Upcoming IPOs | With its second submission to the Hong Kong Stock Exchange, how can cash-strapped Xinji Medical support its valuation of 1.5 billion?

Recently, Guangzhou Xinji Pharmaceutical Co., Ltd. (referred to as Xinji Pharmaceutical) submitted a listing application to the main board of the Hong Kong Stock Exchange. This application comes just two months after the previous one expired. Since its establishment, the company has completed a total of six financing rounds, raising approximately 291 million RMB, with investors including Guangzhou Pharmaceutical Venture Capital, Yuexiu Danlu, Zhejiang Venture Capital, Zhuhai Fund Phase III, and Shaoguan Limited Partnership among other institutions. After completing its Series C financing in November 2025, the company's implied valuation reached 1.53 billion RMB. However, unlike typical innovative pharmaceutical companies that focus on molecular discovery, Xinji Pharmaceutical primarily concentrates on the development of modified new drugs, seeking differentiated breakthroughs in administration methods and alternative formulations. As of now, the company's two core products are both in Phase II clinical trials, with clinical efficacy data yet to be disclosed. Given the existing uncertainties, can the company truly attract market investors solely based on its potential? Accumulated losses exceed 400 million RMB; core products not yet commercialized. The prospectus indicates that Xinji Pharmaceutical was founded in 2007 and is a clinical-stage pharmaceutical company. It develops and commercializes modified new drugs based on previously approved active pharmaceutical ingredients (APIs), utilizing alternative formulations and drug delivery technologies. To date, the company has no commercially available products, with revenues primarily coming from CRO services and MAH business. In terms of MAH business, the company has terminated the sales of propofol emulsion injection as of 2024, currently relying solely on the esomeprazole magnesium sustained-release capsules (sold in the United States, with marketing rights acquired from a third party and produced and distributed by a CMO, unrelated to core products). From a financial perspective, the company reported revenues of 49.026 million, 55.238 million, and 16.567 million RMB for the fiscal years 2024, 2025, and the five months ending May 31, 2026, respectively, with corresponding gross profit margins of 33.7%, 23.4%, and 19.8%. During this period, the company recorded net losses of approximately 147.1 million, 110.9 million, and 197.2 million RMB, with cumulative losses reaching 455.2 million RMB. It is also expected to continue incurring net losses for the foreseeable future. The operational losses primarily stemmed from expenses related to R&D plans and administrative costs associated with operations. R&D expenditures during the reporting period were 16.41 million, 38.18 million, and 18.96 million RMB, the majority of which were directed towards the two core products. In terms of cash flow, the net cash flow used in operating activities during the reporting period was approximately 15.29 million, 66.52 million, and 30.80 million RMB. As of May 31, 2026, the company had only about 103 million RMB in cash and cash equivalents, with current liabilities netting 573 million and total net liabilities reaching 533 million RMB. Based on the current cash consumption rate, without additional financing, the available funds can only sustain operations for about eight months. Soluble Microneedle Formulations: Innovative Administration Method Achieving Painless Minimally Invasive Delivery Different from typical innovative pharmaceutical companies focusing on molecular discovery, Xinji Pharmaceutical's pipeline strategy centers on selecting indications where existing traditional formulations have limitations (such as invasive procedures, poor patient compliance, or suboptimal pharmacokinetic characteristics) and applying drug formulation technologies to address these challenges, thereby overcoming the limitations of traditional administration routes and improving therapeutic effects, patient compliance, and clinical practicality. The company has two major drug formulation technology platforms: the soluble microneedle formulation technology platform and the nasal inhalation formulation technology platform, and has independently developed several products, including dexmedetomidine hydrochloride microneedle patches (DHMP) and nasal inhalation formulation XJN010. The soluble microneedle technology uses an array of micrometer-sized needle tips to penetrate the skin's stratum corneum, releasing medication as the needles dissolve, enabling painless and minimally invasive transdermal delivery, aimed at replacing traditional injection methods. Xinji Pharmaceutical's core product, the dexmedetomidine hydrochloride microneedle patch (DHMP), is intended for preoperative sedation in both pediatric and adult patients. The company initiated Phase IIa clinical trials for pediatric indications in August 2025, completing related studies in June 2026. The Phase II clinical trial for adult indications began in March 2026. This product is the first soluble microneedle transdermal drug patch approved for clinical trials in China. In terms of commercialization positioning, DHMP is designed as a more comfortable non-intravenous sedation option during perioperative and invasive procedures, initially targeting hospital-based channels including anesthesiology, pain management, endoscopy, and pediatrics, focusing on scenarios where non-intravenous administration offers distinct advantages. However, it is important to note that due to its innovative delivery method, the ultimate effect and clinical benefits of DHMP remain unclear, with uncertainties regarding the safety, efficacy, and regulatory approval of subsequent clinical trials. In addition to DHMP, the company is also expanding into the endocrine treatment field, advancing microneedle patches XJN1102 for diabetes and weight control, with plans to file IND applications with the NMPA and FDA in the fourth quarter of 2026. In recent years, microneedles have garnered significant attention in the pharmaceutical industry and academia as a key formulation technology for innovative drugs. However, their development involves multidisciplinary integration, with high technical barriers, facing multiple challenges such as compatibility, stability, drug loading efficiency, release kinetics, and transdermal absorption characteristics. Moreover, they are not suitable for all drugs or indications and need targeted development based on the physicochemical properties of the drugs, frequency of