Recently, Zhejiang Jingxin Pharmaceutical Co., Ltd. (hereafter "Jingxin Pharmaceutical") has once again submitted an H-share listing application to the Hong Kong Stock Exchange, with CITIC Securities (Hong Kong) acting as the sole sponsor, just over a month after its previous prospectus lapsed upon reaching six months of validity. Information shows that Jingxin Pharmaceutical focuses on two major areas—central nervous system and cardiovascular and cerebrovascular—with operations spanning generic drugs, innovative drugs, traditional Chinese medicine, active pharmaceutical ingredients, and medical devices. However, under the persistent pressure of centralized procurement, the company's revenue has remained stagnant for three years, profit growth has mainly relied on "cost-cutting," and goodwill impairment left over from past related-party acquisitions continues to be released. Whether the company can break through its difficulties by raising funds in Hong Kong remains to be seen.

Cost Contraction Drives Profit Growth, Capacity Utilization Hits New Lows

From the financial data, in 2023, 2024, and 2025, Jingxin Pharmaceutical's revenue was 3.999 billion yuan, 4.159 billion yuan, and 4.069 billion yuan, respectively, with an annualized compound growth rate of less than 1%; over the same period, net profit attributable to shareholders rose from 619 million yuan to 758 million yuan, a cumulative increase of about 22%. The divergence between revenue and profit stems from the fact that the company's profit growth has mainly been achieved through "cost-cutting." From 2023 to 2025, Jingxin Pharmaceutical's selling and marketing expenses were 784 million yuan, 692 million yuan, and 601 million yuan, respectively, compressing a cumulative total of about 183 million yuan over three years. R&D expenses followed a similar pattern: from 2023 to 2025, the company's R&D expenses were 401 million yuan, 383 million yuan, and 368 million yuan, respectively, a cumulative decline of about 33 million yuan. Entering 2026, the company's expenses continued to contract, but performance has already shown an inflection point. In the first half of 2026, the company's R&D expenses were 165 million yuan, continuing to decline by 10.89% year-on-year; selling and marketing expenses were 273 million yuan, down 12.26% year-on-year. During the same period, the company's revenue was 1.987 billion yuan, a decrease of about 30 million yuan from 2.017 billion yuan in the same period last year; net profit attributable to shareholders was 352 million yuan, down 9.35% year-on-year.

Combined with the business perspective, the company's main businesses all performed sluggishly. According to the semi-annual report, during the reporting period, finished drug revenue was 1.163 billion yuan, down 1.08% year-on-year. API revenue was 417 million yuan, down 7.83% year-on-year, having recorded negative growth for three consecutive years with no narrowing of the decline, making it the main segment dragging down revenue. Medical device revenue was 375 million yuan, up 7.48% year-on-year, the only business segment with positive growth. However, this business accounts for only about 19% of total revenue and is essentially contract manufacturing of medical devices and self-branded display equipment, with limited relevance to the innovative drug story the company tells, and it is insufficient to support the overall business.

Accompanying the weak revenue is a rapid decline in capacity utilization. According to the prospectus, as the company's foundation, the capacity utilization rate of the generic drug production line fell from 77% in 2023 to 69.4% in 2024, dropped to 68.1% in 2025, and further declined to 61.3% in the first half of 2026. The capacity utilization rate of the traditional Chinese medicine production line declined even more rapidly, from 55.6% in 2024 to 35.2% in 2025, and only 24.9% remained in the first half of 2026. With the traditional generic drug business under pressure, the company's bet on a second growth curve, Daxidini, is indeed ramping up, but it is still not yet at a point where one can feel at ease. Information shows that Daxidini capsules (trade name "Jingnuoning") were approved in November 2023, officially began commercial shipment in March 2024, and were included in the national medical insurance catalog in November 2024. In terms of sales data, the drug recorded 195 million yuan for the full year of 2025 and surged to 153 million yuan in the first half of 2026 alone, with a year-on-year growth rate of nearly 180%. It is worth noting that Daxidini is not entirely self-developed; it was originally developed by Roche, then Evotec obtained global exclusive rights, and Jingxin Pharmaceutical acquired exclusive rights in China through licensing in 2010—essentially a "license-in" model—and the company's original innovation capability has not been verified. At the same time, competition in the insomnia space is intensifying. As of 2025, 148 drugs have been approved in China for sleep-onset insomnia, among which the new-generation dual orexin receptor antagonists lemborexant and daridorexant were both approved and launched in 2025, with market shares rapidly reaching 3.2% and 1.7%, respectively. Both belong to a new generation of mechanism-based drugs and may form generational competition with the benzodiazepine-class Daxidini in clinical practice. With the advancement of medical insurance access and in-hospital promotion, whether Daxidini can maintain its first-mover advantage remains uncertain.

