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Regencell Bioscience Holdings Ltd (RGC US)

Year: 2022

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Regencell Bioscience Holdings Ltd (Regencell) operates a traditional Chinese medicine (TCM) bioscience company. It focuses on the research, development, and commercialisation of TCM for the treatment of neurocognitive disorders and degeneration, primarily attention deficit hyperactivity disorder and autism spectrum disorder. The company was incorporated in 2014 and is headquartered in Hong Kong.

Regencell listed on the NASDAQ on 16 July 2021 and raised US$25m in its IPO. The manager of the offering was Maxim Group.

On 1 March 2022, Peabody Street Research published a short report; "Professional Misconduct, Luxury Apartments, An IPO Bailout & More".  Peabody's research into Regencell raised a number of issues.  In brief, these were:

  • In its annual report, Regencell noted its dependency on its partner, Sik-Kee Au, who is the father of the founder. Sik-kee Au granted Regencell the exclusive rights and ownership of all his traditional Chinese medicine formulas as well as exclusive IP rights. However, Peabody uncovered that Sik-Kee Au was found guilty of professional misconduct in August 2021 by the Chinese Medicine Practitioners Board of the Chinese Medicine Council of Hong Kong. 
  •  Sik-Kee Au was proven guilty of professional misconduct during the time period in which Regencell's first trial was conducted.
  • Peabody was sceptical of recent trial results for a Covid 19 medicine, noting that it had yet to be peer reviewed  It also noted that it was conducted outside of Hong Kong; perhaps to avoid further penalties from the HK Chinese Medicine Council.
  • Peabody questioned Regencell's leasing of two luxury apartments costing US$14k a month.
  • Prior to its IPO, the company had US$67K in cash, negative shareholder equity of US$4M and was burning through US$112 a month. Peabody believed it was close to going under.
  • Peabody questioned the company's plans for spending its IPO proceeds, It noted that no funds had been allocated to commercialisation of its products.
  • Regencell has been burning through cash at an increasing clip rate; increasing by 108% from 2019 to 2020 and 66% from 2020 to 2021.
  • Lastly, Peabody pointed out the IPO underwriter's recent record. Regencell's underwriter was Maxim Group. Six of its IPOs in 2021 had returns in the range of -45% to -93%.

Peabody concluded saying that failure to disclose Sik-Kee Au’s professional misconduct, renting luxury apartments, and continuation of non-scientific studies did not bode well. It estimated a 100% downside on the stock.


Peabody Street Research: Professional Misconduct, Luxury Apartments, An IPO Bailout & More, 1 Mar 2022
Regencell Bioscience: Annual Report - YE Jun. 2021
Regencell Bioscience:: Prospectus, July 2021
SEC: Regencell Bioscience Filings


 

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