Zelgen Biopharmaceuticals Co., Ltd. has recently re-filed its listing application with the Hong Kong Stock Exchange, with CICC as the sole sponsor, coming less than two months after its initial filing in December 2025 lapsed. A review of the prospectus and related documents reveals several lingering concerns, including lackluster growth from commercialized products facing医保 price cuts and competition, high selling expenses weighing on core operations, a significant loss from a related-party acquisition by the controlling family, and shareholder selling amid IPO expectations. These intertwined risks cast doubt on the company's sustainable profitability, making its path to a Hong Kong listing challenging.

High Selling Expenses Drag Down Core Operations

Financially, in 2025, Zelgen reported revenue of RMB 810 million, a significant 52.07% year-over-year increase, marking the highest growth rate since its listing. However, behind this impressive revenue figure, net losses widened. The company's net loss attributable to shareholders was RMB 163 million, up 18.22% from RMB 138 million in 2024. In the first half of 2026, Zelgen generated revenue of RMB 1.205 billion, a 220.88% year-over-year surge, and achieved a net profit attributable to shareholders of RMB 640 million, its first semi-annual profit since listing. Notably, RMB 662 million of this revenue, or 54.9%, came from a technology licensing fee for the ZG006 product from AbbVie. This one-time business development transaction revenue is not sustainable, leaving the company's long-term profitability in question.

The primary driver of revenue growth without profit expansion is the high selling expenses, which continue to erode profits. In 2025, selling expenses reached RMB 465 million, surging 71.44% year-over-year, far outpacing revenue growth. The selling expense ratio hit 57.42%, up 6.48 percentage points year-over-year, significantly exceeding the industry average. On the business front, of Zelgen's four marketed products, Donafenib, Recombinant Human Thrombin, and Jaktinib have all been included in the National Reimbursement Drug List (NRDL). The company's recombinant human thyrotropin beta injection is also likely to enter future NRDL negotiations. While NRDL inclusion can rapidly boost product sales volume, it comes at the cost of significant price reductions. For example, Donafenib, which entered the NRDL in 2021 through negotiations, saw its price drop from around RMB 8,300 per box to approximately RMB 3,000 per box.

From a competitive standpoint, the liver cancer targeted therapy market already includes several NRDL-listed competitors like Sorafenib, Lenvatinib, and Regorafenib. With Lenvatinib's patent expiration, generic versions from companies like Chia Tai Tianqing and Qilu Pharmaceutical have been approved, with winning bids in the seventh national volume-based procurement (VBP) dropping to just a few hundred RMB per box. After NRDL reimbursement, patient out-of-pocket costs are extremely low. In contrast, Donafenib's post-NRDL annual treatment cost remains above RMB 30,000, offering no clear price advantage. This makes it difficult to sustain significant growth for Donafenib. Jaktinib was first included in the NRDL in January 2026, with its price dropping from about RMB 10,000 per box to RMB 5,160 per box, a nearly 50% reduction. While short-term volume growth is expected, the myelofibrosis patient population is limited, with fewer than 10,000 new patients annually nationwide. The market space is inherently small, and the price cut may further constrain the product's ceiling, making it difficult to support expectations of a blockbuster drug. Recombinant Human Thrombin faces a similar predicament. Following NRDL inclusion in 2025, sales volume surged to nearly 500,000 units for the year, but gross margins declined. The gross margin for hemostatic drugs in 2025 was 74.2%, down 6.73 percentage points year-over-year.

Insider and Institutional Selling Ahead of Filing, and Related-Party Transaction Risks

Beyond financial and operational challenges, Zelgen also faces governance concerns. On February 14, 2026, just six weeks before filing its Hong Kong prospectus, the company announced a shareholder reduction plan. The controlling shareholder, actual controller, and chairman, Sheng Zelin, planned to sell up to 273,900 shares, while shareholder Ningbo Zeao planned to sell up to 2.4751 million shares, totaling up to 2.749 million shares or 1.0385% of total equity. Based on the stock price at the time, the expected cash-out was about RMB 260 million. This timing, amid heightened Hong Kong IPO expectations and a relatively high A-share price, may reflect a lack of confidence by insiders in future prospects. In terms of results, Ningbo Zeao sold 2.475 million shares between March 30 and April 15, 2026, essentially completing its plan. Sheng Zelin also sold 273,900 shares on April 16, achieving the maximum planned reduction.

Additionally, on November 14, 2025, just six weeks before the formal Hong Kong filing, Zelgen suddenly announced the liquidation and dissolution of GENSUN. Records show Gensun was founded in February 2016, incorporated in the US, with founders Sheng Zeqi and Mike C Sheng, who are the sister and son of Sheng Zelin, the actual controller and chairman of Zelgen. In August 2018, Zelgen acquired a 51% fully diluted stake in Gensun for $8.6602 million from Sheng Zeqi. This included $5 million as a capital increase into Gensun and $3.6602 million for purchasing existing shares. Based on the transaction price, GENSUN's pre-investment valuation was about $11.98 million. In January 2022, Zelgen signed an agreement with Sheng Zeqi and Mike C Sheng, granting Hong Kong Zelgen the right to purchase their remaining GENSUN shares at an agreed price within three years. According to an appraisal report by Shanghai Dongzhou Asset Appraisal, GENSUN's equity value was then $90.2793 million, a 653% increase in valuation over four years. That same year, Zelgen initially acquired about 4% of GENSUN shares for $3.6112 million, raising its stake from 51% to 55.74%, partially realizing the valuation premium. This three-year purchase option essentially locked in an exit price of nearly $100 million for the remaining shares held by the controlling family.

In July 2024, six months before the option expired, Zelgen exercised its purchase right, acquiring the remaining 36.43% of GENSUN shares from Sheng Zeqi and Mike C Sheng for $32.8887 million, or approximately RMB 230 million. After the transaction, Zelgen's indirect stake through its Hong Kong subsidiary rose to 92.17%, achieving near-full control. However, by the end of 2024, GENSUN's financial condition had significantly deteriorated, with zero revenue, a net loss of $4.8006 million, and a substantial shrinkage in net assets. Despite the target's continued losses and lack of revenue, Zelgen still acquired the actual controller's shares at a peak valuation from two years prior, raising questions about the fairness of the transaction. Cumulatively, the three rounds of acquisitions cost Zelgen approximately $45.16 million, or about RMB 320 million, for control of GENSUN. The actual controller's family cashed out about $40.16 million, or roughly RMB 285 million, through the sale of old shares. The Shanghai Stock Exchange had already questioned the rationale for the GENSUN acquisition during Zelgen's STAR Market IPO, with three rounds of inquiry letters identifying it as a key review item. The core concerns included the necessity of the related-party transaction, pricing fairness, clarity of intellectual property ownership, and potential for benefit tunneling. On November 14, 2025, Zelgen liquidated and dissolved GENSUN, with the losses ultimately borne by all listed company shareholders. Direct financial losses included the cumulative RMB 320 million in acquisition costs, and upon liquidation, RMB 56.97 million in accounts receivable from GENSUN were fully written off as bad debts due to the entity's dissolution.

The combination of unsustainable one-time licensing revenue, pressure on NRDL product growth, premium acquisitions of the actual controller's assets, and pre-filing selling by the actual controller and investment institutions leaves both profitability and governance challenges unaddressed. This creates significant uncertainty regarding the company's valuation and investor acceptance in the Hong Kong market.