IPO Outlook | Is the first half-year report profit after listing a difficult challenge for ZaiJing Pharmaceuticals (688266.SH) at the Hong Kong Stock Exchange?

Recently, according to a disclosure from the Hong Kong Stock Exchange, Suzhou Zelgen Biopharmaceuticals Co., Ltd. (referred to as "Zelgen Pharma") has submitted its listing application to the main board of the Hong Kong Stock Exchange, with CICC serving as the sole sponsor. This marks the companys second attempt at going public. If successful, the company will become a dual-listed enterprise with both A-shares and H-shares. On the operational front, in the first half of 2026, the company reported its first profitable half-year results since its listing, reversing the trend of continuous losses over the previous years. However, a closer examination of its fundamentals reveals that this profit primarily originates from technology licensing income of 662 million yuan from global development cooperation with AbbVie on the ZG006 project, raising doubts in the market about the company's self-sustaining capacity. As of now, the company has four marketed products. With their inclusion in the medical insurance system, rapid volume expansion is expected to enhance the companys subsequent profit performance. Additionally, the companys research pipeline is quite promising; ZG006 has received breakthrough therapy designation from Chinas CDE and orphan drug qualification from the FDA, while ZG005 is making significant progress in clinical trials, ranking among the global leaders. As of the close on September 4, 2026, Zelgen Pharma (688266.SH) had an A-share price of 117.99 yuan and a total market capitalization of approximately 31.2 billion yuan. Four marketed products gradually gain traction; one-time BD income aids loss reversal. From a financial performance perspective, revenue is expected to increase from 302 million yuan in 2022 to 384 million yuan in 2023, 532 million yuan in 2024, 810 million yuan in 2025 (all in RMB), and further to 1.204 billion yuan in the first half of 2026, representing a year-on-year increase of 220.71%. However, profit margins show a marked disparity: from 2023 to 2025, net profits incurred losses of 295 million yuan, 150 million yuan, and 165 million yuan, respectively, with the 2025 loss expanding by 9.87% year-on-year, marking the sixth consecutive year of losses since its listing. It was not until the first half of 2026, due to a 655 million yuan upfront payment received from its exclusive licensing collaboration with AbbVie, that the company returned to profitability, achieving profit of 640 million yuan during this period, whereas it sustained a loss of 68.09 million yuan in the same period last year. Regarding gross margins, they were recorded at 92.6%, 93.6%, 90%, and 94.5% from 2023 to the first half of 2026, with the rise in the comprehensive gross margin in the first half of 2026 largely due to an increase in the proportion of high-margin licensing revenue. The gross margin for drug sales slightly increased from 88.8% in the same period last year to 89.6%, thanks to changes in the product mix. It is understood that the company currently has four commercialized products, with sales and price changes reflecting the impact of medical insurance policies. Zepzelca (donafenib tosylate tablets) is Chinas first locally developed small-molecule multi-target drug for first-line treatment of advanced liver cancer, launched in June 2021. During the reporting period, its gross margin remained stable at around 94.5%. Zepzelca (recombinant human thrombin) is Chinas only successfully commercialized recombinant thrombin developed using recombinant DNA technology, set to be launched in January 2024. During the reporting period, Zepzelca revenue saw a year-on-year growth of 73.5%, increasing from 206,000 boxes to 384,000 boxes. Although the average selling price dropped from 332.4 yuan per box to 309.9 yuan due to broader market coverage after being included in the medical insurance system, economies of scale reduced unit costs, leading to an increase in gross margin from 62.5% to 78.9%. Zeppekin (gimsilumab tablets) is Chinas first innovative JAK inhibitor developed for the treatment of myelofibrosis, commercialized in May 2025. Following its commercialization, sales surged from 1,400 boxes to 33,600 boxes, but due to its inclusion in the national medical insurance catalog in January 2026, the average selling price plummeted from 8,266.2 yuan per box to 4,279.0 yuan, resulting in a decline in gross margin from 95.2% to 90.4%. Zesignetin (recombinant human thyroid-stimulating hormone beta) is Chinas only approved recombinant human TSH for post-operative follow-up diagnosis in patients with differentiated thyroid cancer, launched in January 2026. In the first half of the year, the drug generated sales revenue