Pharmaceutical services firm ​​Medtide rose 2% in Hong Kong grey market trading.

Medtide was founded in 2020 but a key subsidiary, Zhongtai Biochemical,started operating in 2001 as a peptide-focused supplier of wide-ranging services, from research and development to testing and manufacturing. The peptides are provided to customers as active pharmaceutical ingredients for combining with boosting agents to create the finished products.

The global peptide drug market is projected to grow from $89.5 billion in 2023 to $261.2 billion in 2032, a compound annual growth rate of 12.6%, according to research contained in the prospectus. With explosive demand threatening to outstrip supply, pharmaceutical giants are scrambling to lock in extra production capacity in partnership with service companies. Medtide has also strategically pivoted to the weight-loss market, partnering with seven clients on nine GLP-1 projects for injectable or oral drugs.

According to the report cited in the prospectus, the company is the world’s third-biggest peptide-focused contract research, development and manufacturing organization (CRDMO), measured by 2023 revenue. However, the industry is top heavy, with the leading two companies controlling nearly 24% of the market while those ranked three to six have only around 1% each, the report said. Medtide’s specific share was 1.5%.

While demand for weight-loss drugs is soaring off the charts, the company’s earnings graph has not traced a steady climb over the last three years.

Turnover and profits dipped in 2023, a setback blamed on a handful of clients changing their drug development plans, highlighting the risks associated with small customer base.

Revenues came in at 351 million yuan in 2022, falling to 337 million yuan the following year before accelerating to 442 million yuan in 2024. Over the same timeframe, gross profits were 201 million yuan, 180 million yuan and 250 million yuan, while the company logged net profits of 53.98 million yuan, 48.91 million yuan and 59.17 million yuan.

The company explained in the prospectus that the actions by three clients in the U.S. and China caused 2023 revenue to drop 34 million yuan. Meanwhile, the 31% rise in 2024 revenues was driven by a single U.S. client focused on GLP-1 drug development.

As of last year, Medtide had 707 clients overall but relied on the top five for just over half of its revenue, with the single biggest customer contributing 26.8%. The small base leaves the company exposed to business shifts, as well as geopolitical risks. Overseas revenue accounts for nearly 79% of total revenue, with the U.S. market responsible for 55%, leaving Medtide vulnerable to trade disputes and U.S. tariff policies.

The company said 76.4% of the IPO proceeds would go towards building facilities for producing peptides and oligonucleotides in the United States and China. More specifically, 38.2% has been earmarked for the new Rocklin Site in California, which is due for completion in the first half of this year, boosting the firm’s annual production capacity by between 100 kg and 300 kg. Another 9.5% of the funds would be spent on expanding the company’s network of sales and post-sales service stations and 4.1% would go towards upping capacity in China.