F-1/A: Beroni Group Eyes Nasdaq Listing with Proposed IPO

Beroni Group Limited, an Australian biopharmaceutical company, is seeking to list its Ordinary Shares on the Nasdaq Capital Market through a firm commitment initial public offering.

Summary

• Beroni Group Limited, an Australian holding company, is planning an initial public offering (IPO) of its ordinary shares to list on the Nasdaq Capital Market under the symbol BRNI.
• The company's ordinary shares are currently traded on the OTCQB market (BNIGF) and the National Stock Exchange in Australia (BTG).
• The IPO's success is contingent on Nasdaq's approval of the listing.
• Beroni Group operates through subsidiaries in the US, Australia, China, Hong Kong, and Japan, focusing on research and development of anti-cancer drugs, cell therapies, and detection/diagnosis of infectious diseases, as well as e-commerce sales of pharmaceutical and healthcare products.
• The company intends to use approximately $10 million of the IPO proceeds to commence Phase II clinical trials for its PENAO product candidate in Australia and China, and approximately $10 million to advance gamma delta T-cell therapy through Phase I and II clinical trials in China and Japan.
• The remaining proceeds will be used for general corporate purposes, including working capital, facility improvements, and strategic acquisitions.
• The company faces risks related to its operations in China, including regulatory uncertainties and governmental control, as well as risks associated with clinical trials, commercialization, and intellectual property protection.
• The company's auditor may not be inspected by the PCAOB which could lead to delisting.
• The company has issued convertible notes and loans that could cause dilution upon conversion.
• The company's ability to continue as a going concern is dependent on raising additional financing and meeting sales forecasts.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While the company is pursuing an IPO and has promising research programs, it also faces significant financial challenges, regulatory risks, and operational uncertainties. The sentiment is cautiously negative.

Positives

• The company has established international scientific and research collaborations with renowned universities.
• The company is developing a robust and growing pipeline of product candidates addressing immuno-oncology and treatment of infectious diseases including COVID-19.
• The company adopts GMP standards for the manufacturing of its products for both in-house and outsourced manufacturing.
• The company has established strategic alliances to conduct clinical development, manufacturing and commercial capabilities.

Negatives

• The company has incurred total comprehensive losses of AUD5.19 million and AUD3.70 million for the six months ended June 30, 2023 and June 30, 2022, respectively.
• The company has incurred total comprehensive losses of AUD8.51 million, AUD3.25 million and AUD5.25 million for the years ending December 31, 2022, December 31, 2021 and December 31, 2020, respectively.
• The company's auditor may not be inspected by the PCAOB which could lead to delisting.
• The company faces uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
• The company faces potential liquidity risks arising from regulations applicable to its PRC subsidiaries, including potential limitations on dividends and distributions from its PRC subsidiaries, and governmental controls on currency conversions.
• The company faces inadequate segregation of duties with respect to internal control over financial reporting, given it has limited accounting personnel to enable and sufficiently evidence an independent review of complex financial reporting matters.
• The company faces significant increase in provisions for bad debts for the aged customer receivables of Beroni Tianjin after taking into account the market uncertainty and slowing economy in China.
• The company faces credit loss for the investment in Youtokukai Fund due to uncertainty of recovery in the current market condition in Japan.
• The company faces potential adverse effects on existing business relationships with suppliers and customers.
• The company faces deteriorating market conditions in Japan affecting its business and also its investment in Dendrix Inc.
• There is substantial doubt about the company's ability to continue as a going concern.