of 9.6 million yuan from 1,100 boxes sold, with an average price of 9,153.8 yuan per box and a gross margin of 66.2%. In terms of revenue structure, in the first half of 2026, Zepzelca accounted for 23.2%, Zepzelca accounted for 37.8%, Zeppekin accounted for 20.8%, and Zesignetin accounted for 4.9%. The expansion of performance accompanies persistently high operating expenses. From 2023 to 2025, sales and distribution expenses increased from 250 million yuan to 465 million yuan, while research and development expenses remained above 388 million yuan. However, from 2025 onwards, total sales and marketing expenses have exceeded research and development expenses, with R&D expenditure at 200 million yuan in the first half of 2026. Regarding working capital, as of June 30, 2026, the companys bank deposits and cash equivalents amounted to 2.0566 billion yuan, with an additional undrawn, committed, and unrestricted bank financing limit of 2.1006 billion yuan. Furthermore, aside from the 100 million USD upfront payment from AbbVie, the company also received a milestone payment of 200 million yuan from Merck in February 2026, further enhancing its capital reserves. Strategic focus on cutting-edge oncology research pipeline with two first-in-class products in development. Zelgen Pharma has established a strategically tiered R&D pipeline consisting of 10 candidate drugs, encompassing 29 key clinical projects, with a wide focus on oncology and autoimmune diseases, particularly targeting indications with significant unmet medical needs. Several advanced candidate products are at the BLA/NDA stage or are advancing critical Phase III clinical trials, with a clear pipeline hierarchy. In terms of marketed products, Zepzelca (donafenib tosylate tablets) received approval in June 2021 as Chinas first domestic small-molecule multi-target drug for first-line treatment of advanced hepatocellular carcinoma. Its Phase III clinical trials have confirmed superior survival benefits over sorafenib, making it the only monotherapy in head-to-head trials to demonstrate such an advantage. In August 2022, it received further approval for use in progressive, locally advanced, or metastatic radioactive iodine-refractory differentiated thyroid cancer, both indications included in the national medical insurance drug catalog. With good efficacy and safety, Zepzelca has been recommended as a first-line treatment in 32 national-level clinical guidelines and expert consensus documents, and the company is continuously expanding coverage in hospitals and pharmacies to lay the foundation for sales growth. Zeppekin is Chinas first approved domestic JAK inhibitor for the treatment of myelofibrosis, capable of targeting both JAK and ACVR1. It has now been approved for two indications: myelofibrosis and severe alopecia areata, with indications for moderate-to-severe atopic dermatitis and ankylosing spondylitis in BLA/NDA stage. This product spans both oncology and autoimmune treatment fields, but in the area of JAK inhibitors for treating atopic dermatitis, there are several competing products already on the market globally, with intense competition in topical formulations; for instance, CMS's introduced ruxolitinib cream received approval in January 2026 for vitiligo indications and its atopic dermatitis indication has been given priority review. Faced with a competitive landscape where numerous pharmaceutical firms are actively targeting multiple indications, Zelgen Pharma, as a latecomer in the hematological oncology and autoimmune fields, still faces a degree of uncertainty in future progress. Zesignetin (recombinant human thyroid-stimulating hormone beta) is Chinas only approved recombinant human TSH for post-operative follow-up diagnosis in patients with differentiated thyroid cancer, applicable for radioactive iodine whole-body imaging and serum thyroglobulin monitoring, filling a clinical gap in the country. Its post-operative diagnostic indication has been launched, while its post-operative treatment indication is in the BLA/NDA stage, having received recommendation from the Chinese Medical Associations Nuclear Medicine Branch in 2025 in the "Guidelines for Diagnosis and Treatment of Radioactive Iodine-Refractory Differentiated Thyroid Cancer in China." The company has signed an exclusive commercialization cooperation agreement with Merck's subsidiary ATSA, supporting rapid market penetration. Zepzelca (recombinant human thrombin) is the only recombinant thrombin developed by recombinant DNA technology successfully marketed in China, granted approval in January 2024 and included in the national medical insurance catalog in January 2025. This drug has been recommended in the 2025 "Expert Consensus on Hemostasis in Hip and Knee Replacement Surgery" and the 2026 "Guidelines for Blood Management in Adult Abdominal