Wen Leju Finance Sun Subo
As a window to the soul, especially in the current era of electronic products, the health of "eyes" is becoming more and more important.
Globally, the number of people suffering from major eye diseases continues to increase. In 2022, juvenile myopia and dry eye disease affected more than 5 percent of the world, respectively500 million and 900 million patients. In addition, the overall growth of the ageing population and the increasing prevalence of diabetes and hypertension are also driving the prevalence of age-related eye diseases such as pterygium and palpebral fissures.
In this context, the ophthalmology track has been sought after by many star capitals, and more and more ophthalmology companies have taken the opportunity to embark on the road of capital.
Recently, the ophthalmic biotechnology company Cloudbreak Pharma Inc(hereinafter referred to as "Dial Kangshiyun") submitted a prospectus on the Hong Kong Stock Exchange and joined the IPO army of ophthalmology companies.
In the huge track of ophthalmology, we mainly focus on the development and commercialization of first-in-class or best-in-class ophthalmology**. Based on this, Diacom Vision Cloud is also facing the dilemma of no product commercialization, zero revenue, and perennial losses. Currently, two of its clinical-stage drug products have not yet been approved.
Looking at the growth experience of the company, it can be found that since its establishment in 2015, its founder Ni Jinsong has begun to plan and build a huge and complex group system. After restructuring and share swaps and multiple rounds of financing, the valuation of the cloud has reached 36 in 2021HK$5.5 billion. Gaotejia, Yingke, Chuangdong and other star capitals are all strategic investors of Kangshi Cloud.
1. Four rounds of financing1$5.4 billion, and shareholders took $30 million
The story of the cloud starts from 2015.
In November 2015, the news of Pfizer, the world's largest pharmaceutical company, merging Allergan, came from the U.S. capital market. Five months ago, Allergan's scientific director of the drug safety evaluation department, Ni Jinsong, resigned. At that time, Ni Jinsong left along with DiNH, the chief scientist of Allergan's Drug Safety Evaluation Department.
Three months after leaving the company, Ni founded Cloudbreak USA. In the prospectus, Dr. Ni Jinsong, Dinh and Dr. Li were listed as the co-founders of the group.
Just two months after its establishment, Cloudbreak USA received a $2 million investment from Bright Future Pharmaceutical, a local pharmaceutical company in Hong Kong. After the completion of the investment in Bright Future Pharmaceutical, Cloudbreak USA will be owned by Jinsong Ni, Bright Future, DINH and Dr. Li respectively in % and 10%, while the remaining 15% of the outstanding shareholders' equity has not been distributed.
In 2016 and 2017, Cloudbreak USA successively received investments from Xaar Holdings (Asia)**hereinafter referred to as "Xaar Holdings"), BrilliMedical, and Beijing Jiurunda Medical Technology*** hereinafter referred to as "Beijing Jiurunda").
Among them, Xaar Holdings is engaged in investment holding, Brillimedical is an investment company focusing on medical equipment and health care companies, and Beijing Jiurunda is mainly engaged in medical equipment sales and medical technology services.
Leju Finance's "Pre-trial IPO" penetrated the equity structure of Beijing Jiurunda and found that Beijing Jiurunda was 50% owned by Zhongji (Hong Kong) Investment Holdings, 31% by Jiangsu Zhongji Real Estate Development, and 19% by Beijing Zhentouyuan Technology Development.
Among them, Zhongji (Hong Kong) holds 70 of Zhongji Real Estate67% equity, the former is a private shareholding registered in Hong Kong, and the legal person of the investment enterprise under the *** is Zhu Fengdi.
In conjunction with the investment, Cloudbreak USA also hired a scientific advisor, Dr. Scott Whitcup. To motivate Dr. Scott Whitcup, Cloudbreak USA allocated 53% equity interest (500 Class A units) to its wholly-owned company, Whitcup Life.
In December 2017 and June 2018, Cloudbreak USA awarded an additional 250 Class A units to Dr. Yang, 227 Class A units to Jinsong Ni, 200 Class A units to Brillimedical, 70 Class A units to DINH, 20 Class A units to Dr. Scott Whitcup's Whitcup Life, and 10 Class A units to Dr. Li. Twenty-three Class A units were awarded to Dr. John Hovanesian.
Since then, Cloudbreak USA has been held by Ni for 2812%, 26% owned by Bright Future Pharmaceutical01%, 1365%, 876%, 6% owned by Brillimedical5%, 4% held by Beijing Jiurunda95%, 483%, 465%, 232%, 021%。
On May 1, 2019, in recognition of your contributions to obtaining approval from the U.S. Food and Drug Administration to conduct the Phase 3 clinical trial of CBT-001 in the U.S., Cloudbreak USA awarded a profit equity unit award to Jinsong Ni, Jinsong Ni and Dr. Yang's investment holding company. Among them, Ni Jinsong's Water Lily Consultants was awarded 112 Class A units, DINH's VD&TL was awarded 17 Class A units, and Dr. Yang's YDD Consulting was awarded 14 Class A units. In addition, Whitcup Life was again awarded 280 Class A units at a cost of 0 in recognition of Dr. Scott Whitcup's contribution to the development of CBT-001.
