New Stock Outlook | Profits are on the rise but cash flow is under pressure, can the CRO newcomer Bonasia come from behind?

Recently, Hangzhou Bonasia (Hangzhou) Pharmaceutical Technology Co., Ltd. (referred to as Bonasia) submitted an application for listing on the main board of the Hong Kong Stock Exchange, with CISI FIN and ICBC International as its joint sponsors. The prospectus shows that this Hangzhou-based clinical contract research organization (CRO) is committed to innovating drug clinical research through digital empowerment, focusing on the fields of oncology and autoimmune diseases. It has achieved a profit of approximately RMB 67.291 million in 2024. However, at the same time, the company's cash flow and accounts receivable situation are facing challenges, and its market share is not dominant, which may become a concern for market investors. In the crowded CRO industry, can Bonasia's "small and beautiful" story win the favor of investors? Profit rebounds in 2025, gross margin steadily increasing Financial data shows that after a brief decline in 2024, Bonasia's performance returned to a growth track in 2025. The company recorded revenues of approximately RMB 371 million and RMB 340 million in the 2023 and 2024 fiscal years, with annual profits of RMB 62.412 million and RMB 67.291 million, respectively. The decrease in revenue in 2024 was mainly due to the overall industry environment. As the business recovered and grew, the company's revenue for the first nine months of 2025 ended on September 30 was approximately RMB 245 million, a 3.38% increase from the same period last year. The profit for the period was RMB 45.22 million, a 1.48% increase from the same period last year. It is worth noting that the quality of profits has improved. The company's gross profit margins were 33.5%, 38.3%, and 37.8% for 2023-2024 and the first nine months of 2025, respectively, showing a steady upward trend. However, behind the impressive profits, several indicators on the company's balance sheet have performed poorly. The net cash flow from operating activities for the first nine months of 2025 was a net outflow of RMB 3.53 million, while it was a net inflow of RMB 67.29 million and RMB 11.51 million for 2023 and 2024, respectively. At the same time, cash and cash equivalents plummeted from RMB 111 million at the end of 2024 to RMB 55.16 million on September 30, 2025, a 50.3% decrease. The rapid depletion of cash reserves may pose substantial pressure on the company's normal operations and business expansion. Compared to the industry average, the company's trade accounts receivable turnover days are significantly high. It surged from 44 days in 2023 to 65 days in 2024, and further to 89 days for the first nine months of 2025, far exceeding the industry average of around 60 days. The rapid increase in accounts receivable turnover days indicates that, on one hand, in the biopharmaceutical financing environment, though warming up, still remains cautious, the proportion of financially strained biopharmaceutical companies among Bonasia's downstream customers may be increasing, leading to extended payment cycles. On the other hand, Bonasia's weak position in the industry also weakens its bargaining power. According to the prospectus, in terms of revenue from clinical CRO services in 2024, Bonasia ranked 14th among market participants headquartered in China, with a market share of 0.7%. The significant cash flow pressure may be an important reason for the company's urgent need for an IPO. Focus on oncology and autoimmune diseases, high concentration of business Public information shows that Bonasia's clinical CRO services mainly focus on clinical trial technology services, covering the entire clinical development process, including new drug clinical trial application (IND), Phase I-IV clinical research, new drug marketing application (NDA) registration declaration, FSP services, and other services. In terms of revenue structure, Bonasia's revenue from clinical trial technology services for the first nine months of 2025 was RMB 200 million, accounting for 81.1%; revenue from FSP services was RMB 44.98 million, accounting for 18.4%. Clinical research technology services remain the main source of revenue, with a high concentration of business. It is understood that Bonasia primarily focuses on the fields of oncology and autoimmune diseases. As of the last feasible date, the company has successfully assisted in obtaining NDA approvals and submitting applications for 12 innovative drugs or therapies in China. In 2023, 2024, and the first