehensive evaluation of whether the counseling object meets the conditions for issuance and listing, and assisting the company in preparing for the initial public offering of shares."

However, Pegasus Biopharmaceuticals admitted in the IPO application materials to the Hong Kong Stock Exchange that it had planned to move to the Hong Kong Stock Exchange as early as the second half of 2023. PegBio pointed out, 'In order to further expand our global business and considering that the Hong Kong Stock Exchange will provide us with access to foreign capital and attract a diverse international platform, the company voluntarily decided to seek a listing in Hong Kong in the second half of 2023.'

Considering the possibility of the Hong Kong Stock Exchange starting from the second half of 2023 is indeed a wise move for PegBio.

As PegBio has not yet listed any drugs during the reporting period, if it chooses an A-share IPO, it can generally only apply for the Sci-Tech Innovation Board with the fifth set of listing standards.

However, the IPO process for such companies is often slow.

According to Wind data, as of February 26th, there are a total of 11 companies on the Sci-Tech Innovation Board that have applied for an IPO with the fifth set of listing standards, and some of these companies have been waiting in line for up to 812 days.

Moreover, since July 2023, the Shanghai Stock Exchange has not accepted any companies applying for the Sci-Tech Innovation Board with the fifth set of standards.

In fact, many companies have chosen to withdraw.

According to data disclosed by the Shanghai Stock Exchange official website, since the second half of 2023, at least four companies, including Shanghai HanYu Medical Technology Co., Ltd. and Shanghai Aikebai Fa Biopharmaceutical Technology Co., Ltd., have failed in their IPO attempts with the fifth set of standards.

As companies that failed in their IPO attempts with the fifth set of standards may turn to the Hong Kong Stock Exchange, the market is eagerly awaiting to see.

Concentrated Pipeline

PegBio is just one step away from breaking free from the 'zero revenue' dilemma.

The prospectus shows that PegBio has a total of 6 pipelines under research, covering type 2 diabetes, obesity, non-alcoholic fatty liver disease, constipation caused by opioid drugs, and congenital hyperinsulinemia.

Among them, the long-acting GLP-1 drug 'PB-119' used to treat type 2 diabetes is the core drug of PegBio. It submitted an application for the indication of type 2 diabetes to the regulatory authority in September 2023, making it the drug closest to commercialization under PegBio.

In terms of basic principles, as a long-acting GLP-1 receptor agonist hypoglycemic drug, PB-119 is mainly a drug selected from the modification of exenatide and site-specific modification by polyethylene glycol.

Exenatide, originally launched by AstraZeneca in 2005, was a short-acting GLP-1 receptor agonist with a dosing frequency of twice daily. However, AstraZeneca later upgraded it to 'exenatide microspheres for injection,' extending the half-life of exenatide in the body. The dosing regimen was upgraded to once-weekly injection, becoming the first drug approved by the FDA for treating type 2 diabetes with a once-weekly dosing schedule.

Currently, PB-119 has a dosing regimen similar to exenatide microspheres for injection, both being administered once a week.

In terms of efficacy, under the conditions of 150μg/needle/week, once a week, and continuous administration for 52 weeks, PB-119 reduced the HbA1c (glycated hemoglobin) value by 1.39% compared to the baseline. Due to the fact that PegBio has not yet conducted a head-to-head experiment with similar hypoglycemic drugs for PB-119, the efficacy data is still difficult to confirm the unique competitiveness of PB-119.

However, as a similar drug to PB-119, the efficacy of injectable exenatide microspheres is not outstanding. Public data shows that under the treatment conditions of 2mg/shot/week for 30 consecutive weeks, exenatide microspheres reduced the HbA1c value by 0.87% compared to the baseline.

Nevertheless, PegBio's PB-119 still faces various challenges.

On one hand, as a similar drug to PB-119, the sales of injectable exenatide microspheres are bleak.

On February 28, 2023, as the agent of AstraZeneca's injectable exenatide microspheres in China, Sanofi (1530.HK) announced the termination of the commercialization of its injectable exenatide microspheres (Bydureon) and exenatide injection (Byetta).

"Due to the minimal financial contribution of Byetta licensed products to the Group, the Board believes that the termination of the exclusive license agreement and the related commercial arrangements for Byetta licensed products will not have a significant impact on the Group's business operations and financial condition," Sanofi pointed out.

Whether PB-119 has the potential to break the curse still remains to be confirmed.

On the other hand, the market where PB-119 is located is surrounded by strong competitors.

Looking at the popular "miracle weight-loss drugs" on the market, semaglutide, another long-acting GLP-1 drug, shows significant hypoglycemic effects.

Clinical trial data shows that under the conditions of 1mg/shot/week for continuous treatment for 30 weeks, semaglutide reduced the HbA1c value by 1.7% compared to the baseline.

Currently, no less than 9 pharmaceutical companies including Huadong Medicine (000963.SZ) and CSPC Pharmaceutical Group (1093.HK) have semaglutide in Phase 3 clinical trials.

As a strong competitor of semaglutide, Lilly has submitted an application to the NMPA for the market approval of tirzepatide, a GLP-1R/GIPR dual agonist, for the treatment of type 2 diabetes.

Against the backdrop of intense market competition, whether PegBio's core drug PB-119 can achieve the desired results in commercialization still remains a question mark.

Bold Bet on GLP-1

Although pharmaceutical companies' original intention in promoting GLP-1 drugs is to treat diabetes, with the advancement of clinical trials, various other indications have gradually become possible. This is also an important reason why GLP-1 drugs have become the darling of the capital market in recent years.

However, in the fiercely competitive market, PegBio's pipeline is mainly focused on GLP-1, which may also pose a potential risk to its business.

Currently, PegBio's pipeline includes a total of 4 GLP-1-related investigational drugs, including PB-119, GLP-1R/GCGR dual agonist PB-718, GLP-1R/GIPR dual agonist PB-2301, and GLP-1/GIP/GCG triple receptor agonist. On top of PB-119, the progress of other pipelines is relatively slow.

Pegasus Bio is also expanding the indications of PB-119 to include weight loss, but it is only in Phase 1 clinical trials, clearly lagging behind other domestic drugs.

On February 7, 2024, Sinda Bio (1801.HK) announced that the market application for the GLP-1R/GCGR dual agonist Marsetideptide for weight loss indications has been accepted by the drug regulatory authority, making it the world's first GLP-1R/GCGR dual agonist to submit a market application.

Pegasus Bio's GLP-1R/GCGR dual agonist PB-718, which targets the same pathway as Marsetideptide and is also used for weight loss, has only entered Phase 1 clinical trials.

It is worth noting that PB-718 has been identified by Pegasus Bio as a key drug and an important asset for its future commercialization.

Pegasus Bio faces more challenges.

In the first three quarters of 2023, Pegasus Bio's net loss has reached 225 million yuan, with a cash and cash equivalents balance of only 103 million yuan at the end of the same period.

With slow progress in other pipelines, the question mark remains as to whether Pegasus Bio can overcome its predicament solely with PB-119.