At the same time, Dr. Briillimedica, Beijing Jiurunda, Ni Jinsong, DiNH and Dr. Yang respectively transferred their interests in Cloudbreak USA to their own trustees or other investment vehicles or their own wholly-owned subsidiaries.
As of December 29, 2019, Cloudbreak USA was 2805%, 25% owned by Bright Future02%, 14% owned by LI (Brillimedical).69%, 13% owned by VD&TL (DINH).29%, 7% owned by Whitcup Life15%, 447%, by kRui (Beijing Jiurunda) holds 295%, 236%, by Renfu Zhou Ltd(Beijing Jiurunda) holds 181%, 021%。
In November of the following year, Cloudbreak Pharma IncThe listing entity of Kangshi Cloud was incorporated in the Cayman Islands with an initial authorized share capital of US$50,000.
On January 13, 2021, the restructuring and share swap of Diacom Vision Cloud was officially launched. As a result of the reorganization, Cloudbreak USA's business was transferred to Cloudbreak Pharma Incand by Cloudbreak Pharma IncWholly owned.
At the same time of restructuring and share exchange, from October 2018 to November 2021, the company also received 4 rounds of war investment, with a financing amount of 11HK$3.3 billion, with a post-investment valuation of 36 in the last roundHK$5.5 billion, an increase of about 3 times compared with the first round of investment.
Leju Finance's "Pre-trial IPO" penetrated the prospectus and found that there are many strategic investors in the cloud, including CCB International, Gaotejia, Grand Pharmaceutical, Deyi Capital, Yicun Capital, Bank of China International, Yingke Capital, Chuangfang Investment, Industrial **, etc.
Most of the investors only participated in the Series C round, which was the last round of funding. According to the prospectus, the C round of financing of Kangshi Cloud raised a total of 9900 million Hong Kong dollars, accounting for nearly ninety percent of the total investment and financing of the four rounds of war.
In addition, it is worth noting that in the four rounds of financing, each war investor subscribed for convertible redeemable preferred shares of Kangshi Cloud.
The so-called convertible and redeemable preferred shares, the vernacular explanation is that when the company's operation does not meet expectations, the liabilities are recognized and the money is paid interest; When the operation can achieve expectations, investors can sell shares to obtain greater returns instead of creditors as shareholders.
However, changes in the fair value of convertible redeemable preferred shares are closely related to the appreciation of the company's valuation, and when the company's valuation rises, it will appear as a loss in the income statement.
Because of this, due to the sudden surge in Series C financing of Kangshi Cloud, it has been burdened with high financial liabilities. As of the end of 2021, 2022 and the end of the first half of 2023, the change in the fair value of financial liabilities through profit or loss at fair value was -2603., respectively$10,000, -4531$40,000 and -4209$90,000, a total of 1 for two and a half years1.3 billion US dollars, equivalent to about 800 million yuan.
For the investors of the company, the greater the loss caused by the change in fair value, the higher the valuation of the company, which means that the value of the common shares after the conversion will be higher in the future, and the higher the income that investors can expect in the future.
According to the prospectus, a total of 15 investors participated in the C round of financing of the company, and the company received a total of 1$2.7 billion investment. According to the disclosure of the company, it used the $30 million raised in the Series C financing to repay the promissory notes related to the share swap.
Previously, when Cloudbreak USA shareholders transferred their shares to the company, the latter paid promissory notes to shareholders in the aggregate of $30 million, in addition to the issuance and allotment of common shares to the former on a pro-rata basis.
Before the submission of the form, the founder Ni Jinsong and his spouse held a total of 2218% equity.
In addition, DINH holds 714% and 025%；Dr. Yang Rong holds 176%；Dr. Li holds 414%；Bright Future holds 123%；Skketch Shine, a subsidiary of CDH Investments, holds 639%；Yicun Holdings, a subsidiary of Yicun Capital, holds 604%；Gaotejia, a subsidiary of Gaotejia Capital, holds 48%；Dr. Scott Whitcup's wholly owned Scott Whitcup Life holds 351%；Grand Diamond, a subsidiary of Grand Pharma, holds 345%；Design Time, a subsidiary of CCB International, and Dehongxin, a subsidiary of Deyi Capital, hold 32%；Brillimedical holds 308%；Xaar Holdings holds 22%；Guanzi equity holds 16%；Hainan Yifeng holds 148%；K., a subsidiary of Beijing JiurundaRui holds 145%, Renfuzhou holds 089%；Yunxin Holdings, a subsidiary of Yunzinc Management, holds 114%；CNCB, Shanghai Tianyi, and Chuangdong Investment, both of which are subsidiaries of Grand Pharmaceutical, hold 107%；Zhongyin Health, a subsidiary of Bank of China International, holds 103%；Yingke is worth 075%；Yunwen holds 074%；Jiangmen Yifeng holds 066%；Jinhua Jinkai holds 058%；Shanghai Yiyue holds 049%。
2. Delegate the right to produce and commercialize core products to indirect shareholders
As of the submission date, there are no commercialized products, with only four drug candidates in the clinical stage and three drug candidates in the preclinical stage.
