The mRNA tide is ebbing, and AIM Vaccine pays for the young .

Visual China.

Text |Damask.

When mRNA was at its hottest, AIM Vaccine set foot in this track with a high profile. In May 2021, AIM Vaccine acquired Livanda Biotech 5015% equity, successfully obtained mRNA platform research and development capabilities. Relying on the help of mRNA, AIM Vaccine landed in the capital market in October 2022.

But no one thought that such a popular concept would quickly ebb after four years, and the AIM vaccine, which was originally high-profile, also suffered heavy losses due to mRNA. On March 4, AIM Vaccine issued a profit warning announcement, and the company expects a net loss of up to 181-19.900 million yuan, compared with the same period in 2022300 million yuan significantly enlarged. The reason for such a huge loss is precisely because of the provision of intangible assets and goodwill of Livanda Bio, and the loss amount is as high as 165-1.8 billion yuan.

It is undeniable that mRNA technology has great potential, and AIM Vaccine has the courage to enter the battle at the first time. However, the overheated expectations that deviated from the fundamentals still allowed this track with unlimited potential to end miserably.

The reason for AIM Vaccine's deployment of mRNA technology is very simple, that is, it hopes to add some imagination space to the company.

Although AIM Vaccine is known as "China's largest private vaccine company" and its performance is quite stable, the company has never been recognized by the capital market.

In the early years, the fundamentals of AIM Vaccine were quite beautiful: in 2019 and 2020, the operating income was 95.2 billion yuan, 163.8 billion yuan, and the net profit attributable to the parent company was 11.7 billion yuan, 37.9 billion yuan, operating profit margin from 1647% rose to 2966%, achieving rapid growth in both scale and profit.

AIM Vaccine originally wanted to use its performance to increase its performance and achieve listing on the Science and Technology Innovation Board. In December 2020, it signed a pre-IPO counseling agreement with China Securities Construction Investment, but unfortunately, the listing ended in failure. In desperation, AIM Vaccine had to move to Hong Kong. After two marketing failures, AIM Vaccine finally passed the hearing in September 2022 and was launched the following month.

The reason why the road to listing of AIM Vaccine is so bumpy is not unrelated to the company's performance "changing face", and the company's performance has gradually declined since 2021.

In 2021 and 2022, AIM Vaccine achieved operating income of 15700 million yuan, 126.4 billion yuan, down 4 percent year-on-year2% and 195%；At the same time as the revenue declined, the company began to lose a lot of money, with losses of 69.3 billion and 3200 million yuan. This loss trend is further amplified in 2023 due to the impairment of mRNA assets.

Figure: AIM Vaccine Revenue and Growth Rate, **Brocade Research Institute.

In addition to the impact of the new crown epidemic, the unbalanced revenue structure of AIM Vaccine is also an important factor affecting the performance.

Up to now, AIM Vaccine has launched a total of 8 vaccine products, covering 6 major disease areas, but most of the company's revenue is mainly contributed by hepatitis B vaccine and human rabies vaccine. From 2021 to the first half of 2023, the sales revenue of these two core vaccine products accounted for the company's total revenue. 33%, which contributed almost all of the revenue.

When the proportion of core products in the company's total revenue is too high, it will lead to the company's excessive sensitivity to market fluctuations, thereby increasing the operating risk. This is also the main reason for the unstable performance of AIM Vaccine.

Looking at the two core vaccine products of AIM Vaccine, they are actually Red Sea products with fierce competition. Although the company still occupies a strong position in the market, the room for subsequent growth is quite limited.

As a class of vaccines, the profit margin of hepatitis B vaccine itself is not enough, and its revenue is closely related to the number of newborns and market competition. Although the rabies vaccine is a class II vaccine, it has encountered the violent impact of human diploid vaccine, and at the same time, the market competition is becoming increasingly fierce, and 20 rabies vaccines with different technical paths have been approved for marketing, and there are countless varieties under development.

Figure: List of rabies vaccines approved in recent years, **SDIC**.

In the case of blockage of core products, the only way for AIM Vaccine to break the situation is to develop new products in the future, which has also become the key for investors to measure the value of AIM Vaccine's investment. Under pressure, AIM Vaccine had no choice but to focus on innovation, on the one hand, laying out more R&D pipelines extensively; On the other hand, we will make every effort to promote the progress of the MRAN vaccine pipeline.

How to get out of the Red Sea? AIM Vaccine hopes to answer with the word "innovation".

After all in innovation, AIM Vaccine has laid a well-stocked R&D pipeline matrix, and as long as this expected pipeline matrix is realized, AIM Vaccine will be able to solve the growing pains. But the crux of the matter is, how should such a dream be realized?