administration, and clinical demands. Regarding drug loading capacity, microneedles only load drugs in their needle shell, resulting in relatively low drug loading that may not meet the therapeutic dose requirements for some medications. Additionally, the minuscule size of microneedles significantly raises the precision requirements for industrial production processes. Although cosmetic microneedle products have been on the market, mass production and sterile packaging of drug-loaded microneedle patches still face significant challenges. Furthermore, using microneedles requires piercing the skin's stratum corneum, subjecting them to strict regulatory approval, while there is currently a lack of targeted quality standards and regulatory policies. All these factors present commercial challenges that Xinji Pharmaceutical needs to address for its product commercialization. Nasal Inhalation Formulations: Suitable for the Blue Ocean Market of Parkinson's Disease Nasal inhalation formulations represent another important technical direction for Xinji Pharmaceutical, particularly in demonstrating unique advantages in treating central nervous system diseases. The unique anatomical structure of the nasal cavity provides a direct connection to the central nervous system while also connecting to the respiratory tract, acting as a first line of defense against pathogenic microorganisms and providing a convenient pathway for drug delivery to the brain. The nasal mucosa is rich in blood vessels and has high permeability, creating favorable conditions for drug absorption. Drugs absorbed through the nasal cavity can bypass the blood-brain barrier and enter the brain directly, often exerting a stronger pharmacological effect on the central nervous system. Therefore, nasal drug delivery is increasingly applied in the treatment of central analgesia, sedation, antiemetics, antidepressants, and antiepileptics. Currently, the application of nasal delivery formulations in treating central nervous system diseases has become a research hotspot in the industry, but there are only a few related products available in the domestic market, such as diazepam nasal spray for treating epilepsy and sumatriptan nasal spray for treating migraines, indicating a vast market potential. Xinji Pharmaceutical's second core product, XJN010, is a nasal inhalation formulation intended for on-demand treatment of "off" episodes in patients with Parkinson's disease. "Off" episodes are characterized by the resurgence or worsening of motor symptoms that were previously controlled by medication. Currently, there are no approved therapies targeting this symptom in China, indicating a clear clinical demand. XJN010 completed its Phase II clinical trials in China in April 2026. According to Frost & Sullivan data, this product is the only one authorized to conduct clinical trials for "off" episodes of Parkinson's disease in development in China. In the U.S., it received IND approval in February 2026 and is set to proceed directly to Phase II clinical trials, with related studies scheduled to commence in the third quarter of 2026. In addition, the company has established clear pipeline layouts in indications requiring rapid symptom relief, such as the preclinical phase nasal inhalation formulation XJN026 for treating acute episodes of migraine in adults and pediatric patients aged 6 to 17, which initiated Phase I clinical trials in China in April 2026, with plans to submit an IND application to the FDA. The nasal formulation XJN2503 intended for chemotherapy-induced vomiting is slated for IND submission to the NMPA in the fourth quarter of 2026, with both products advancing ahead of competitors. However, nasal drug delivery comes with inherent limitations. It is noted that absorption through the nasal mucosa is influenced by various factors, such as drug properties and nasal conditions, leading to variable absorption stability. Some drugs may irritate the mucosa, posing risks of damage with prolonged use. Additionally, contamination is a risk to nasal delivery, increasing the likelihood of infection. Not all drugs are suitable for this route; certain drugs may be limited due to susceptibility to enzymatic degradation, difficulties in permeating the mucosa, or greater irritability. The small delivery area of nasal administrations limits single doses, and the mucus layer and enzymes in the mucosa can hinder absorption, potentially causing systemic side effects. Moreover, the complex anatomical structure of the nasal cavity may impact patient compliance with long-term administration. The companys prospectus also acknowledges that nasal administration clinical trials for central nervous system indications have, in some cases, been interrupted or terminated due to insufficient efficacy. The efficacy and clinical benefits of XJN010 remain unknown. Generally, Phase I studies are primarily designed to assess safety, tolerability, and pharmacokinetics and are not typically aimed at establishing efficacy. While DHMP and XJN010 have both completed Phase IIa or Phase II clinical studies, relevant clinical research reports have yet to be completed, and there are currently no efficacy data available, making it impossible to guarantee that the safety and pharmacokinetics data observed to date can predict outcomes in subsequent trials. Summary Overall, Xinji Pharmaceutical is sprinting towards the Hong Kong Stock Exchange with two innovative formulation platforms, targeting the blue ocean markets of transdermal delivery and central nervous system delivery that have clear clinical demands. Its core product, DHMP, is China's first soluble microneedle patch to enter clinical trials, while XJN010 is simultaneously progressing in both China and the U.S., aiming to capture the niche market for "off" episodes in Parkinson's disease, which currently lacks competition. However, the company has yet to achieve product commercialization, and its financial situation is becoming increasingly strained. The cumulative losses during the reporting period exceeded 455 million RMB, with existing funds only supporting operations for about eight months. Future clinical progress heavily relies on IPO financing or a new round of external support. At the same time, both core products are in the early stages of clinical development, with efficacy data yet to be disclosed and future validations still uncertain. From a commercialization perspective, the company faces multiple challenges, including large-scale production, quality control, and the absence of regulatory standards. For the capital market, the commercialization prospect remains unclear, and discussing valuations may be premature at this stage.