ZYBT.NASDAQZhengye Biotechnology Holding LTD
F-1/A: Zhengye Biotechnology Eyes Nasdaq Listing with 1.25 Million Share IPO
Sentiment:
Registration Statement
Zhengye Biotechnology Holding Limited is pursuing an initial public offering of 1.25 million ordinary shares, aiming for a Nasdaq listing and proceeds for acquisitions and R&D.
Capital raiseZhengye Biotechnology Holding Limited is planning an initial public offering of 1,250,000 ordinary shares.The expected initial public offering price is between $4.00 and $5.00 per share.The company aims to use the IPO proceeds for acquisitions of vaccine production companies and R&D initiatives.
Worse than expectedThe company's revenue decreased from RMB260.3 million ($36.7 million) in 2022 to RMB211.7 million ($29.8 million) in 2023.
Summary
- Zhengye Biotechnology Holding Limited is planning an initial public offering of 1,250,000 ordinary shares.
- The expected initial public offering price is between $4.00 and $5.00 per share.
- The company intends to list its Ordinary Shares on the Nasdaq Capital Market, but approval is not yet final.
- Kingswood Capital Partners, LLC is the underwriter for the offering on a firm commitment basis.
- The company plans to use the net proceeds to acquire vaccine production companies and conduct research and development projects.
- The company is incorporated in the Cayman Islands and conducts its operations through a subsidiary in China.
- The company acknowledges risks associated with operating in China, including regulatory uncertainties and potential government intervention.
- The company has filed the required documents with the China Securities Regulatory Commission (CSRC) and completed the filing on January 8, 2024.
- The company's director, chairman of the board of directors and largest shareholder, Mr. Zhenfa Han, will beneficially own approximately 91.58% of the aggregate voting power of the company after the offering.
Sentiment
Score: 6
Explanation: The document presents a mixed sentiment. While the company is pursuing growth strategies and has competitive strengths, it also faces significant risks and challenges, including declining revenue and regulatory uncertainties.
Positives
- The company has filed the required documents with the China Securities Regulatory Commission (CSRC) and completed the filing on January 8, 2024.
- The company has a diversified product range of veterinary vaccines.
- The company has high production quality standards.
- The company has strong research and development capabilities.
- The company has extensive distribution channels.
- The company has an experienced management team and employees.
Negatives
- The company's revenue decreased from RMB260.3 million ($36.7 million) in 2022 to RMB211.7 million ($29.8 million) in 2023.
- The company faces intense competition in the veterinary vaccine market.
- The company is subject to regulatory risks associated with operating in China.
- The company has high customer concentration, with two customers accounting for 67.05% of total revenue in 2023.
Risks
- Changes in Chinese economic, political, or social conditions could adversely affect the company.
- Uncertainties in the interpretation and enforcement of PRC laws could limit legal protection.
- The Chinese government may intervene in the company's operations.
- Recent greater oversight by the CAC over data security could adversely impact the company's business.
- The company may be subject to additional compliance requirements in the future.
- The company may not be able to maintain its growth rate.
- The company is subject to inherent risks relating to product liability.
- The company's business will be materially and adversely affected if its collaborative partners fail to perform as expected.
- The company may be accused of infringing the intellectual property rights of third parties.
- The company could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.
- There has been no public market for the company's Ordinary Shares prior to this offering.
- The initial public offering price may not be indicative of prices that will prevail in the trading market.
- You will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased.
- The company may fail to implement and maintain an effective system of internal controls.
- The company will incur substantial increased costs as a result of being a public company.
- Substantial future sales of the company's Ordinary Shares could cause the price of the Ordinary Shares to decline.
- The company does not intend to pay dividends in the foreseeable future.
- The market price of the company's Ordinary Shares may be volatile or may decline regardless of operating performance.
- The price of the company's Ordinary Shares could be subject to rapid and substantial volatility.
- Management has broad discretion to determine how to use the funds raised in the offering.
