Cai Shuo | Yifang Biotech A+H dual listing only relieves an urgent need

Recently, Yifang Biotech officially submitted its listing application to the Hong Kong Stock Exchange, planning to establish a dual listing platform in both “A+H” markets. Notably, the company’s performance forecast for 2025, disclosed at the same time, casts a shadow over this process.

Yifang Biotech expects revenue of approximately 37.245 million yuan in 2025, with a net loss attributable to shareholders of about 292 million yuan. 2025 is the year of commercialization for the company’s two products. Although both core products, Befuotinib and Gxlyse, have been included in the medical insurance catalog, the annual revenue of less than 40 million yuan indicates that the company’s terminal revenue-sharing benefits under the “ship-leasing” model are far below market expectations.

Commercialization Challenges

Yifang Biotech’s total revenue of 37.245 million yuan in 2025 remains below the sensitive threshold of 100 million yuan for the STAR Market, and falls short of commercialization expectations for the two products, Befuotinib and Gxlyse. The “net rights” of these two core products are relatively slim, implying a low conversion rate in the terminal market.

The root cause is Yifang Biotech’s highly dependent business model on partners. The commercialization rights for Befuotinib and Gxlyse have been granted to Betta Pharmaceuticals and Zhengda Tianqing, respectively. The company only receives upfront payments, milestone payments, and licensing fees.

Yifang Biotech told Jiemian News, “Since the composition of technology licensing and cooperation income varies across different years, fluctuations in related income are normal.”

The shortfall in revenue directly leads to a rigid increase in losses. Yifang Biotech forecasts a net loss attributable to shareholders of 292 million yuan in 2025, further expanding from a loss of 240 million yuan in 2024. After deducting non-recurring gains and losses, net losses exceed 304 million yuan. Commercialization income not only fails to cover high R&D costs but also struggles to offset basic operating expenses, significantly delaying the company’s breakeven point.

Faced with ongoing losses, the “cost-effectiveness” of R&D investment is being scrutinized by the market, and Yifang Biotech appears to have temporarily scaled back R&D efforts. The company’s R&D expenses in the first three quarters of 2025 dropped to 190 million yuan, a decrease of nearly 100 million yuan year-on-year, but still six times its revenue during the same period.

Additionally, the external variables of partner-driven commercialization efforts and priority adjustments have made Yifang Biotech’s revenue uncontrollable. Although the partners are leading domestic pharmaceutical companies, the company cannot directly control the allocation of marketing resources.

Looking at the 2025 situation, under fierce market competition, partners may not prioritize promoting these two products or face substantial obstacles such as price wars in terminal sales. This “asset-light” model, which transfers sales rights, reduces the direct costs of building a sales team but leaves Yifang Biotech in a passive position regarding cash flow.

Capital Needs

As losses continue to grow, Yifang Biotech’s cash reserves are steadily depleting.

As of September 30, 2025, the company’s cash and cash equivalents stood at 670 million yuan, down from 740 million yuan a year earlier. Considering the net cash outflow from operating activities in the first three quarters was -160 million yuan, the existing funds can only sustain about 2 to 3 years of normal operations, not including the upcoming high expenditure peak for the global Phase III clinical trials of its two core drugs.

There is a risk of mismatch between the costly late-stage clinical trial costs and available funds. Yifang Biotech stated that the funds raised from the Hong Kong IPO will mainly be used to advance the clinical development of D-0502 and D-2570, both of which are in the most resource-consuming registration clinical phases. Previous investor communication records show that D-0502 has completed Phase III trials domestically, and D-2570 has initiated Phase III trials for psoriasis.

Yifang Biotech’s listing in Hong Kong is a strategic “defensive financing” based on ensuring the safety of its capital chain. The losses disclosed in the performance forecast indicate that relying on internal cash flow to support subsequent R&D is no longer feasible, and the refinancing window on the STAR Market in A-shares is not friendly to loss-making companies. Therefore, opening a financing channel in Hong Kong is a key move to prevent liquidity exhaustion.

Pharmaceutical analyst Chen Li told Jiemian News, “With the safety cushion of cash flow gradually thinning, Yifang Biotech urgently needs to raise funds through the Hong Kong IPO to ensure that its core pipelines are not forced to halt or sell due to a break in the funding chain. This urgency may lead the company to compromise on the offering price.”

Meanwhile, the “ship-leasing” business model’s drawbacks in controlling cash flow further increase Yifang Biotech’s capital turnover pressure. The company relies on partner settlements of milestone payments and revenue sharing, making its receivables dependent on partners’ processes and willingness. If partners delay payments or renegotiate commercial terms due to strategic adjustments, Yifang Biotech faces cash flow risks.

Additionally, exchange rate fluctuations and cross-border fund transfer compliance costs add complexity to the company’s financial management. As a company listed in A-shares and seeking H-share listing, fund transfers across borders must strictly follow foreign exchange regulations.

Currently, Yifang Biotech mainly operates in mainland China, but its global clinical trials involve large foreign currency payments. Although foreign exchange losses in the third quarter did not cause significant impact, expanding overseas clinical trials could erode funds through exchange rate risks. Improving capital efficiency under compliance remains a tactical challenge for management.

Balancing Shareholder Interests

The valuation logic for unprofitable biotech companies (18A) in the Hong Kong market is relatively strict, generally trading at a significant discount compared to A-shares.

Yifang Biotech has not yet disclosed a specific offering price range, but market predictions suggest its H-share price could be significantly lower than its current A-share market price. A severe valuation inversion would directly lower the company’s overall market valuation. Moreover, this “price-for-volume” financing approach could potentially harm the interests of small and medium shareholders.

As the valuation center of the A-share STAR Market shifts downward, Yifang Biotech’s pre-loss further weakens its bargaining power in the capital market. The 292 million yuan loss invalidates traditional PE valuation methods, leaving investors to rely on pipeline net present value (rNPV) or cash reserves multiples for pricing.

Therefore, the success of the Hong Kong IPO largely depends on whether Yifang Biotech can demonstrate its differentiated clinical value and global market potential to international investors. The company states that the funds raised will mainly be used for late-stage clinical development of its core pipelines, D-0502 and D-2570. It also emphasizes the differentiated advantages of these two drugs, attempting to attract cornerstone investors through a “Best-in-Class” story.

Although the management cited impressive data from the JAAD journal in IR materials, gaining institutional recognition in the Hong Kong market will require answering how to translate academic achievements into tangible overseas licensing or sales revenue. Otherwise, clinical data alone may not justify a high valuation.

Thus, Yifang Biotech’s H-share listing is only a temporary solution; subsequent commercialization and product clinical progress remain key focus areas.