The newly upgraded 18A, BAO PHARMA-B (02659) is using the three horses strategy to create a sustainable growth model.

In 2025, the Hong Kong stock market's 18A biotechnology sector welcomed a long-awaited IPO boom. However, unlike in the past, after going through a complete cycle of baptism, investors' mindset has undergone a profound transformation - shifting from blindly chasing "hot tracks" and "cutting-edge concepts" in the early days to a cautious evaluation of the commercial maturity of companies, sustainability of cash flow, and clear value proposition. This fundamentally reshapes the valuation algorithms of all participants. Previously, the traditional investment logic mainly relied on predicting the future cash flows of a single product pipeline. But with the intensifying competition in popular targets such as PD-1 and ADC technologies, and the decreasing tolerance of capital markets for unprofitable assets, the return on investment of this model has shown diminishing marginal returns. The market has placed more stringent requirements on the 18A Biotech companies seeking to go public in Hong Kong. In this context, BAO PHARMA-B (02659) has opened up a unique differentiation track with its three distinct "horse carriages," providing the industry with a new Biotech survival logic and innovation paradigm. First carriage: Strategic positioning - From target competition to scenario revolution As the first carriage of Bao Pharma, its differentiated strategic positioning fundamentally determines the robustness of the company's valuation logic. In terms of race track selection, Bao Pharma intentionally avoids the "red sea" competition in areas like ADC and PD-1, instead focusing on "upgrading traditional technologies and changing clinical application scenarios." This strategy aims to focus on optimizing efficiently already clinically validated drugs, rather than blindly chasing high-risk new targets, effectively avoiding the high failure rate and long cycle risks that are common in pure innovative drugs and achieving faster, more certain commercialization. This strategic thinking stems from the multi-faceted background of founder Dr. Liu Yanjun - with experience as a doctor, scientist, and corporate executive, allowing him to accurately identify the "real needs" and "invisible major categories" of clinical frontline from clinical application scenarios and avoid the R&D pitfalls of "not understanding medicine." For example, its core products KJ017 (recombinant human hyaluronidase) and SJ02 (long-acting FSH-CTP) do not explore a new mechanism full of uncertainty but focus on improving patient's quality of life and medication convenience, a demand that is not only immense but can effectively bypass the price pressure on major products from national medical insurance. Second carriage: Technological barriers - Industrialization capabilities of advanced biomanufacturing As the second carriage of Bao Pharma, the advanced biomanufacturing platform represented by synthetic biology is the core tool for achieving strategic differentiation. After six years of cultivation, the company has successfully built a high barrier advanced biomanufacturing platform aimed at solving the challenging problems of large-scale expression, activity maintenance, and ultra-efficient purification of recombinant enzymes. This capability gives it a strong Know-How in the field of recombinant protein drugs. More importantly, the synthetic biology platform not only provides technical feasibility but also brings structural security advantages: Its products achieve zero animal source production, eliminating the virus contamination and severe allergy risks that traditional biochemical extractives may bring from the source, establishing an "security barrier" that cannot be shaken through price wars. This high quality and high safety brought about by technological upgrades is the core guarantee for Bao Pharma to achieve the "technology substitution" dividend in the market. Third carriage: Industrial operation - A full-platform system with total cost leadership At the strategic execution level, Bao Pharma deeply integrates its technological advantages with the third carriage - industrial operational capability, constructing a "total cost leadership" structural moat. Unlike many biotech companies that rely on external CDMOs, Bao Pharma insists on building and expanding large-scale cGMP production bases. Currently, the company is one of the few domestic companies with commercial-scale production lines for mammalian engineered cells (CHO), yeast, and E. coli, providing a "one-stop" full-platform system. Currently, Bao Pharma has built and is building production bases covering nearly 100,000 square meters, with an expected total reactor volume of about 26,100L, and an estimated annual production capacity of 22.5 million units of formulations. The intention behind this strategic investment is to firmly grasp the initiative of cost control and supply chain security, making new drug development controllable. By achieving industrial scale, the company is able to maintain a "total cost leadership" advantage, giving Bao Pharma the confidence to lower prices at any moment, providing strong counterattack and survival capabilities in the face of medical insurance price reductions or price wars with competitors. At the same time, self-built capacity also solves the stability and adjustability problems of high volume products (such as KJ017, SJ02), avoiding the risk of being "strangled" by external CDMOs. The synergistic results of the three carriages: Pyramid-like pipeline layout Under the synergy of "scenario-driven" strategic choices, the technological barrier of synthetic biology, and the industrialization advantage of "total cost leadership," Bao Pharma has been able to form its unique "pyramid-like" pipeline layout: As the base of cash flow, Bao Pharma's "pyramid-like" pipeline base consists of products with short clinical cycles, low costs, and high market demand certainty, such as the approved SJ02 and the NDA-submitted KJ017. These products, focusing on solving clear clinical scenario pain points and technological substitutions, can quickly establish stable sales and cash flow, providing the company with the ability to "self-generate" cash flow, effectively eliminating the "financing anxiety" that is common among 18A companies. In addition, as the high-value innovative engine, the "tower/body/top" of Bao Pharma's "pyramid-like" pipeline focuses on high barriers, disruptive potential innovative projects with FIC/BIC potential. Taking the company's KJ103 product as an example, it is positioned as the world's first and only low-residual antibody IgG degrading enzyme to reach the registered clinical stage, having obtained two "Breakthrough Therapy Designations" (BTD) for desensitization in kidney transplantation and anti-GBM disease in China. With its mechanism to rapidly and efficiently clear pathogenic IgG antibodies, KJ103 is expected to become a rescue therapy in the field of "acute severe autoimmune diseases," with a broad spectrum application potential for hundreds of pathogenic antibody-mediated autoimmune diseases, establishing its position as a high-value innovative engine. This distributed and layered "two-pronged" approach allows Bao Pharma to achieve sustained, stable, and incremental "ramp-like" growth, successfully avoiding the traditional "staircase-type" gambling model that relies on the success or failure of a single product and demonstrating comprehensive competitiveness and long-term sustainability in the new valuation system. Conclusion In conclusion, Bao Pharma's rise is not accidental, but a necessary result of the organic synergy between its unique strategic positioning, technological route, production capabilities, and pipeline layout. In the current context where the biopharmaceutical industry is generally facing "homogenization" challenges, Bao Pharma has not fallen into the trap of homogenization but has provided a new innovation paradigm. By focusing on clinical scenario innovation, technological upgrades (replacing traditional therapies), and strategic resilience (pyramid-like layout, self-built production base), the company has formed a unique differentiation path, making it poised to become the next generation of Biotech pioneers that balance research and commercialization effectively.