- If the company ceases to qualify as a foreign private issuer, it would be required to comply fully with the reporting requirements of the Exchange Act applicable to U.S. domestic issuers.
- Because the company is a foreign private issuer and intends to take advantage of exemptions from certain Nasdaq corporate governance standards applicable to U.S. issuers, you will have less protection than you would have if the company were a domestic issuer.
- If the company cannot continue to satisfy the listing requirements and other rules of the Nasdaq, its securities may be delisted.
Future Outlook
The company intends to develop its business and strengthen brand loyalty by developing high-demand products, expanding its sales and distribution network, enhancing its ability to attract and retain talented professionals, increasing investment in production lines, and increasing research and development investment.
Industry Context
The veterinary vaccine industry in China is highly competitive and rapidly evolving, with many new companies joining the competition in recent years and few leading companies.
Comparison to Industry Standards
- The document mentions Jinyu Bio-Technology Co., Ltd., Wuhan Keqian Biology Co., Ltd., Shanghai Shenlian Biomedical Co., Ltd., Guangdong Yongshun Biopharmaceutical Co., Ltd., and Shanghai Haili Biotechnology Co., Ltd. as competitors.
- The document mentions that the operating entity, Jilin Zhengye Biological Products Co., Ltd. (ZYBIO) has the most comprehensive product portfolio among domestic veterinary vaccine companies.
- The document mentions that in 2022, the annual growth rate of ZYBIOs veterinary vaccine revenue reached 21.4%.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Vice General Manager | Yawen Dong | NA | April 30, 2024 | Retired |
| Vice General Manager | Wanlin Zhang | NA | April 30, 2024 | Retired |
| Chief Operating Officer | NA | Zhongyao Liu | April 2024 | NA |
Related Party Transactions
- The operating entity purchased inventory from Jilin Huazheng Agriculture and Animal Husbandry Development Co., Ltd., which is controlled by Mr. Zhenfa Han.
- The operating entity sold a motor vehicle to Beijing Hanzhenyuan international hotel co., ltd., a company controlled by a shareholder of the Company.
Stakeholder Impact
- Shareholders will experience immediate and substantial dilution in the net tangible book value of Ordinary Shares purchased.
- The company's ability to pay dividends in the foreseeable future is uncertain.
- The company's operations could be adversely affected by changes in PRC laws and regulations.
- The company's ability to attract and retain qualified personnel is critical to its success.
Next Steps
- The company will apply to have its Ordinary Shares listed on the Nasdaq Capital Market.
- The company intends to use the proceeds from this offering to acquire vaccine production companies and conduct research and development projects.
Key Dates
| Date | Description |
|---|---|
| May 18, 2004 | Jilin Zhengye was established as a limited liability company organized under the laws of the PRC. |
| August 1, 2008 | The Anti-Monopoly Law of the Peoples Republic of China took effect. |
| January 1, 2008 | The PRC Enterprise Income Tax Law (EIT Law) became effective. |
| February 20, 2009 | SAT Circular 81 became effective. |
| September 26, 2013 | The CSRC issued a notice on its official website specifying documents and materials required to be submitted to it by an SPV seeking the CSRC approval of its overseas listings. |
| July 4, 2014 | SAFE issued SAFE Circular 37. |
| February 2015 | SAFE promulgated SAFE Circular 13. |
| February 2015 | SAT issued SAT Circular 7. |
| March 30, 2015 | SAFE issued SAFE Circular 19. |
| June 1, 2015 | SAFE Circular 13 became effective. |
| June 1, 2015 | SAFE Circular 19 took effect and replaced previous regulations. |
| June 9, 2016 | SAFE promulgated SAFE Circular 16, effective on June 9, 2016. |
| January 26, 2017 | SAFE issued SAFE Circular 3. |
| December 2017 | SAT Circular 82 was amended. |
| December 2017 | SAT issued SAT Circular 37, effective in December 2017. |
