Pulai Pharmaceuticals' non-commercialized patents are about to expire: operating cash flow is under pressure, and debt repayment ability is relatively weak.

“Harbor Business Observation” Xu Huijing

Recently, Plei Pharmaceutical (Jiangsu) Co., Ltd. (hereinafter referred to as “Plei Pharmaceutical”) submitted a listing application to the Hong Kong Stock Exchange, intending to list on the Main Board, with Citic Securities serving as the sole sponsor.

According to Tianyancha, Plei Pharmaceutical was established in 2009. It is a leading domestic innovative antimicrobial peptide (AMP) therapeutic drug company. After sixteen years of R&D accumulation, it has officially started the process of capitalization. The company’s core product PL-5 has already submitted a new drug上市 application in China, but a combination of risk factors—such as the impending expiration of the compound patent, redemption-related liabilities of nearly 800 million yuan hanging in the balance, and sustained losses—means its IPO path faces severe tests.

1

Commercialization of the core product is imminent, and the patent moat is already showing gaps

Plei Pharmaceutical focuses on R&D of antimicrobial peptide therapeutic drugs, aiming to address major global unmet health needs through proprietary breakthrough technologies and candidate drugs. Its core product PL-5 (Bailian Jiaanannan) is the first Jiaanannan-class drug worldwide to have submitted a new drug上市 application, targeting secondary wound infection and diabetic foot infection.

As disclosed in the prospectus, PL-5 achieves bactericidal effects by destroying the integrity of microbial membranes through a “membrane separation mechanism.” This mechanism was first jointly proposed by the company’s founder, Dr. Chen Yuxin, in 2006. The drug has broad-spectrum and efficient killing effects against multi-drug resistant bacteria, and it is not prone to developing resistance. It has been continuously selected for national major new drug creation science and technology major special projects during the “Twelfth Five-Year Plan” and “Thirteenth Five-Year Plan” periods.

In terms of clinical progress, PL-5 has completed Phase III clinical trials in China. Its new drug上市 application was accepted by the Center for Drug Evaluation at the National Medical Products Administration in 2024. For the indication of diabetic foot infection, Phase II clinical trials are conducted in the United States. The company expects PL-5 to be approved in the third quarter of 2026. If it is successfully上市, it will become the first approved Jiaanannan-class antimicrobial peptide drug in China. In addition, in October 2024, the U.S. Food and Drug Administration approved the company’s application. Based on Phase I clinical trial data conducted in China and Australia, it can directly initiate Phase II clinical trials for PL-18.

However, despite its first-mover advantage, PL-5’s commercialization prospects may still have concerns. According to the prospectus, the company’s most core Chinese compound patent expires in December 2025, and the U.S. compound patent will also become invalid in October 2028. Although the company claims it has established a robust and effective defense patent moat for PL-5, including five Chinese patents and one Japanese patent, covering specific sequence-related formulations used with PL-5 with an effective period until 2041, the expiration of the compound patent means that other manufacturers may develop their own formulations based on the same compound basis. The original developer’s market exclusivity will be significantly narrowed.

The company also admits that although these patents have expired and are expected to expire, it believes it has established a robust and effective defense patent moat for PL-5. Whether this judgment can stand up to market testing remains in question.

Regarding patent layout, as of the last practicable date, among 73 globally authorized patents, 71 are concentrated in China. In the United States there is only 1 (including 1 via license acquisition). In other jurisdictions (including Japan and Europe), there are only 2. In addition, there are 29 pending patent applications, including 16 in China, 3 in the United States, 1 that has not yet entered the national phase under the Patent Cooperation Treaty, and 9 in other jurisdictions.

What is even more noteworthy is that the company has transferred commercialization rights for its core product. In December 2022, Plei Pharmaceutical entered into an exclusive commercial cooperation agreement with Jiangzhong Tianqing Pharmaceutical Group Co., Ltd., granting it exclusive commercialization rights for PL-5 in mainland China, and the company only receives service fees. Under this agreement, Jiangzhong Tianqing will also be responsible for PL-5’s market promotion activities.

The prospectus clearly indicates that the company has limited experience in marketing and sales. It relies on an internal marketing team and third-party distributors to promote the drugs. If it fails to strengthen sales and distribution capabilities, it may have a negative impact on revenue and operations.

