Recently, Hangzhou New Element Pharmaceutical Co., Ltd. ("New Element Pharmaceutical") submitted its prospectus to the Hong Kong Stock Exchange, seeking to list under Chapter 18A rules with CITIC Securities as its sole sponsor. As an innovative pharmaceutical company focused on gout and related metabolic diseases, New Element Pharmaceutical possesses broad market prospects, yet underlying concerns regarding delayed R&D progress, intensifying competition, and challenges in realizing commercial value warrant attention.
**Best-in-Class Single Product Still Faces Hidden Concerns: Lagging R&D Progress Poses Commercialization Value Realization Challenges**
According to the prospectus, New Element Pharmaceutical focuses on metabolic, inflammatory, and cardiovascular disease areas, covering comprehensive care for gout patients and addressing hyperuricemia, chronic gout, acute gout, tophi dissolution, and hyperuricemia-related chronic kidney disease (CKD).
Currently, globally marketed uric acid-lowering drugs include allopurinol, benzbromarone, febuxostat, lesinurad, and dotinurad. However, some of these medications exhibit certain safety concerns. For example, allopurinol may cause severe allergic reactions and is contraindicated in patients with allergies, severe hepatic or renal dysfunction, and significant cytopenia. Benzbromarone has serious hepatotoxicity and has been withdrawn from major European and American markets. Febuxostat has been subject to FDA black box warnings due to reported 4.3% cardiovascular mortality rates, alerting physicians and patients to potential risks and serious side effects.
Safety issues with existing drugs create market opportunities for next-generation medications while simultaneously imposing higher safety requirements for new products. Currently, New Element Pharmaceutical's pipeline includes two clinical-stage products (ABP-671 and ABP-745) and multiple preclinical-stage projects (AT6616, ABP-6016, ABP-6118).
The core product ABP-671 is a URAT1 (uric acid transporter 1) inhibitor primarily addressing treatment needs for gout and hyperuricemia. Mechanistically, URAT1 inhibitors promote uric acid excretion through urine by inhibiting renal uric acid reabsorption, making them suitable for patients with poor uric acid excretion.
The company states in its prospectus that ABP-671 possesses a unique chemical structure that successfully eliminates hepatotoxicity risks compared to traditional benzbromarone and its derivatives, demonstrating superior safety and higher target selectivity. The product is currently conducting simultaneous Phase 2b/3 clinical trials for gout and hyperuricemia in the United States and China.
However, from a competitive landscape perspective, New Element Pharmaceutical's advantages are not significant. Regarding efficacy data, reducing patients' serum uric acid (sUA) levels to <6 mg/dL is one of the approval standards for uric acid-lowering drugs and can reduce gout attack frequency, while reduction to <4 mg/dL can dissolve tophi. Based on non-head-to-head competitive data, ABP-671 shows the highest proportion of sUA level reduction to 4 mg/dL, outperforming comparable competitors. In terms of safety, next-generation URAT1 inhibitors generally demonstrate good safety profiles with low incidence rates of serious adverse reactions.
However, regarding R&D progress, New Element Pharmaceutical has fallen behind major competitors. Eisai acquired exclusive development and commercialization rights for dotinurad in the Chinese market in 2020, successfully launching it in China in December 2024, with sales expected to commence in July 2025. Domestic pharmaceutical leader Hengrui Medicine's SHR4640 (Ruzinurad) submitted a marketing application to the Center for Drug Evaluation (CDE) in January 2025. If approved successfully, it would become the first domestically produced highly selective URAT1 targeted drug, securing first-mover market advantages.
Additionally, other competitors are advancing rapidly in their R&D progress. YiPinHong's collaboration with Arthrosi on URAT1 inhibitor AR882 has completed enrollment for global Phase III clinical trials. Ying Li Pharma's YL-90148 is conducting simultaneous Phase III clinical studies in China and the United States. Sinovo's XNW3009 tablets are in Phase III clinical stage.
Lagging R&D progress means that even if ABP-671 successfully reaches market in the future, it will face extremely intense market competition, making market share acquisition potentially challenging. Furthermore, traditional gout medications have all passed patent expiration, with over one hundred approved generic drugs currently available. As a startup R&D company, New Element Pharmaceutical's future commercial value realization still faces challenges in product pricing and medical insurance access.
**Cumulative Losses of Nearly 700 Million Over Two and Half Years with Cash Flow Pressure, Pre-IPO Shareholder Share Transfers at Par Value**
Regarding financial data, as the company has no commercialized products, recognized operating revenue during the period primarily came from non-operating income such as government subsidies and interest income. In 2023, 2024, and the first half of 2025, the company's net losses were 97 million yuan, 434 million yuan, and 165 million yuan respectively, with cumulative losses approaching 700 million yuan over two and half years.
Analyzing cash flow conditions, as of the end of June 2025, the company held approximately 55 million yuan in cash and cash equivalents, along with 226 million yuan in financial assets measured at fair value and 20.9 million yuan in term deposits. Although the company received a 67.5 million yuan final payment through Series D financing in August 2025, considering that R&D expenses alone reached 338 million yuan for the full year 2024, existing capital reserves may be insufficient to support long-term operations. If the company cannot complete new round financing or achieve product commercialization breakthroughs in the short term, it will face severe working capital pressure.
Regarding corporate history, one month before New Element Pharmaceutical submitted its IPO application, a notable equity transfer transaction occurred. In August 2025, investor Kaitai Kanghui transferred its company shares to three transferees - Fang Liangchang, Chen Mingxian, and Zhang Huirong - at a transfer price of 66 yuan per share.
Notably, Kaitai Kanghui, as a participant in New Element's D1 round financing, originally invested in the company at exactly 66 yuan per share. Comparing the two transactions reveals identical pricing, meaning Kaitai Kanghui gained no price differential during its shareholding period.
Such par value transfers immediately before IPO are highly unusual and clearly inconsistent with the normal logic of shareholders waiting for company listing and exiting after equity appreciation. This abnormal transaction raises multiple market speculations: does it indicate that some investment institutions hold cautious attitudes toward the company's listing prospects, or are there other undisclosed agreement arrangements?
Examining the company's financing history, New Element Pharmaceutical has completed five financing rounds since establishment, raising a total of 1.078 billion yuan. The company's valuation soared from 107 million yuan during Series A financing in 2017 to 2 billion yuan in 2022, and further to 3.052 billion yuan in 2025, representing remarkable valuation growth over just a few years. However, this rapid valuation growth lacks performance support and is primarily built on future commercialization expectations. If core product development faces obstacles or commercialization progress falls short of expectations, the sustainability of high valuations will face challenges.
From a valuation cost-effectiveness perspective, due to the innovative pharmaceutical industry's special characteristics, some companies are still in early development stages without profitability, with core value logic often based on favorable future development expectations rather than current performance. Therefore, commonly used price-to-earnings ratio valuation methods exhibit distortions. Price-to-research ratio serves as a key quantitative valuation indicator introduced in this context and can serve as a company valuation reference.
Based on the company's 2024 R&D expenses, New Element Pharmaceutical's price-to-research ratio is approximately 9.03 times. Wind data shows that the median price-to-research ratio for currently listed unprofitable biomedical companies in Hong Kong is 27.5 times, with an arithmetic average of 67.27 times, indicating the company's valuation is significantly below overall industry levels.