Risks

• The company's business is subject to the complex and rapidly evolving laws and regulations in China.
• Changes in China's economic, political and social conditions, as well as changes in any government policies, laws and regulations, could have a material adverse effect on the company's business.
• The Chinese government may exercise significant oversight and discretion over the conduct of the company's business and may intervene in or influence its operations at any time, which could result in a material change in its operations and/or the value of its Ordinary Shares.
• If the Chinese government chooses to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers, such action could significantly limit or completely hinder the company's ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless.
• Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.
• The PRC government exerts substantial influence over the manner in which we must conduct our business activities in China.
• Restrictions under PRC law on our PRC subsidiaries ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions, pay dividends to you and otherwise fund and conduct our business.
• The company may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that it violated these laws could have a material adverse effect on its business.
• The requirements to obtain regulatory approval of the U.S. FDA and regulators in other jurisdictions can be costly, time-consuming, and unpredictable.
• The company's inability to protect its systems and data from continually evolving cybersecurity risks or other technological risks, including as a result of breaches of its associated third parties, could affect its ability to conduct its business.
• The company's future commercial success depends upon attaining significant market acceptance of its products, if approved, among physicians, patients and healthcare payors.
• Adverse economic conditions in our current markets, or internationally may harm our business, results of operations and financial condition.
• Ethical and other concerns surrounding the use of stem cells in cosmetics may negatively affect regulatory approval or public perception.
• The company's operating and financing activities expose it to foreign currency exchange and interest rate risks, which may adversely affect its revenues and profitability.
• The company may not be able to carry on its business if it loses any of the required permits and licenses.
• The company does not have discretion to increase the prices of certain of its products, which are subject to the regional government tendering mechanism and/or reimbursement ceilings.
• The company's financial position and operations may be materially and adversely affected if its product liability insurance does not sufficiently cover its liabilities.
• The company is subject to intense competition and may encounter increased competition from both local and overseas enterprises if PRC regulators relax the approval process for our products or international trade restrictions.
• The company depends heavily on key personnel, and turnover of key employees and senior management could harm its business.
• Future acquisitions may have an adverse effect on the company's ability to manage its business.
• The company may lose its competitive advantage and its operations may suffer if it fails to prevent the loss or misappropriation of, or disputes over, its intellectual property or proprietary information.
• A disruption in the supply of utilities, fire or other calamity at the company's manufacturing plant would disrupt production of its products and adversely affect its business.
• The company does not have insurance coverage for its products and its inventories of raw materials or business interruption.
• If the company fails to establish and maintain proper internal financial reporting controls, its ability to produce accurate financial statements or comply with applicable regulations could be impaired.
• The company faces risks related to health epidemics and other outbreaks, including the coronavirus (COVID-19), which may cause business disruptions, resulting in a material, adverse impact to its financial condition and results of operations.
• If the company is unable to satisfy its repayment obligations under certain convertible notes, it may be subject to litigation for collection of the amount due, or shareholders may face substantial dilution upon conversion of these notes.
• If the company is unable to make certain required milestone payments under its Shareholders Agreement with NewSouth Innovations Pty Limited (NSI) and PENAO Pty Ltd, its licensing rights to the PENAO cancer drug candidate could be jeopardized.
• There is substantial doubt about the company's ability to continue as a going concern.
• The market price of the company's Ordinary Shares is volatile, leading to the possibility of its value being depressed at a time when you want to sell your holdings.
• The company's ability to raise capital in the future may be limited.
• An active trading market for the company's Ordinary Shares may not develop or be liquid enough for you to sell your Ordinary Shares quickly or at market price.
• Investors purchasing the Ordinary Shares will suffer immediate and substantial dilution.
• As a foreign private issuer, the company is permitted to file less information with the SEC than a company incorporated in the United States.
• Stock prices of companies that have business operations in China have fluctuated widely in recent years, and the trading prices of our Ordinary Shares are likely to be volatile, which could result in substantial losses to investors.
• Stock prices of companies with business operations primarily in Australia have fluctuated widely in recent years, and the trading prices of our Ordinary Shares are likely to be volatile, which could result in substantial losses to investors.
• Anti-takeover provisions in the company's constitution and its right to issue preference shares could make a third-party acquisition of it difficult.
• Australian takeover laws may discourage takeover offers being made for the company or may discourage the acquisition of a large number of shares.
• The company's constitution and Australian laws and regulations applicable to it may adversely affect its ability to take actions that could be beneficial to its shareholders.
• Australian companies may not be able to initiate shareholder derivative actions, thereby depriving shareholders of the ability to protect their interests.
• You may have difficulty enforcing judgments against the company.
• The company does not intend to pay dividends for the foreseeable future.
• As a foreign private issuer, the company is permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from NASDAQ corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy under NASDAQ corporate governance listing standards.

Future Outlook

The company expects a number of important clinical and commercial milestone events to occur over the next 2 years, including Phase II clinical trials of PENAO, Phase I clinical trial of Gamma Delta T Cell therapy, development of a medical treatment for COVID-19, commencement of clinical study of Dendritic Cells (DC) Vaccine Therapy, and commercial-scale production for the viral detection kit developed by Columbia University.