In addition to the core product, the company’s other two main products—PL-3301 (thermosensitive peptide gel) and PL-18 (antimicrobial peptide suppositories and gel)—are still in clinical development. PL-3301 is used for oropharyngeal candidiasis, and PL-18 is used for vulvovaginal candidiasis. Both products are expected to file IND applications in the second half of 2026.

The other six candidate drugs are all in preclinical stage, including PL-4902 (injectable α-helical antimicrobial peptide), PL-MD-333 (oral small-molecule FGF19/FGF21 inducer), PL-AC-1001 (oral small-molecule KIF18A inhibitor), PL-AC-1201 (oral small-molecule KRAS inhibitor), PL-AC-2001 (PROTAC degrader), and PL-AD-2301 (PROTAC degrader). In the short term, they cannot contribute performance.

2

Sustained losses put pressure on cash flow, and costs are high

Financial data shows that in 2024 and the nine months ended September 30, 2025 (hereinafter referred to as the “reporting period”), Plei Pharmaceutical’s revenue was 2.96M yuan and 80.72M yuan, respectively.

The company explains that all revenue comes from sales of its Rihe product. Its core drugs have not yet been上市 and it has generated no income from patent licensing. Revenue decreased year over year in the first nine months of 2025, mainly because management focused more on R&D of candidate drugs rather than promotion of Rihe products.

In terms of profitability, the company recorded losses of 158 million yuan and 101 million yuan for the year and during the period, respectively, during the reporting period. Cumulative losses were nearly 259 million yuan. In 2024, net cash used in operating activities was -92.88 million yuan. For the nine months ended September 30, 2025, net cash used in operating activities was -56.43 million yuan. Cash flow has continued to net outflow.

Research and development expenses are the primary factor that eats into profits. During the reporting period, the company’s R&D spending was 38.06M yuan and 3.62M yuan, respectively, accounting for 88.0% and 85.7% of total cash operating costs in the same period. The R&D costs for core product PL-5 accounted for 63.6% and 50.7% of total R&D costs, respectively, meaning R&D investment is highly concentrated.

Regarding the R&D team, as of the last practicable date, the company had established a dedicated internal R&D team consisting of 36 members. They have an average of more than seven years of industry experience, and over 86.1% of the team members hold a master’s degree or above.

In addition to internal R&D activities, the company also works with reputable CROs and SMOs. Under close supervision and management, they support preclinical research and clinical trials. The company selects CROs and SMOs based on professional qualifications, relevant research experience, service quality, efficiency, industry reputation, and costs. It typically signs master service agreements and signs separate work orders for each preclinical or clinical research project. The company is highly dependent on outsourced services. A large amount of preclinical research and clinical trials is outsourced to CROs and SMOs, and the vast majority of R&D spending in 2024 flows to these third-party institutions.

Sales and distribution expenses are also high. During the reporting period, the company’s sales and distribution expenses were 31.74M yuan and 69.94M yuan, respectively. Its selling expense ratios were 113.13% and 122.16%, respectively. Notably, since the company’s core product has not yet been formally上市, selling expenses are mainly used to promote Rihe products.

Regarding gross margin, the company’s gross margin during the period was 41.86% and 40.24%, respectively, maintaining a high level. However, given the extremely small revenue scale, the high gross margin contributes limitedly to overall profitability. The company states that in the foreseeable future it is unlikely to qualify to pay dividends with profits, and investors should be prepared for a long period of no returns.

More concerning than losses is the company’s liquidity situation. Plei Pharmaceutical’s prospectus discloses in detail its equity redemption agreements with multiple Pre-IPO investors. The terms stipulate that if the company fails to complete a qualified listing by the agreed date (such as 2025 or 2026), or if a material breach occurs or there is a change in control, investors have the right to require the company to repurchase shares. The redemption price is typically based on the original investment amount and includes compensatory interest at an annualized rate of 8% to 12%. Although most redemption rights were agreed to terminate before listing or became invalid after listing, as of the end of September 2025, the “equity redemption liability” amounting to as much as 799 million yuan is still classified as a current liability.

During the reporting period, Plei Pharmaceutical’s cash and cash equivalents were 1.92M yuan and 608k yuan, respectively; its net current liabilities were -763 million yuan and -826 million yuan, respectively; the current ratio was 0.07 and 0.06, respectively; the quick ratio was 0.06 and 0.06, respectively; and its debt-to-asset ratio was as high as 352.3% and 449.1%, respectively.

