AIM VACCINE is expected to incur a loss of over 1.8 billion: Are the three domestic mRNA vaccine players falling?

Companies betting on the COVID-19 vaccine have yet to emerge from the market turmoil.

On March 4th, AIM VACCINE (6660.HK) released a performance forecast indicating a net loss of between 18.1 billion and 19.9 billion yuan in 2023, a several-fold increase from the 2.3 billion yuan net loss in 2022.

The huge loss is attributed to market changes - the significant impairment of the pipeline and mRNA technology platform of its subsidiary Zhuhai Lifanda Biotechnology Co., Ltd. ("Lifanda Biotechnology"), with an estimated impairment loss of 16.5 billion to 18 billion yuan.

"Given the significant changes in the global COVID-19 situation, the Group has made impairment provisions for the intangible assets and goodwill of its acquired subsidiary Zhuhai Lifanda Biotechnology Co., Ltd. in 2023 based on factors such as product development progress, market environment changes, and sales forecasts, ranging from RMB 16.5 billion to 18 billion," AIM VACCINE stated.

In fact, Lifanda Biotechnology once enjoyed great success.

During the COVID-19 pandemic, the mRNA vaccine track received favor from capital. Lifanda Biotechnology, along with Abogen and Walvax Biotechnology, were collectively known as the "domestic mRNA vaccine trio," with one of Lifanda Biotechnology's core pipelines being an mRNA COVID-19 vaccine in development.

In March 2021, Lifanda Biotechnology's mRNA COVID-19 vaccine was approved for clinical trials, becoming the third mRNA COVID-19 vaccine in China to receive approval for clinical trials from the National Medical Products Administration. In May of the same year, AIM VACCINE acquired 50.15% of Lifanda Biotechnology's equity for a total transaction value of 1.043 billion yuan.

However, Lifanda Biotechnology has yet to bring the mRNA COVID-19 vaccine to market, and with the changing market demand, the once-promising core pipeline of mRNA COVID-19 vaccine has since declined.

The timing of recognizing impairment losses on the intangible assets and goodwill formed by this acquisition has become a looming threat over AIM VACCINE.

In its 2022 financial report, AIM VACCINE had not yet recognized significant impairment losses on Lifanda Biotechnology's core pipeline, making its losses relatively manageable, with a net loss of 2.3 billion yuan in 2022.

Realizing that the mRNA COVID-19 vaccine and mRNA technology platform may not have a short-term turnaround, AIM VACCINE finally made the decision to recognize impairments in its 2023 financial report.

TradeWind01 reached out to AIM VACCINE via email to confirm whether they are still advancing the research and development of the mRNA COVID-19 vaccine, but had not received a response as of the time of writing.

It is worth noting that AIM VACCINE is not the only vaccine company in 2023 to recognize significant impairment losses on COVID-19 vaccines.

On February 24th, Kangxinuo (688185.SH) released a performance forecast indicating that the net loss attributable to shareholders in 2023 had increased from 909 million yuan to 1.447 billion yuan, mainly due to a sudden decrease in market demand leading to insufficient production capacity utilization of the COVID-19 vaccine production line, for which Kangxinuo recognized impairment losses. "In terms of operating costs, due to the low production volume of the COVID-19 vaccine and the underutilization of related production lines, the company has included the fixed costs corresponding to the redundant production capacity in the operating costs; considering the future usage plan of the COVID-19 vaccine-related inventory and long-term assets, the company has conducted impairment tests on inventory, cost of goods returned, prepayments, and long-term assets showing impairment signs, and made impairment provisions based on the test results," said Kangxinuo.

In addition, currently, AIM VACCINE still has 13-valent pneumococcal conjugate vaccine products, serum-free iterative rabies vaccine products, and other 5 main core products in Phase 3 clinical trials, resulting in certain pressure on its research and development expenses.

AIM VACCINE has submitted an A-share IPO guidance to the Securities Regulatory Commission in October 2023, but the significant losses in this performance may bring more uncertainties to its IPO process."