Biotech Power Struggle: Founder Ousted from the Game

In a dramatic turn of events, the biotech industry has witnessed a power struggle that resulted in the ousting of a prominent founder. The recent incident involving YS Biopharma, as reported by Yaozhi News, has not only shaken the company but also provided valuable insights into the future of the domestic biotech landscape. This article delves into the details of the conflict and its implications for the industry.

The IPO Journey and Capital Structure:

YS Biopharma had initially set its sights on the Hong Kong Stock Exchange for its IPO. However, due to the lengthy waiting period and the fading IPO frenzy in Hong Kong, the company's IPO plans faced challenges. As of the IPO filing in March 2021, major shareholders included Zhang Yi, Min Rui (a couple), OrbiMed, Asia Ventures II L.P, Oceanpine, and 3W Capital, holding stakes of 58.17%, 5.14%, 3.25%, 4.91%, and 2.68%, respectively.

Successful Listing and Troubles Ahead:

In March 2023, YS Biopharma successfully went public through a reverse merger with Summit Healthcare, a special purpose acquisition company (SPAC), listing on the NASDAQ in the United States. The company raised $236 million in funding, with participation from SPAC, Pulin Capital, Snow Lake Capital, and other cornerstone investors. Notably, this success had connections to Cambridge Capital, as its subsidiary R-Bridge had provided $40 million in strategic investment support to YS Biopharma.

The Unfolding Conflict:

The public disclosure of the power struggle occurred in December 2023. First, the CEO and President of YS Biopharma, Shao Hui, convened a board meeting on December 9th, resulting in the removal of Zhang Yi as Chairman and the appointment of Ajit Shetty as temporary Chairman. Subsequently, R-Bridge raised concerns about significant discrepancies between budget and actual financials, warning of default risks and demanding full repayment. In February 2024, YS Biopharma conducted a private placement, issuing approximately 95.27 million common shares, with Apex becoming the largest shareholder. These events escalated the conflict between the ousted founder and the capital side, leading to the aforementioned controversy.

Challenges Faced by YS Biopharma:

YS Biopharma, unlike many biotech startups, has been in operation for over 20 years. However, the company has heavily relied on a single product, "Yisheng Junan," the first domestically produced freeze-dried, aluminum-free purified rabies vaccine for human use. The commercialization of this vaccine faced hurdles, including a production halt from 2014 to 2019 due to the expiration of the GMP certification for the production facility. YS Biopharma's revenue in the fiscal years 2020-2023 showed a heavy dependence on this single product, with revenues of 184 million, 502 million, and 687 million RMB, respectively.

The Promise of the Picovax Adjuvant Platform:

YS Biopharma's appeal to investors and institutions extends beyond its rabies vaccine. The company has developed the Picovax adjuvant platform, which combines adjuvants (immunostimulants) with mature vaccine mechanisms to target specific viral infections. Adjuvants play a crucial role in enhancing immune responses and optimizing protective immunity. YS Biopharma aims to leverage the Picovax platform to develop innovative vaccines, similar to how GSK has achieved a competitive advantage in the herpes zoster vaccine market with its robust aluminum adjuvant technology.

The turmoil faced by YS Biopharma, a veteran player in the biotech industry, underscores the challenges of relying on a single product and the intensified competition in the vaccine market. However, the company's promising Picovax adjuvant platform offers potential avenues for future growth and innovation. The power struggle within YS Biopharma serves as a reflection of the broader dynamics in the domestic biotech sector, shedding light on the importance of diversification and strategic partnerships amidst a rapidly evolving landscape.