Positioning in the Hong Kong stock market, AI technology empowers the scarce track. Backed by a top-level investment team, YingSi Intelligence (03696) has the potential for long-term value allocation.

In recent years, artificial intelligence (AI) is evolving at an astonishing speed from "technological breakthrough" to "all-factor empowerment". Especially in the AI pharmaceutical field, benefitting from the deep empowerment of AI algorithms and computing capabilities, the research in biomedicine has achieved unprecedented speed and accuracy, entering into a new era of efficiency, personalization, and revolutionary change. The international renowned consulting firm McKinsey predicted in a previous report that AI empowerment is expected to bring economic value of 60-110 billion US dollars annually to the pharmaceutical and healthcare industries. As a unicorn enterprise with exclusive AI technology platform that can achieve innovative drug research and deep empowerment in multiple fields, Insilico Medicine (03696) has now made its debut on the Hong Kong stock exchange, providing Hong Kong stock investors with a significant option in the scarce AI empowerment investment track. On December 30, Insilico Medicine was officially listed on the main board of the Hong Kong Stock Exchange. It is understood that Insilico Medicine's IPO on the Hong Kong stock market has received significant market attention. On one hand, the company is expected to raise up to approximately 2.277 billion Hong Kong dollars, making it the largest biopharmaceutical IPO in 2025; on the other hand, during the IPO issuance process, Insilico Medicine not only received joint sponsorship from Morgan Stanley, CICC and GF SEC, but also attracted the favor of 15 top investment institutions including global pharmaceutical giants Roche, tech giant Tencent, as well as Oaktree Capital, Schroders Global, Temasek, and UBS Asset Management, forming a strong cornerstone line-up. It is worth mentioning that according to the current Hong Kong Stock Connect "subscription rules", Insilico Medicine's issuance market value of 13.406 billion Hong Kong dollars has exceeded the current entry threshold, and as long as the company's market value and liquidity remains stable in the two trading days before the end of the evaluation period, the company is expected to be included in the new round of Hong Kong Stock Connect adjustment in March next year. The reason why the market has high hopes for Insilico Medicine's long-term value is due to its strong AI platform technology, innovative-commercialization accumulation in the international market, and unique international cooperation advantages. Currently, with its unique AI underlying platform and technology, Insilico Medicine has become a representative in the global AI pharmaceutical and scientific intelligence track. After successfully listing on the Hong Kong stock market, the company's intrinsic value is expected to be further released. Backed by a luxury cornerstone line-up, Hong Kong's market enters "sweeping mode" In the second half of the global AI pharmaceutical track, which values platform validation and commercialization, as one of the few companies globally to cover the entire AI drug discovery and development process, Insilico Medicine's IPO in Hong Kong has received both luxury cornerstone endorsement and market investor acclaim, indicating that the Hong Kong stock market has reached a "value consensus" on this company. Compared to many individual investors who gradually deepen their understanding of the company as the IPO process progresses, the top capital that supported Insilico Medicine early on clearly understands the long-term value of the company. During the IPO process, Insilico Medicine gathered 15 cornerstone investors including global pharmaceutical giant Roche, Tencent, Singapore's sovereign fund Temasek, and others such as Schroders global, UBS Asset Management, and Oaktree Capital. This lineup includes multinational pharmaceutical companies, tech giants, international sovereign funds, and large asset management companies, making the cornerstone lineup luxurious. It is worth mentioning that this is the first time Roche, a global pharmaceutical giant, has participated as a cornerstone investor in a biopharmaceutical company. It is understood that on November 10 this year, Insilico Medicine and Roche reached a research cooperation agreement, with the potential for over 1 billion US dollars in total cooperation in the innovative target field. Now, with Roche joining as a cornerstone investor, through a deep combination of "capital + business", the strategic cooperation between the two parties is expected to evolve towards becoming "global core R&D partners", which is beneficial for the long-term stability of the partnership. If Roche represents the biopharmaceutical field, then Tencent represents the leading strategic capital in the internet field. With both appearing on Insilico Medicine's cornerstone list, it shows the high recognition of the top giants in their respective industries for Insilico Medicine's "AI + pharmaceutical" cross-technical strength and business model. In addition to the aforementioned top industry capital, the internationalized and long-investment-oriented nature of the investors on Insilico Medicine's cornerstone list is also worth noting, such as Temasek, Schroders global, UBS Asset Management, and Oaktree Capital. These institutions are globally recognized as "patient capital" and prefer long-term value growth. With these top institutions backing Insilico Medicine, it not only signals the mainstream market's recognition of the company's valuation rationality, but also demonstrates confidence in its long-term value growth. It is understood that Insilico Medicine adopted a "mechanism B" issuance for this IPO, with institutions, cornerstones, and anchor investors as the main allocation pattern, and around 19,000 lots were publicly issued with an entry fee of 12146.27 Hong Kong dollars. Although the entry fee for participating in Insilico Medicine's IPO is relatively high, it still ignited a wave of subscription frenzy in the market and pushed up leveraged subscriptions to nearly 1000 times and leveraged subscriptions to nearly 300 billion Hong Kong dollars. This indicates the high market enthusiasm for Insilico Medicine in the Hong Kong market. With the high leverage and market enthusiasm, Insilico Medicine achieved a significant 50.10% increase in Leifermo Securities' grey market trading and a 48.44% increase in its highest opening price since listing. This clearly shows that the continuous growth of the company's intrinsic value has gained high recognition from market investors. Leveraging advanced AI empowerment to build