As a mage, I just want to pursue the truth

Chapter 25 Endorphin approved for marketing

Zheng Li waited on the stage for the audience to quiet down.

The investors who can stand here are the elite among the elites. They can immediately grasp the key point. Endorphins combined with another drug can cure addiction and drug dependence, even if this treatment is targeted and only effective against opioids.

But it's also a captive market.

Lei Jun was also filled with emotion. Investing in Zheng Li was the most profitable thing he had ever made in his investment career over the years.

Young Guo felt extremely helpless. He felt like he had missed the world just by missing one step. Perhaps if he had persisted a little longer, he could have participated in the A round of venture capital in Ke Chuang Biotechnology.

The excitement did not last long. Investors looked at each other as if they were enemies. There were only so many investment shares. There were more than 30 investment institutions present, but it was estimated that no more than five would be able to participate in the B round of investment.

After the situation calmed down again, Zheng Li said:

"Now I want to talk about what everyone is most concerned about, which is the specific details of Kechuang Bio's Series B investment."

"First, for our Series B investment, I will sell 20% of my shares to introduce four institutions, and these four institutions will share the 20% of the shares."

"The funds from the B round of investment will be mainly used for clinical trials at home and abroad. Endorphins have been approved for official sales. In addition, we need to build a production base integrating R&D and production in Suzhou, and plan to build a biomedical laboratory in Southeast Asia."

Many pharmaceutical giants build their own laboratories around the world. For example, Pfizer has a laboratory in South Africa and Bayer has its own laboratory in Singapore.

One reason is that these places offer tax incentives to innovative enterprises, and the other is that they utilize local resources to carry out resource allocation.

“Representatives of investment institutions present here can write down on paper your valuation of Kechuang Biotechnology and the help you can provide for Kechuang Biotechnology’s future development, as well as the name of the investment institution you represent, and then submit it to the service staff.”

"The service staff summarized the documents written by everyone and gave them to me."

“I will select four institutions present here to participate in the Series B investment of Kechuang Biotechnology.”

This is a form of blind bidding in an auction. Blind bidding is very disadvantageous for investors because you don’t know what price you should estimate in order to participate in the B round of investment.

Zheng Li continued: "Finally, the valuation of Kechuang Bio's Series B investment will be the average of the top four valuations of everyone present."

"If anyone from the four companies I selected gives up this opportunity, then it will be postponed."

After Zheng Li finished speaking, the waiter handed paper and pen to the investors in the audience.

Young Guo was very hesitant, he didn't know what conditions to write to win in this competition. Judging from what Zheng Li asked them to write, valuation was not the most important thing.

Moreover, investment institutions' valuations of Ke Chuang Biotechnology are roughly the same, even when Zheng Li claimed that endorphins can cure opioid addiction.

Because endorphins want to replace morphine's status as an analgesic, their price cannot be much higher than morphine. If endorphins want to be sold at a high price as a drug for treating addiction, they cannot be sold as an analgesic.

All in all, you can't take advantage of both positionings.

It is difficult to accurately judge the valuation of Ke Chuang Biotechnology as it has not yet entered production and has not completed the entire clinical trial process.

According to the most optimistic calculations, endorphins can completely replace opioids in the analgesic industry. The global analgesic market share in 2018 was approximately 2000 billion yuan.

The market is huge, but the annual compound growth rate is very low, less than 1%.

From this perspective, the value of endorphins is about 2000 billion. If endorphins can capture 600% of the market in the early stage after listing, that is, 90 billion in sales, and then 20% of the profit margin, that is, 2000 billion in annual net profit. Calculated at times the PE, the valuation is about billion.

In 2019, the average PE of domestic pharmaceutical companies was around 20, not as exaggerated as it was later.

2000 billion was the previous price. If endorphins also have the effect of treating addiction, then this valuation would be difficult to calculate.

Because this is a market that has never existed before. Although intuition and experience show that there are many drug addicts both at home and abroad, the market is huge and it is still a monopoly market.

However, how much profit a blue ocean market can generate, and whether Zheng Li, as the helmsman of the company, has the talent and courage to explore business, are all unknowns to Young.

Everyone present is in trouble.

"In the end, it will be these four, Goldman Sachs, IDG Capital, Bocom International and Temasek Investment Fund?" Zheng Li asked.

The valuations of Goldman Sachs, IDG Capital and Temasek Investment Fund are all around US$500 billion, and only Bocom International is valued at US$350 billion, which is significantly lower than the other three.

It was because of the consideration that state-owned capital was needed to allow Bocom International to enter the market.

Lei Jun nodded and said, "I think it's okay. These four institutions have rich experience, and the resources they can provide are also conducive to the development of the company."

Zheng Li asked, "At this price, do you want to follow up with the investment, brother?"

Zheng Li sold 20% of his shares. If Lei Jun does not make additional investments based on the new valuation, his equity will be diluted accordingly.

Lei Jun said directly: "Of course, if I don't invest in such a good project, what else should I invest in?"

"People are more important. I believe you can develop better products and benefit more patients."

After an agreement was reached among the shareholders of Kechuang Bio, Zheng Li arranged for Cheng Gang to handle specific matters.

The valuation of the last two rounds of investment in Kechuang Bio was US$471 billion. After Cheng Gang notified the four institutions of the news, Goldman Sachs, IDG and Temasek all responded on the same day: they were willing to invest.

After internal communication on the second day, Bocom International also decided to participate in the investment.

So far, the second round of investment in Kechuang Biotechnology has been participated by Goldman Sachs, IDG Capital, Temasek and Bocom International, and followed by Shunwei Capital.

Kechuang Bio received an investment of 141 billion yuan. After the money and resources were in place, Kechuang Bio entered the fast lane of development.

At the end of 2019, the Phase IV clinical trial of endorphin was completed, and the integrated production and R&D base was officially put into production in Gusu.

After the integrated base was put into production, Zheng Li began to work on the reproduction of the artificial magic brain. Without the help of magic, it is very difficult to cultivate a magic brain suitable for humans. Whether it is gene editing or later cultivation, many difficulties need to be overcome.

Zheng Li entered a state of deep research. Before entering the state of deep research, he appointed Li Miaomiao as the deputy general manager of Ke Chuang Bio, in charge of finance.

In February 2020, the Drug Review Center of the National Medical Products Administration accepted the marketing application of Ke Chuang Bio's endorphin and approved its marketing application.

After endorphins were approved, Kechuang Bio announced that it would unconditionally provide endorphins worth 100 million yuan to Jiangcheng to fight the epidemic.

(End of this chapter)