Chinese vaccine maker CanSino faces tough IPO sell in wake of Changsheng Bio-technology scandal

A source close to the IPO says the company is different because it is run by scientists and is not simply a mass producer

PUBLISHED : Wednesday, 25 July, 2018, 9:49pm
UPDATED : Thursday, 26 July, 2018, 12:30am

CanSino Biologics, a Chinese developer of vaccines, will have to contend with investors’ scepticism as it tries to convince them to buy into its initial public share offering, after a recent scandal caused outrage across the country and raised alarm bells over the industry’s quality standards.

The Tianjin-based company, whose name reflects the Canadian and Chinese backgrounds of the four scientists who set it up with their personal savings nine years ago, filed an application on Tuesday last week to list on Hong Kong’s stock exchange. CanSino and the company implicated in the scandal are not connected, and investors need to know that, one expert said.

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“Amid the vaccine scandal, this IPO would be a tough sell to retail investors,” said Louis Tse Ming-kwong, managing director of VC Asset Management. “The key to gaining their confidence is whether it has commitment from well-known cornerstone investors.”

China’s pharmaceutical sector has come under fierce scrutiny after Changchun Changsheng Bio-technology was found by authorities in Jilin province to have sold some 252,600 lots of substandard diphtheria, whooping cough and tetanus (DPT) vaccine and to have faked data on 113,000 lots of rabies vaccine.

The scandal caught the attention of China’s top leaders. Just a day after Premier Li Keqiang dispatched an investigation team, President Xi Jinping interrupted a trip to Africa to order local authorities to conduct an immediate probe and release the findings to the public in a timely manner to ensure social stability.

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A source close to CanSino’s IPO said the company should be differentiated from Changsheng, since CanSino is a developer of new and better vaccines and is backed by scientists with rich industry experience in global firms, while Changsheng is a mass producer of an older generation of vaccines. The source declined to say anything about the IPO’s timetable or fundraising target.

CanSino counts Lilly Asia Ventures, which is backed by US pharmaceutical giant Eli Lilly, among its investors in five private fundraising rounds before the IPO. Also investing are Shanghai-based private equity firm Qiming Venture Partners and SDIC Fund Management, which is backed by the state-owned State Development & Investment Corporation.

CanSino has a pipeline of 15 vaccine candidates for 12 diseases, according to the preliminary listing prospectus of the IPO, which is jointly sponsored by Morgan Stanley and CLSA. Of the 15, two are being developed jointly with partners, and the rest are in-house research and development.

Eight of the 15 are considered “core” products, of which two vaccines for DPT are in early stage phase 1 trials.

In the prospectus, CanSino said nearly all currently available DPT vaccines in mainland China are made through a process that results in varying quantities of antigen, while its candidate drugs are purified individually and combined in a defined ratio, ensuring a “fixed and consistent composition”.

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It also has two meningitis vaccines, which it said show improved effectiveness and safety over current vaccines, in phase 3 clinical trials expected to be completed later this year and early next, as well as a tuberculosis booster vaccine which is in phase 1 trials in Canada.

Among its non-core drug candidates, the most mature is a vaccine against the Ebola virus for which the firm – together with the Institute of Biotechnology of the Academy of Military Medical Science – received Chinese regulatory approval last year for emergency use and for a national stockpile.

CanSino’s co-founders include chief executive Yu Xuefeng, a former fermentation development director at Sanofi Pasteur, the vaccines division of US pharmaceutical firm Sanofi.

The three other co-founders, Zhu Tao, Helen Mao Huihua and Qiu Dongxu, have been senior managers at Sanofi, Wyeth Pharmaceuticals, Endo Pharmaceuticals and Shanghai-based biotech firm GenePharma.