nine months of 2024 and 2025, clinical trial technology services for oncology and autoimmune diseases accounted for 51.1%, 69.1%, 65.3%, and 85.1% of the company's total revenue, respectively. In the field of oncology, the company's project portfolio covers solid tumors (including gastric cancer, non-small cell lung cancer, ovarian cancer, and breast cancer, etc.) and hematologic malignancies (including multiple myeloma, acute myeloid leukemia, and chronic myeloid leukemia, etc.), targeting high-priority treatment targets such as PD-1, PD-L1, KRAS, BTK, SHP2, EGFR, VEGFR2, etc. In the field of autoimmune diseases, the company covers ten different mechanism of actions, including JAK, PDE4, TNF-, IL-4, and IL-25, etc. The company has undertaken 70 projects related to autoimmune diseases, involving small molecule drugs, monoclonal antibodies, and bispecific antibodies; completed 18 phase III clinical trials for NDA, and supported regulatory approvals for therapies such as Xeligekimab (IL-17A), adalimumab, and benzyamodin cream. As we enter 2026, the heat of innovative drug business development transactions continues to rise, with the oncology field remaining a hotbed for concentrated BD directions. Data shows that in less than half a month into the year, there have been 14 BD transactions in the overall innovative drug industry, covering various technical directions such as small nucleic acids, ADCs, bispecific antibodies, inflammation and immune small molecules, and AI pharmaceuticals; in the oncology field, 3SBIO reached a BD transaction with Pfizer for PD-1/VEGF bispecific SSGJ-707 with an upfront payment of 1.25 billion USD, while REMEGEN signed an exclusive licensing agreement with AbbVie for a similar bispecific RC148 in January 2026, receiving an upfront payment of 650 million USD, with a potential total amount of up to 5.6 billion USD. By focusing on the popular field of oncology, Bonasia has the opportunity to deepen its ties with innovative drug companies and share industry dividends. However, the fact that the company's revenue in these two major areas of oncology and autoimmune diseases accounts for over 80% also means that the company's performance is vulnerable to the impact of technological iterations, policy changes, or intensified competition. According to the prospectus, Bonasia also has plans to expand into ophthalmic diseases and infectious diseases in the future, and intends to extend its reach to emerging frontier treatment areas, including Cellular and Gene Therapy (CGT), microRNA drugs, Central Nervous System (CNS) diseases, and metabolic diseases. Competing in the crowded CRO industry, how can Bonasia stand out? From a macro perspective, Bonasia undoubtedly finds itself on a tough track with steep challenges. In 2025, the State Drug Administration approved 4,087 drug marketing registration applications for the entire year, including 76 innovative drugs, reaching a historic high; the pace of internationalization in the pharmaceutical industry is accelerating, with the cumulative amount of overseas licensing transactions for innovative drugs exceeding 130 billion USD. The high intensity of innovative drug research and development is driving an increase in outsourced clinical research and development. Data shows that in 2024, the market size of clinical CRO services in China was 46.1 billion RMB, projected to reach 148.7 billion RMB by 2034, with a compound annual growth rate of 12.4%, higher than the global market growth rate. While the demand for CRO services remains strong, the industry is highly competitive, with many players vying for a piece of the pie. Compared to industry giants like Hangzhou Tigermed Consulting and Pharmaron Beijing, which generate revenues in the tens or hundreds of billions, Bonasia's business scale seems relatively small. Overall, Bonasia's strategy in specific niches is clear, following a "small and beautiful" path. Its focus on the popular fields of oncology and autoimmune diseases, combined with improved performance in recent years, will be a positive factor for its IPO. However, the rapid growth in accounts receivable turnover days and the tight cash flow situation indicate a slight deficiency in the company's ability to self-"generate blood." If it can successfully land on the Hong Kong stock market, the company's financial tightness will be alleviated. However, in the long run, if the company cannot truly translate its differentiation advantages into market share growth, even a successful listing may not guarantee peace of mind in the fiercely competitive industry.