True Nature Biotechnology Faces CSRC Scrutiny Over Equity Transfers

True Nature Biotechnology, a biotech company focused on developing innovative treatments for viral infections, tumors, and cardiovascular diseases, has been asked by the China Securities Regulatory Commission (CSRC) to provide detailed explanations regarding its past equity transfers. The CSRC's request includes information on the pricing basis, payment methods, payment deadlines, and compliance with relevant regulations for the company's acquisition of its domestic operating entity, Henan True Nature Biotechnology. The CSRC has also asked for information on whether the transfer prices were fair and whether the transferors had filed and paid taxes as required. This request comes as part of the CSRC's broader scrutiny of companies seeking to list overseas, particularly those with complex equity structures or past equity transfers that may raise compliance concerns.

The CSRC's request is part of a larger trend of increased scrutiny of companies seeking to list overseas. The CSRC has been paying close attention to the compliance of companies' equity structures, particularly those with variable interest entity (VIE) structures or red-chip structures. These structures are often used by Chinese companies to circumvent restrictions on foreign investment in certain sectors. The CSRC has been requiring companies to provide detailed explanations of how these structures were set up and whether they comply with relevant regulations.

True Nature Biotechnology's core product, Azvudine, is a 1.1 class original innovative drug that has been conditionally approved by the National Medical Products Administration for the treatment of HIV infection and COVID-19. The company's revenue for 2023 and 2024 was approximately 3.44 billion yuan and 2.38 billion yuan, respectively, with net losses of approximately 7.84 billion yuan and 4004.2 million yuan, respectively. The company has filed for a second listing on the Hong Kong Stock Exchange, with Goldman Sachs as its sole sponsor. The company had previously filed for a listing on the Hong Kong Stock Exchange in August 2022.

The CSRC's request to True Nature Biotechnology is not an isolated incident. The CSRC has been requesting similar information from other companies seeking to list overseas. For example, the CSRC has asked companies to provide detailed explanations of their equity transfers, including the pricing basis, payment methods, and compliance with relevant regulations. The CSRC has also been paying close attention to whether companies have filed and paid taxes as required.

The CSRC's increased scrutiny of companies seeking to list overseas is part of a broader effort to ensure that Chinese companies comply with relevant regulations and that investors are protected. The CSRC has been working to improve the transparency and disclosure of companies seeking to list overseas, and to ensure that these companies comply with relevant regulations. The CSRC's request to True Nature Biotechnology is a sign of this increased scrutiny and a reminder to companies seeking to list overseas that they must comply with relevant regulations and provide detailed explanations of their equity structures and past equity transfers.