Leju Finance's "Pre-trial IPO" penetrated the prospectus and found that the four drug candidates in the clinical stage were CBT-001, CBT-009, CBT-006 and CBT-004. Among them, CBT-001 and CBT-004 may be the world's first-in-class drugs for ** pterygium and vascularized palpebral fissures, respectively.
It is worth noting that the manufacturing and commercialization rights of CBT-001, which is the core product and the closest drug candidate to commercialization, were granted to Grand Pharma, an indirect shareholder, by CBT-001 in Greater China.
It is reported that on April 13, 2020, Diakang Vision entered into a commercialization licensing arrangement with Grand Pharma. Accordingly, Grand Pharma granted Grand Pharma an exclusive, sublicensable, royalty-inclusive license to manufacture and commercialize CBT-001 in Chinese mainland, Hong Kong, Macau and Taiwan, which is applicable to all human uses of CBT-001 (including prevention of pterygium development and reduction of conjunctival injection).
Previously, Grand Diamond, a wholly-owned subsidiary of Grand Pharmaceutical Group, and CNCB, which was indirectly invested and managed by a contact of the controlling shareholder of Grand Pharmaceutical Group, participated in the Series B financing and Series C financing of Diakang Vision Cloud, respectively.
As for the rationale for the cooperation with Grand Pharma, the company said that the company was able to leverage Grand Pharma's well-established distribution channel network to optimize the market potential of CBT-001 and generate profitable cash flow without the need to make a large upfront investment to build a complete sales team in the early stages of CBT-001's commercialization.
According to the company, it has the right to receive advance payments, pre-emptive right payments and milestone payments of up to $59.5 million from Grand Pharma. If NMPA requests to initiate a stand-alone Phase 3 clinical trial in Chinese mainland, it has the right to collect certain additional payments and tiered royalty payments. However, the company has never disclosed the plan for the follow-up profit distribution with Grand Pharmaceutical.
3. In two and a half years, he lost more than 1 billion yuan and was defrauded of 1.06 million US dollars by hackers
In the past two years, the company has had no revenue and is in a loss-making state. In 2021, 2022 and the first half of 2023, they will lose 3,539$80,000, $6,683$80,000 and $5,625$70,000.
It is reported that the expenses of the cloud are mainly used for administrative and R&D expenditures. In 2021, 2022 and the first half of 2023, the general and administrative expenses of the company were 19390,000 US dollars, 891US$20,000 and US$5.73 million. During the same period, its R&D expenditure was 845$70,000, $15.29 million and $1,194$70,000.
Due to the high R&D expenditure and administrative expenses, and the lack of self-sold products to generate revenue, the operating cash flow of the company was also affected. As of the end of the first half of 2023, the net operating cash flow of the company was -1230$80,000.
In the case of perennial losses in performance, Kangshi Cloud has also been defrauded by hackers who impersonate the controller and 106US$50,000 (about $7.61 million at the exchange rate on December 6).
It is reported that from February 20, 2019 to March 4, 2019, DiNH, the executive director and chief operating officer of Diakyvision Cloud, received a fraudulent email impersonating Ni Jinsong, the controller.
DIN was asked by hackers to transfer funds from the U.S. bank account of Dia Kangshi Cloud to the bank accounts of two designated Hong Kong companies.
According to the description of Diakang TV, Ni Jinsong was traveling in the United States at that time, and the contact between him and DIN was mainly through email. DIN had asked the other party to provide the invoice of the transaction, and the hacker pretended to be Ni Jinsong to provide a forged invoice in the email, and DINK did not find anything abnormal. As a result, DIN transferred money to the account designated by the hacker based on the instructions in the email at the time.
On March 9, 2019, after the transfer was completed, the actual controller Ni Jinsong found emails related to fraud in the deleted folder of his mailbox. Later, he realized that his email account had been hacked. Ni Jinsong immediately contacted DINCH and reported the incident to the United States and Hong Kong**.
However, as of now, the hacker has not been caught. 106The $50,000 was also not recovered, but the company received $410,000 in insurance compensation.
Attached: List of intermediaries for the listing and issuance of Bakang Vision
Joint Sponsors:UBS Securities Hong Kong Limited, CCB International Financial***, Huatai Financial Holdings (Hong Kong)**
Legal Counsel:Hogan Lovells, Haiwen Law Firm, Harneys Law Offices, JunHe Law Offices Shanghai Branch, JunHe Law Offices.
Reporting Accountants and Auditors:PricewaterhouseCoopers.
Industry Consultants:Frost & Sullivan (Beijing) Consulting*** Shanghai Branch.