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China Biotech Services (8037.HK): Confident shareholders are taking long on their books in anticipation of promising results to be generated from the double engines of growth on cell therapy and precision diagnostic businesses

HONG KONG, Jun 28, 2021 – (ACN Newswire via – 2021-6-23 / Gelonghui – The Company’s self-developed cell therapy product was approved by NMPA to enter into phase I clinical trial as a class I new drug

Source: official website of NMPA

With the recent approval of the first CAR-T cell therapy product for marketing in China, a brand-new era of immune cell therapy has just begun.

According to the announcement of National Medical Products Administration of China (NMPA), Axicabtagene Ciloleucel injection (code name: FKC876), a CAR-T cell therapy product of Fosun Kite, was officially approved for the treatment of adult patients with relapsed or refractory large B-cell lymphoma (including diffuse large B-cell lymphoma (DLBCL) non-specific type, primary mediastinal B-cell lymphoma (PMBCL), high-grade B-cell lymphoma and DLBCL transformed from follicular lymphoma) after second-line or higher systemic therapy.

China Biotech Services took its first show in the field of CAR-T cell R&D through its acquisition of Shanghai Longyao Biotech in July 2018.

By now, Shanghai Longyao Biotech has built a first-class scientific and R&D transformation team and has pooled up more than 10 products in pipeline, of which four have obtained international technology patents and the other six are pending for completion of applications. Other than those popular target markers, the Company has developed certain proprietarily structured CAR-T. Based on the number of proprietary patents on hands, the distinctive progress made in filing for clinical trials and those highly regarded articles published in top international medical journals (e.g. Science Translation Medicine), Shanghai Longyao Biotech has proved itself to be amongst the first-tier players in the global CAR-T field.

With respect to the latest progress of those pipelines, CD20-CART-OX40 product has received the approval to kick off the clinical trial as a Class I Investigational New Drug (IND) on January 20, 2021.

At almost the same time, Professor Yang Xuanming, the chief scientist of Shanghai Longyao Biotech, published his article on CD20-CART-OX40 in Science Translational Medicine on January 27, 2021, EST.

The article specifically highlighted the findings of such cell product’s potential efficacy against solid tumors. The clinical data will support the Company’s subsequent research on making use of the product to tackle solid tumors.

CLDN18.2-CART-OX40, the Company’s second CAR-T product for treatment of solid tumors, has now passed ethical and academic reviews for pancreatic and gastric cancers at the Affiliated Hospital of Xuzhou Medical University, Jiangsu Province. The Company has started investigator-initiated trial on the product and is in the process of patient enrolment. The Company has prepared to start investigator-initiated clinical trial of the product at Ruijin Hospital, Shanghai.

In addition, the generic UCART- CD19, which has passed academic and ethical review at Huaian People’s Hospital, Jiangsu Province, has started an investigator-initiated trial which is in the process of patient enrolment.
Once the cell therapy products have got through the respective stages of clinical trials one by one, it is expected that Shanghai Longyao Biotech can become one of the leaders in the development of cell therapies.

II. A comprehensive scope of diagnostic products that can secure sustainable business growth

Over the past one year, the outbreak of COVID-19 pandemic has brought rapid business growth for companies in medical diagnostic industry. Yet, there are concerns in the market that once the outbreak is under control, the performance of these third-party medical diagnostic companies will gradually fade out. How to maintain sustainable business growth is a problem being faced by the whole industry. China Biotech Services’ revenue continued to grow by 1,113% in the first quarter of this year on a year-on-year basis, after recording a remarkable growth in last year. This is mainly attributable to the Company’s comprehensive scope of medical diagnostic products, the ownership of three well-positioned medical laboratories, as well as the synergistic growth of businesses in three health check-up centres located in strategic regions of Hong Kong. The key highlights are listed out as follows:

1. Sunrise Diagnostic Centre is focusing on the provision of nucleic acid testing for COVID-19. The overall community demand for testing business has remained strong due to the continuous mutation of the virus and the ongoing spread of virus. Being a member company of China Biotech Services, Sunrise Diagnostic Centre is one of the largest nucleic acid testing providers in Hong Kong. It has once served as the main contractor of the universal testing program for COVID-19 in Hong Kong lasting from July to September 2020. During the period, 1.68 million people had taken the tests within 15 days with 44 positive cases identified. The program had effectively cut off 10 virus transmission chains and had proved to be crucial for the Hong Kong government to suppress the third wave of the outbreak. As well, Sunrise Diagnostic Centre is the appointed service provider to perform quarantine testing for arrival passengers at the Hong Kong International Airport since December 2020. Since then, the Sunrise team has successfully shortened the turnaround time of the test to less than two hours. This has brought significant improvement of service to those inbound passengers and has assisted the government to enhance the efficiency of passenger clearance at the Hong Kong International Airport.

2. Set up in 1968 with a history of 53 years, PHC Medical Diagnostic Laboratory is a third-party medical testing centres well-established in Hong Kong with good brand recognition. PHC offers a wide range of tests to clients covering almost all medical diagnostic items related to pathology, blood, biochemistry, immunology, radiology and others. Its clients come from many leading insurance companies and private clinics in Hong Kong. The PHC Medical Diagnostic Laboratory has also launched its Abbott Serum Antibody Testing Platform recently to provide neutralizing antibody testing services for vaccinated clients.

3. Serum antibody testing business is set to become a new growth driver
A. According to the latest quarantine arrangement for the control and prevention of COVID-19 that will become effective from 1 July 2021, Hong Kong residents who have taken serum antibody tests at their own expense in any recognised local laboratory before leaving Hong Kong with results showing that their antibody levels in sera are acceptable and return to Hong Kong within the next three months, the quarantine period can be shortened. For non-Hong Kong residents arriving in Hong Kong on or after 1 July 2021, the Hong Kong government will arrange for user-paid serum testing services at the airport. With satisfactory results found in both the serum antibody and nucleic acid tests at the airport, those non-Hong Kong residents who have been vaccinated will only need to be quarantined for seven days. This newly adopted policy is effectively reopening the boundary for travellers to go in and out of Hong Kong and as a result will boost the demand for serum antibody testing.

B. In addition, relevant statistics show that since the official launch of the COVID-19 vaccination program on 26 February 2021 and up to 20 June 2021, a total of about 3.28 million Hong Kong residents have been vaccinated. The market for post-vaccination antibody testing will also create a new opportunity for voluntary antibody testing.
C. Once the pandemic is brought under control, Hong Kong will surely move to reopen the boundary and to encourage more international travels for promotion of economic growth. While the overseas development of pandemic is largely uncertain even by now, the COVID-19 nucleic acid testing and antibody testing are expected to stay essential in the market for a longer time. The continuous mutation of the virus and the development of the pandemic are going to normalize the nucleic acid and antibody testing businesses and will bring sustainable growth to the Company.

The Company is riding on double engines of growth in both medical diagnostic and cell therapy businesses. The medical diagnostic business has formed the bedrock of the Company’s growth by providing stable income and cash flow. The medical diagnostic part is set to growth with the inclusion of more innovative tests apart from the COVID-19 related testing. The income stream from the medical diagnostic business is sufficient to support the capital requirements in the R&D phase of the cell therapy products. Once the development of cell therapy products gets into the harvest period, the Company will experience a new phase of rapid growth. Based on a comparison of key performance data with peer group companies in either the medical diagnostic sector or the cell therapy development sector, the outlook of the Company is rather promising as a value pick.

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