Industry Context

The announcement reflects a broader trend of biopharmaceutical companies seeking access to U.S. capital markets, particularly the Nasdaq, to fund research and development activities. The company's focus on oncology and infectious diseases aligns with areas of significant unmet medical need and investor interest.

Comparison to Industry Standards

• Beroni's strategy of developing anti-cancer drugs and cell therapies is comparable to companies like Celgene (acquired by Bristol Myers Squibb) and Kite Pharma (acquired by Gilead), which focused on innovative cancer treatments.
• The company's e-commerce platform for pharmaceutical and healthcare products is similar to companies like JD Health and Alibaba Health, which operate online pharmacies and healthcare marketplaces in China.
• The company's development of viral detection kits is comparable to companies like Roche and Abbott, which are major players in the diagnostics market.
• The company's focus on the Chinese market is similar to companies like BeiGene and Zai Lab, which are developing and commercializing innovative therapies in China.

Legal Proceedings

• A claim for RMB1.4 million (approximately A$280,000) compensation was lodged by the deceased estate of a shareholder in the later part of 2020 against the Chinese subsidiary, Beroni Biotechnology Co., Ltd. The claimant challenged that the share subscription agreement entered into between the Chinese subsidiary and the deceased shareholder in the pre-IPO period before Beroni Group Limited was listed on the National Stock Exchange of Australia was not valid and thereby sought a return of the share subscription money. Beroni Biotechnology Co., Ltd has strongly defended against the claim and provided evidence that the share subscription agreement was valid and effective. In December 2020, the Chinese court issued a judgement dismissing the validity of the claim. After the court ruling, the deceased estate lodged an appeal in February 2021. And subsequently in August 2021, the appeal court having considered the case, dismissed the ruling of the first trial and requested a retrial. The retrial was held on 2 June 2022 and later on 4 July 2022, the Chinese court issued a judgement rejecting the claim again and ruling in favour of the Chinese subsidiary. The claimant however lodged a further appeal and a court hearing was attended by Beroni on 18 November 2022. On 24 April 2023, the Chinese court dismissed the claim again and ruled in favour of Beroni.

Related Party Transactions

• The Company has engaged the services of Asia Invest Partners Pty. Ltd to manage its financial and tax affairs in Australia. Asia Invest Partners is owned by the Australian director, Peter Yap Ting Wong. The Company has paid AUD17,300 for such services rendered in the half year ended June 30, 2023 (HY2022: AUD19,584) and AUD39,168 per annum for such services rendered in the 2022 financial year (AUD30,000 and AUD25,000 in the 2021 and 2020 financial years respectively).
• The Group CEO, Jacky Boqing Zhang has provided an initial loan to Beroni Hong Kong for payment of general and administrative expenses before the company was able to open its bank account. The amount due to him as of December 31, 2021 was AUD26,730 and this amount was subsequently repaid in February 2022. In June 2023, Jacky Boqing Zhang provided another loan of AUD100,000 to Beroni Group Limited for working capital needs.

Stakeholder Impact

• Shareholders will be impacted by the potential dilution from the IPO and convertible notes, as well as the risks associated with the company's operations and financial condition.
• Employees may be impacted by the company's ability to fund its operations and research and development activities.
• Customers may be impacted by the company's ability to develop and commercialize new products and therapies.
• Suppliers and creditors may be impacted by the company's financial condition and ability to meet its obligations.

Next Steps

• Obtain Nasdaq approval for listing.
• Commence Phase II clinical trials for PENAO in Australia and China.
• Advance gamma delta T-cell therapy through Phase I and II clinical trials in China and Japan.
• Develop a medical treatment for COVID-19 based on single-domain antibody technology.
• Commence clinical study of Dendritic Cells (DC) Vaccine Therapy.
• Embark on commercial-scale production for the viral detection kit developed by Columbia University.

Key Dates

Keywords

IPO, Initial Public Offering, Nasdaq, Biopharmaceutical, Cancer, Cell Therapy, Infectious Diseases, E-commerce, PENAO, Gamma Delta T-cell, COVID-19, China, Australia, Listing, Ordinary Shares