Independent economist Wang Qikun said that Plei Pharmaceutical has very little cash on its books, huge current liabilities, a debt-to-asset ratio above 350%, serious inability to repay debts with assets, cash flow exhaustion, and complete reliance on financing—so it is hard to say it has “money.” It has no profitable products, thin revenue, and continued losses; its business model has not been validated and it lacks self-sustaining cash-breeding capability, so it does not “make money.” At the same time, it has neither capital nor profits, yet it needs future expectations to support its valuation, making the risk extremely high and growth expectations already stretched thin. Its investment value-for-money is very low, so it is not “worth it.” Overall, the company faces extremely high risks and lacks investment value.

3

Equity is highly concentrated, and commercialization capability needs validation

In terms of equity structure, Plei Pharmaceutical shows a high concentration. As of the last practicable date, the chairman of the board, the executive director, the administrative president and general manager, Chen Yuxin, directly held approximately 27.97% of the company’s shares, and indirectly held approximately 7.77% of the shares through Jiangyin Puyuan (Chen serves as its executive partner and general partner). In total, he controlled approximately 35.74% of voting rights. Immediately following completion of the IPO (assuming the over-allotment option is not exercised), Chen Yuxin will continue to control a certain proportion of the company’s issued share capital, becoming the single largest shareholder group.

It is worth noting that as of September 30, 2025, Chen Yuxin provided personal guarantees for the company’s 1.1M yuan bank loans, accounting for 100% of the total loan amount. Although this guarantee was released in January 2026.

For commercialization realization, Plei Pharmaceutical’s Rihe product revenue relies heavily on distributors. In 2024, revenue from its top five Rihe product customers was 19.16 million yuan, accounting for about 36.9% of total revenue in the same period. Revenue from its single largest customer was 6.08 million yuan, accounting for about 11.5% of total revenue in the same period. From January to September 2025, revenue from its top five Rihe product customers was 11.04 million yuan, accounting for about 36.6% of total revenue in the same period. Revenue from its single largest customer was 4.44 million yuan, accounting for about 15.2% of total revenue in the same period.

The scale of existing Rihe products is small. In 2024 they contributed only 5.19 million yuan in revenue. In the first nine months of 2025, it further declined by more than 30%. The weakness of commercialization infrastructure will directly affect the efficiency of market promotion after PL-5上市.

In 2024 and the first nine months of 2025, the company’s procurement amounts from its top five suppliers were 444k yuan and 43.74M yuan, respectively, accounting for 54.7% and 49.8% of total procurement, respectively. Procurement amounts from its single largest supplier were 12.74M yuan and 7.11M yuan, respectively, accounting for 27.0% and 27.8% of total procurement, respectively.

Regarding production facilities, the company has established strong production capacity to support early clinical development of candidate drugs. The total building area of the production facilities located in Jiangyin, Wuxi, Jiangsu Province is approximately 12,000 square meters, maintaining the production facilities for the core product PL-5 and three production lines for Rihe products. In December 2025, the company established its wholly owned subsidiary ZhenTai Biopharmaceuticals (Zhejiang) Co., Ltd., and with an consideration of 16.90 million yuan and land consolidation expenses of 6.90 million yuan, it acquired land-use rights for an industrial plot in the Linhai Economic Development Zone in Taizhou, Zhejiang Province. The total land area is 30,666 square meters. The plan is to build its own raw-material-drug production facilities. The company says this move is intended to ensure stable supply of raw materials for the core product and other drugs under development, and reduce reliance on external suppliers. However, due to a long construction cycle and large capital investment, it will further exacerbate cash flow pressure in the short term.

In terms of competitive landscape, the antimicrobial peptide sector has left the “no-man’s-land.” According to Frost & Sullivan materials, there are already six peptide-based anti-infection candidate drugs in clinical stage globally, and in China there are also eight products of the same type in clinical development. Competition in the sector is intensifying, and PL-5’s first-mover window is narrowing.

The company states that future growth mainly depends on the strength of its drug portfolio and the successful development of candidate drugs. If it fails to complete clinical development of the drugs and expand indications for candidate drugs, fails to obtain the necessary regulatory approvals for commercialization, or if material delays occur while conducting such work, the business and financial prospects may be materially adversely affected. (Harbor Finance production)