differentiated value barriers The reason why institutional investors and individual investors are able to come together in a long-term consensus on Insilico Medicine is ultimately due to the company's unique AI underlying platform and technological advantages, making it a "technology empowerer" that uses AI technology to hedge against uncertainty in diverse scenarios in research and development, and its commercial logic has already been continuously validated in the highly competitive AI pharmaceutical field. It is known that drug discovery has long been known for its "high cost, long cycle, and high risk". According to statistics, in traditional research and development scenarios, it takes an average of 10-15 years and costs over 20 billion US dollars for an original drug to go from discovery to market. How to break through this dilemma? Insilico Medicine chooses to reconstruct the drug development process using AI technology. The company uses its self-developed generative artificial intelligence platform Pharma.AI to build a business system that integrates drug discovery, pipeline development, software solutions, and research in non-pharmaceutical fields. The Pharma.AI platform covers the complete process from target discovery, molecular design to pre-clinical candidate drug confirmation through four major modules: Biology42, Chemistry42, Medicine42, and Science42. With the help of AI algorithms and automated experiments, the company can compress the traditional early drug development cycle from around 4-5 years to 12-18 months, significantly improving research and development efficiency and reducing trial-and-error costs. Currently, Insilico Medicine is advancing its self-developed innovative drug pipeline based on its strong AI platform capabilities and has efficiently set up over 30 R&D projects covering innovative areas such as oncology, immunology, fibrosis, and metabolism. Among them, the core variety Rentezertib (ISM001-055) used to treat idiopathic pulmonary fibrosis (IPF) is one of the fastest developing AI-driven drugs globally, taking only 18 months from target discovery to entering the clinical stage, while the same path for traditional pharmaceutical companies averages 4.5 years. The drug has been previously certified by the National Medical Products Administration as a "breakthrough therapy" and is expected to become the world's first AI drug to enter Phase III clinical trials in 2026. It is worth noting that one significant difference between Insilico Medicine and traditional innovative pharmaceutical companies is not only reflected in higher research and development time efficiency but also in higher financial efficiency. Financial reports show that the gross profit margin for the company in 2022 to 2024 was as high as 63.4%, 75.4%, and 90.4% respectively, showing a clear increasing trend year by year, and the company's trade receivables turnover days have been as low as 6 days during the reporting period. The significantly high gross profit and cash recovery performance, in contrast to the typical several years and tens of billions of dollars in long cash consumption faced by traditional biotech companies, highlights the advantage of Insilico Medicine in its business model. Under the dual-drive strategy of "internal pipeline development + AI platform licensing", Insilico Medicine has established a broad international cooperation network. Among the top 20 pharmaceutical companies with the highest global revenues, 13 have established software platform partnerships with Insilico Medicine. The company has already reached 3 pipeline authorization agreements with Exelixis, Menarini, bringing in a potential revenue of 2.1 billion US dollars. Additionally, several globally renowned pharmaceutical companies, including Sanofi, Roche, and Shanghai Fosun Pharmaceutical, have also partnered with Insilico Medicine for drug development. This indicates that while the company is building a highly differentiated AI innovation pipeline through self-development, it is also actively licensing AI platform assets externally, pushing its AI empowerment technology globally through cooperation and achieving continued funding for further development to form a virtuous cycle of "innovation-commercialization". From a market perspective, the global market size for AI-empowered drug research and development is expected to grow from 119 billion US dollars in 2023 to 746 billion US dollars in 2032, with a compound annual growth rate of 22.6%. In this high-growth track, Insilico Medicine has established a significant first-mover advantage with its clinically validated cases and technological platform. However, AI pharmaceuticals are just one of the application areas of AI empowerment for Insilico Medicine. Currently, the company is also working on expanding the application scope of Pharma.AI to multiple industries such as advanced materials, agriculture, nutrition products, and veterinary drugs, aiming to unlock more new industrial cooperation opportunities and drive the company's commercialization from "AI pharmaceuticals" to the broader "AI for Science" evolution. Conclusion In recent years, AI pharmaceuticals continue to thrive as a major application area of AI technology empowerment. The attitude of multinational companies is also shifting from embracing AI technology from before to competing for innovation discourse power through open-source AI drug discovery models. It is reported that in 2023, there were only 11 AI-related cooperation transactions among multinational pharmaceutical companies, but by the end of the third quarter of 2024, this number had reached 21, with a total amount exceeding 12 billion US dollars. In 2024, Recursion's acquisition of Exscientia for 688 million US dollars became the largest M&A deal in the field of AI pharmaceuticals, marking an acceleration in industry consolidation and the rise of industry leaders. With the increasing attention and recognition of AI pharmaceuticals by the industry and market, the average PS valuation of related concept stocks on the market has soared to over 50 times, for example, the PS valuation of Recursion on the US stock market is around 50.56 times, and that of XTALPI on the Hong Kong stock market is 54.13 times. In comparison, as a leading enterprise in the field of AI technology empowerment and AI pharmaceuticals, as well as a scarce AI for Science company in the Hong Kong market, Insilico Medicine's current PS valuation is only 32.18 times, leaving significant room for valuation uplift compared to its counterparts. With subsequent acceleration in the capital market and clinical operations, Insilico Medicine is expected to see a continuous release of intrinsic value and continue to break through the valuation ceiling.