| April 1, 2018 | Circular on Several Issues regarding the Beneficial Owner in Tax Treaties became effective. |
| October 23, 2019 | SAFE issued SAFE Circular 28. |
| January 1, 2020 | The Foreign Investment Law took effect. |
| March 2020 | Article 177 of the PRC Securities Law became effective. |
| April 21, 2020 | SEC and PCAOB released a joint statement highlighting risks associated with investing in emerging markets. |
| May 18, 2020 | Nasdaq filed proposals with the SEC to apply stricter criteria to Restrictive Market companies. |
| May 20, 2020 | The U.S. Senate passed the HFCA Act. |
| December 2, 2020 | The U.S. House of Representatives approved the HFCA Act. |
| December 18, 2020 | The HFCA Act was signed into law. |
| March 24, 2021 | The SEC announced the adoption of interim final amendments to implement the submission and disclosure requirements of the HFCA Act. |
| September 22, 2021 | The PCAOB adopted a final rule implementing the HFCA Act. |
| June 22, 2021 | The U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act (AHFCAA). |
| July 6, 2021 | The Opinions were made available to the public. |
| December 2, 2021 | The SEC adopted amendments to finalize rules implementing the submission and disclosure requirements in the Holding Foreign Companies Accountable Act. |
| December 16, 2021 | The PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China or in Hong Kong. |
| December 28, 2021 | 13 governmental departments of the PRC jointly promulgated the Cybersecurity Review Measures. |
| January 10, 2022 | The rules adopted by the SEC on December 2, 2021 became effective. |
| February 15, 2022 | The Cybersecurity Review Measures became effective. |
| August 26, 2022 | The CSRC, the MOF, and the PCAOB signed the Protocol governing inspections and investigations of accounting firms based in mainland China and Hong Kong. |
| December 15, 2022 | The PCAOB Board determined that the PCAOB was able to secure complete access to inspect and investigate registered public accounting firms headquartered in mainland China and Hong Kong and voted to vacate its previous determinations to the contrary. |
| December 29, 2022 | Legislation entitled the Consolidated Appropriations Act was signed into law by President Biden. |
| February 17, 2023 | The CSRC promulgated the Overseas Listing Trial Measures and relevant five guidelines. |
| February 24, 2023 | The CSRC promulgated the Confidentiality and Archives Administration Provisions. |
| March 24, 2023 | Zhengye Cayman was incorporated as an exempted company with limited liability in the Cayman Islands. |
| April 3, 2023 | VVAX Skyline was incorporated in the BVI as a company with limited liability. |
| April 28, 2023 | Peg Biotechnology was incorporated in Hong Kong with as a company limited liability. |
| May 18, 2023 | Hainan Senhan was incorporated in the PRC with limited liability. |
| May 22, 2023 | Hainan Senhan acquired an aggregate of 58.689% of the equity interests in Jilin Zhengye from its original shareholders. |
| May 30, 2023 | VVAX Skyline acquired 100% of the equity interests in Windsor Holdings from its original shareholders. |
| June 20, 2023 | Hainan Senhan acquired an aggregate of 58.689% of the equity interests in Jilin Zhengye from its original shareholders. |
| June 21, 2023 | We issued 570,830 Ordinary Shares to VVAX Holdings Limited, 569,688 Ordinary Shares to Vanguards Skyline Holdings Limited, 259,465 Ordinary Shares to TLjinmao Limited, and 16,611 Ordinary Shares to XZjinyuan Limited. |
| March 20, 2024 | VVAX Holdings Limited transferred 399,581 Ordinary Shares to Visuccess Holding Limited. |
| April 30, 2024 | Yawen Dong, a former Vice General Manager, retired. |
| June 6, 2024 | The directors and shareholders of the Company unanimously passed resolutions approving, among others things, the share subdivision. |
Keywords
veterinary vaccines, initial public offering, Nasdaq, biotechnology, China, Ordinary Shares, Kingswood Capital Partners, CSRC, regulatory risks, acquisitions, research and development
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