Up to now, AIM Vaccine has deployed 23 vaccine products under development, with pipelines covering the world's top 10 vaccine varieties and targeting 14 disease areas, of which 9 varieties have obtained 14 clinical approvals. Such a rich degree is comparable to the pipeline layout of leading innovative drug companies. However, if you want to become a real leader in the vaccine industry, it is not enough to have a research and development attitude, but also to show a far-sighted strategic layout and strong execution.

Figure: AIM Vaccine's pipeline under development, **2023 semi-annual report.

Further in-depth analysis shows that AIM Vaccine currently has 4 vaccine products in phase III clinical trials, including bivalent mRNA vaccine, 23-valent pneumococcal polysaccharide vaccine (PPSV-valent pneumococcal conjugate vaccine (PCV13) and lyophilized human rabies vaccine (serum-free VREO vaccine). After excluding the new crown vaccine, which can no longer contribute to the performance, there are only 3 products that can really be sold in the short term, and it is expected to be approved for marketing around 2025.

But in fact, the competition pattern of these new vaccine categories is also quite fierce. Taking PPSV23 as an example, 6 domestic companies have been approved for their products; Even though the competition of PCV13 vaccine is slightly smaller, there are three competing products on the market in China: Pfizer, Walvax Biologics and Kangtai Biologics, and CanSino's product marketing application has been accepted. In other words, AIM Vaccine's upcoming new products will also face red ocean competition.

Except for the meningococcal conjugate vaccine (MCV4) of group A, C, Y and W135, which has started phase II clinical trials, most of AIM Vaccine's other vaccine products are still in the early clinical stage, and if all of them are developed, they will have to maintain high costs in the future.

More realistically, AIM Vaccine not only has hidden concerns about its growth, but also has a difficult cash flow and financial situation. As of the first half of 2023, AIM Vaccine's total cash has been less than 800 million yuan, but its short-term liabilities have exceeded 1 billion yuan, and its cash flow is under high pressure.

Figure: AIM Vaccine Asset Structure, **Brocade Research Institute.

Although AIM Vaccine has a rich pipeline under development, it is not easy to convert it into an approved product, and it is even more difficult to create a truly independent blockbuster product.

The pipeline layout is very ambitious, but how to implement this blueprint is actually the core problem that AIM Vaccine must solve. Looking back at the development history of AIM Vaccine, investors can also find that self-research is not its forte, and it is better at asset mergers and acquisitions.

In 2015, it acquired the entire equity of AIM Chengxin and obtained the exclusive rights and interests of hepatitis B vaccineIn 2016, it acquired AIM Kanghuai and obtained the inactivated hepatitis A vaccineIn 2019, it acquired AIM Weixin and obtained renal syndrome hemorrhagic fever vaccine, mumps vaccine and human rabies vaccineIn 2021, it acquired Levanda Biotech and obtained the ticket to enter mRNA.

Although acquisitions can rapidly expand product lines and market share, they also bring difficulties to subsequent collaborative integration, and if progress does not go well, it is easy to encounter problems such as waste of resources and reduced market competitiveness.

Through the construction of rich pipelines, and then become the leader of the whole industry chain of vaccines, this may be a feasible development path, but how to land is another ability. At the level of strategic planning, AIM Vaccine still shows strong ambitions, and what needs to be proven now is that it has the ability and determination to deliver on this blueprint.

For AIM Vaccine, which is standing in the Red Sea, what it lacks most now is a popular product that can change investors' perceptions.

Although the upcoming products cannot reach the level of popularity, they can still make AIM Vaccine "regain blood". After all, vaccines have always been considered the best pharmaceutical investment track. The long product iteration cycle and the abundant cash flow of the enterprise make the vaccine have a higher certainty of investment.

For example, Merck's 23-valent pneumococcal polysaccharide vaccine, which was approved for marketing as early as 1983, is still the mainstream product in this track today, and can still harvest hundreds of millions of dollars in revenue worldwide every year. In the domestic market, Merck 23-valent pneumonia monopolized the Chinese market after its approval in 1996, and it was not until 2006 that Chengdu 23-valent pneumonia was approved to achieve localization, and Merck's products are still very competitive.

Especially in the case of a sharp decline in the financing ability of Hong Kong stocks, these cash flows brought by products are particularly important. Only by obtaining a steady stream of cash flow can AIM Vaccine have the possibility of finding popular products.

Of course, AIM Vaccine did not bet all its future on new products, and still hopes to return to the A-share market, after all, the financing ability of A-shares is significantly stronger than that of Hong Kong stocks. However, with the tightening of the fifth set of listing standards on the Science and Technology Innovation Board, the difficulty of AIM Vaccine's return to A-shares continues to increase.

Looking back, AIM Vaccine was also full of ideals and dared to invest more than 1 billion yuan in the new technology of mRNA, its courage is commendable, and it also had the opportunity to be among the first echelon of China's vaccines. It's a pity that the value of mRNA has been greatly amplified by the epidemic, and when the demand decreases, this technology has not reached the final height, and AIM Vaccine is also paying for its own impulses.