Surgery Patients," and has partnered with Focus Life Sciences, which specializes in hemostasis and perioperative management, to accelerate market promotion. As the number of surgical procedures continues to grow domestically, the demand for local hemostatic agents is on the rise, and Zepzelca is expected to further expand its market share through the advantages of medical insurance coverage. Among other products in development, ZG006 (Alveltamig) is the worlds first tri-specific T cell engager targeting DLL3/DLL3/CD3, achieving mechanistic breakthroughs through dual DLL3 targeting and is expected to meet effective treatment needs for difficult-to-treat tumors such as small cell lung cancer and neuroendocrine cancer. The drug has received clinical trial approval from the U.S. FDA and Chinas NMPA and has been designated by the NMPA Drug Review Center as a breakthrough therapy for recurrent or progressive advanced small cell lung cancer and DLL3-positive neuroendocrine cancer, as well as receiving orphan drug status from the U.S. FDA, indicating significant clinical value and market potential. To expedite global development, the company entered into a collaboration and licensing option agreement with AbbVie in December 2025, granting it exclusive licensing options globally, excluding mainland China, Hong Kong, and Macau. Under the agreement, Zelgen Pharma will receive a one-time upfront payment of 100 million USD, along with potential milestone payments of up to 60 million USD upon clinical progress and additional payments related to licensing options. If AbbVie exercises the licensing option subsequently, Zelgen Pharma would also be entitled to receive up to 1.075 billion USD in milestone payments and collect tiered royalties ranging from high single digits to mid-teens of net sales for ZG006-related products outside the Greater China region, with total related payments potentially reaching up to 1.235 billion USD. ZG005 (Nilvanstomig) is a recombinant fully human bispecific antibody targeting PD-1/TIGIT, representing a new generation of immunomodulators, with no similar mechanism drugs approved globally, and is among the fastest-developing drugs within the same target category. The product is currently advancing Phase III clinical trials targeting hepatocellular carcinoma and neuroendocrine cancer, and it holds extensive potential for combination therapy with ZGGS18, which regulates the tumor microenvironment, with the related clinical trial application already approved by the FDA and the national drug regulatory authority. Given the limited response rates and resistance problems associated with PD-1 monotherapy, ZG005 holds promise to become a next-generation tumor immunotherapy, harboring significant market opportunities. Overall, ZG006 (for extensive small cell lung cancer third-line and above, second-line treatment, and neuroendocrine cancer) and ZG005 (for hepatocellular carcinoma and neuroendocrine cancer) are both in key Phase III trial stages, expected to successively enter commercialization within the coming years. Moreover, leveraging its core technology platform, the company is advancing R&D from multiple dimensions including tumor immunity, tumor microenvironment, tumor growth, mechanisms of resistance, and gene mutations, while continuously expanding its innovative candidate drug pipeline, which includes ZGGS18 (VEGF/TGF- dual-function fusion protein), ZGGS34 (CD3/CD28/MUC17 tri-specific T cell engager antibody), ZGGS15 (LAG-3/TIGIT bispecific antibody), ZG2001 (novel oral pan-KRAS mutation inhibitor), ZG0895 (highly selective TLR8 agonist), and a new type of pan-RAS inhibitor currently in preclinical stages. Among these, ZGGS18, ZGGS15, ZG2001, and ZG0895 have completed Phase I dose escalation trials in China, while ZGGS34 has entered Phase I clinical trials in China, and all five candidate products have received U.S. IND approval, collectively possessing potential to emerge as breakthrough therapies for solid tumors, and holding broad prospects for combination therapies with promising commercial value. Conclusion Leveraging the revenue foundation built by four marketed products and a tiered pipeline of over ten drugs in development, Zelgen Pharma has preliminarily completed its transformation from a research-driven entity to a mature commercial company. Core products like Zepzelca and Zepzelca are expected to sustain volume growth through coverage in the medical insurance catalog, while globally or domestically innovative drugs like ZG005 and ZG006 have successively gained regulatory breakthroughs and endorsement from multinational pharmaceutical companies, showcasing differentiated clinical potential. Whether the company can continuously translate the advantages of its technology platform into market share will become a focal point of interest for market investors.