On August 31, 2020 Viva Biotech Holdings (the "Company" and, together with its subsidiaries, collectively the "Group" or "Viva Biotech"; stock code: 1873.HK) reported its interim results for the 6 months ended June 30, 2020 (the "Reporting Period") (Press release, Viva Biotech, AUG 31, 2020, View Source [SID1234564198]). As of June 30, 2020, the Group’s revenue amounted to RMB197.6 million, representing a YOY increase of 38.9%. Gross profit was RMB100.1 million, representing a YOY increase of 39.2%. Adjusted net profit was RMB123.7 million, representing a YOY increase of 25.5%. Backlog amount reached approximately RMB493 million, representing a significant YOY increase of approximately 138.2%.
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Facing difficulties induced by the COVID-19 pandemic, the Group proactively implemented containment measures to seek opportunities behind such crisis and accelerate the integration of research and development ("R&D") and production service chain of new drug industry, thereby achieving further synergistic effect between the cash-for-service (CFS) and equity-for service (EFS) models.
Revenue from CFS Surged Successively with Continuously Optimized Customer Structure
During the Reporting Period, both the Company’s backlog amount and number of customers recorded substantial growth. As of June 30, 2020, the Company has provided drug discovery services to an aggregate of over 495 biotechnology and pharmaceutical customers worldwide, delivered over 17,000 protein complex structures and conducted research into more than 1,300 independent drug targets. Revenue from the CFS segment maintained a rapid escalation to RMB154.0 million from RMB105.4 million for the corresponding period last year, representing a YOY growth of 46.1%. Furthermore, total revenue from the top 10 customers increased YOY from RMB64.7 million to RMB82.1 million, while that as a percentage of the Group’s total revenue dropped from 45.5% to 41.5%, indicating a continuously optimized customer structure.
Extensively Explored EFS Opportunities, Proactively Developed Post-Investment Management
As for the EFS segment, the Company extensively explored business opportunities around the globe on an ongoing basis and established long-term cooperation relations and recommendation systems with nearly 60 universities, research transformation centers and investment institutions world-wide. During the Reporting Period, the Company reviewed a total of over 425 projects globally, added 10 start-ups to its portfolio companies, made additional investment in 3 existing portfolio companies and was in negotiation for incubation and investment in 3 new companies. As of June 30, 2020, the Company had a total of 56 portfolio start-ups with a wide range of indications and geographical coverage.
Viva Biotech continuously attracts top ranking scientists from China and overseas to join as business partners. The Company’s business partners have increased to 30, of who have attained remarkable achievements in their academic and drug discovery fields. The Company also actively conducted post-investment management to facilitate incubated companies to advance R&D progress, introduce talents, optimize product pipeline development strategies and coordinate fund-raising resources.
Actively Developed New Technology Platforms, Accelerate the Expansion of Facilities
As of June 30, 2020, the Company’s R&D investment totaled RMB 22.3 million, representing a YOY increase of 42.9%, primarily used for introduction of new technology platforms such as Cryo-EM, Computational Chemistry and HDX-MS. In addition, the Company also proactively mapped out in the antibody macromolecules field and set up CMC process development team so as to expand and satisfy customers’ needs at different R&D stages. To better meet the Company’s requirements arising from rapid business development, in February 2020, the Company acquired the property with a site area of 7,576 square meters located on Faladi Road, Pudong, Shanghai. In April 2020, Viva Biotech New Drug Incubation and Production R&D Center located in Wenjiang of Chengdu with a site area of 33,607 square meters also commenced construction. Furthermore, the Company successfully entered into a bid for the property located in Zhoupu, Pudong, Shanghai, with a gross floor area of approximately 40,000 square meters. It will be developed as Viva Biotech’s Shanghai headquarters. The above facilities will save the Company’s rental expenses and provide stable R&D, manufacturing and operation premise.
Vertically Integrated Industrial Chain to Construct a One-Stop Comprehensive Drug R&D Platform
The Company is speeding up the construction of a comprehensive and one-stop drug service platform, which is designated to provide customers with more comprehensive drug development services. In August 2020, the Company entered into a strategic integration with Zhejiang Langhua Pharmaceutical Co., Ltd., which brought together the synergistic effect of both parties in the R&D, design and manufacturing fields of global pharmaceutical markets, which is of great strategic significance to the Company in terms of vertical integration along the industrial chain and expansion into the CDMO business.
Dr. Cheney Mao, Chairman and Chief Executive Officer of Viva Biotech Holdings said: "Viva Biotech is positioned at the source of early-stage discovery of innovative drugs with technology platform, flow of traffic and talent advantages. Making good use of the traffic flow from CFS and EFS businesses at the source, we will seek strategic collaborations with leading enterprises in each sector along the industrial chain, establish a solid comprehensive R&D and manufacturing system and forge a one-stop platform for new drug discovery, providing customers with the most quality services throughout the full spectrum. Meanwhile, we will continue to strengthen technology advantages, enhance operation efficiency, introduce more talented scientists and technologies, improve capacity of the incubation platforms, strengthen loyalty between existing customers and portfolio companies and proactively conduct industrial integration, in a bid to establish an open and cooperative platform targeting at global biopharmaceutical innovators and build an ecosystem featuring cooperation and mutual benefits."