Fallout from High-Premium Related-Party Acquisition Emerges; Ample Cash on Books Yet Still Seeking Funds in Hong Kong

In addition to the challenges on the business front, Jingxin Pharmaceutical also has hidden concerns at the corporate governance level. At the end of 2021, Jingxin Pharmaceutical acquired 100% equity of Guangdong Shaxi Pharmaceutical, under the control of actual controller Lü Gang, for 205 million yuan, with the entire consideration paid using the listed company's own funds. At that time, Shaxi Pharmaceutical's net assets were only 30.12 million yuan, representing a premium rate of 581%. According to the agreement, Shaxi Pharmaceutical made a three-year cumulative net profit commitment of 61.6 million yuan, but ultimately achieved a cumulative net profit of 60.54 million yuan over the three years, failing to meet the target. After the performance commitment period, Shaxi Pharmaceutical quickly fell into losses. In 2025, it recorded an operating loss, and the company made an impairment of 30.806 million yuan against its long-term equity investment; in the first half of 2026, another impairment of 33.893 million yuan was made. At the same time, goodwill related to Shaxi Pharmaceutical was impaired by 12.88 million yuan in 2025 and by another 19.9 million yuan in the first half of 2026. In just a year and a half, this 205 million yuan acquisition has accumulated impairments exceeding 97 million yuan, accounting for 47% of the acquisition consideration. The listed company used cash to acquire the actual controller's assets at a high premium, and the target's performance immediately deteriorated after the performance commitment period. Issues such as the fairness of the transaction pricing and whether the related-party transaction involved tunneling of benefits remain to be examined.

In addition, the necessity and reasonableness of this Hong Kong IPO fundraising are also worth scrutinizing. As of the first half of 2026, Jingxin Pharmaceutical's quasi-cash assets, comprising monetary funds, trading financial assets, and time deposits of various maturities, exceeded 2.3 billion yuan, while interest-bearing liabilities during the same period were only about 200 million yuan. In terms of cash-generating ability, the company's net cash flow from operating activities has remained stable at around 700 million yuan for many consecutive years. Meanwhile, from 2023 to 2025, against the backdrop of operating pressure, Jingxin Pharmaceutical still maintained a high dividend payout ratio, with cash dividends of 258 million yuan, 285 million yuan, and 287 million yuan in each period, totaling about 830 million yuan in cumulative dividends over the past three years. The company does not lack money, yet it still wants to ask the market for money, and the reasonableness of this may be questionable. From the shareholding structure, the company's actual controller Lü Gang directly holds 20.77% of shares, making him the largest shareholder; Jingxin Holding Group Co., Ltd., wholly controlled by him, holds 15.68% of shares, making it the second-largest shareholder; and concert party Lü Yueying holds 2.74% of shares. Together, the three form a concert party system with a combined shareholding ratio of 39.19%. From cash dividends alone, the actual controller system can steadily obtain more than 100 million yuan in cash returns each year. Combined with the approximately 205 million yuan cashed out from selling 100% equity of Shaxi Pharmaceutical to the listed company in 2021, in just the past five years, the actual controller has obtained a cumulative total of about 700 million yuan in cash from the listed company through asset sales and cash dividends.

In terms of fundraising use, according to the prospectus, the proceeds are intended to be invested in innovative drug R&D, marketing network expansion, potential industrial acquisitions, and product licensing and introduction, among other directions. It is worth noting that, as mentioned above, the company's R&D expenses have declined for three consecutive years. In addition, a 2024 tax authority administrative penalty showed that some of the company's R&D expenses in 2023 were determined to be unrelated to R&D activities. For a pharmaceutical company with an innovation transformation narrative, R&D expenses have not increased but decreased, and even the authenticity of R&D investment data is disputed. Whether the company can make good use of the raised funds after fundraising also remains to be seen.