The Hong Kong Stock Exchange is experiencing a revival, with a flurry of companies seeking to go public and raise funds amidst a series of market rescue packages. Among them is Zephyrm Bioscience Ltd., a young stem-cell drug researcher, developer, and producer, founded in 2017. The company, with no commercialized products and no revenue, is looking to capitalize on the market’s optimism by filing for a listing application on the last day of September. However, Zephyrm’s financial performance raises concerns. Its losses have surged significantly year-on-year, reaching 237 million yuan in the first half of 2024, more than double its losses in the same period of 2023. This dramatic increase is largely attributed to soaring administrative expenses, including 114 million yuan in share-based compensation expenses, which were not incurred in the previous two years. R&D expenses also contributed to the rising losses, reaching 58.52 million yuan in the first half of 2024, a 71.4% increase compared to the same period last year. Despite the losses, Zephyrm boasts a promising portfolio of cell therapy products derived from pluripotent stem cells (PSCs), which are designed to treat a range of diseases. The company is one of the pioneers in China and globally in developing PSC-derived cell therapy products, with its core product, ZH901, currently in Phase II clinical trials for the treatment of injuries, inflammations, and degenerative diseases. While the company claims success in treating 100 patients with ZH901 in multiple clinical trials without serious adverse effects, its other three key products, ZH903, ZH902, and ZH906, are still in early clinical stages. To support future commercialization, Zephyrm has established a manufacturing plant in Beijing with an annual production capacity of 35,000 injections. It is also planning a larger facility in Zhongshan City, Guangdong Province, with an estimated annual production capacity of 500,000 injections, set to commence production in 2030. The funds raised from the IPO, if successful, will be used for these expansion projects, product R&D, and clinical research. Despite the ambitious plans, Zephyrm faces a financial hurdle. As of June 2024, the company had only 78.26 million yuan in cash and cash equivalents, a significant decrease from the end of 2023. This limited cash reserve, coupled with the substantial R&D expenditure and lack of commercial products, necessitates the company’s pursuit of an IPO to secure funding. Early investors, who have poured a total of 656 million yuan into Zephyrm across various financing rounds, are also poised to cash out. With a 180-day lock-up period, investors, including Zhongke Chuangxing Hard Technology, Zhonghe Tiancheng Entrepreneur Management, and Beijing Guoke Dingzhi Equity Investment, are eager to capitalize on the market’s enthusiasm. The IPO presents a risky proposition for investors. Investing in biotechnology companies often involves a bet on the success of its products in clinical trials and subsequent commercialization. The recent surge in the share price of TYK Medicines (2410.HK), a biotech stock listed in August, which has risen by about 150%, indicates the potential for short-term profits. However, given Zephyrm’s mounting losses and the absence of commercial products, investors must carefully assess the company’s prospects before deciding whether to invest in its IPO. The IPO, if successful, could inject much-needed funding for Zephyrm’s ambitious plans, but the journey to profitability remains uncertain.
Zephyrm Bioscience Seeks IPO Amidst Rising Losses and Stock Market Frenzy
