On July 10, SKB BIO (06990.HK) announced the successful completion of a new H-share placement, raising net proceeds of approximately HK$2.723 billion.

This innovative biotech company, which listed under the Chapter 18A framework in 2023, has now conducted multiple equity fundraising rounds over its three years on the exchange to continually support its pipeline development.

However, considering its financial data and the industry environment, factors such as slowing revenue growth, persistent operating losses, and continuous negative operating cash flow, combined with variables like the scope for future share issuance and pipeline commercialization, require investors to remain attentive to potential operational risks.

Financing Details and Cumulative Fundraising

The placement was jointly arranged by Goldman Sachs, Citigroup, and J.P. Morgan, involving the issuance of 5.838 million new shares to no fewer than six independent institutional investors.

These shares represent about 2.44% of the company's enlarged share capital, resulting in limited short-term dilution.

The pricing exhibited contrasting characteristics: the placement price of HK$470.2 represented a discount of 8.52% to the closing price the day before the placement and a 3.66% discount to the five-day average price, but it was at a 9.81% premium to the average price over the preceding twenty trading days.

Under the general mandate granted by the shareholders' meeting, the company can issue new shares representing up to 20% of its total share capital, amounting to approximately 46.637 million shares.

The current placement utilized only about 12.5% of this quota, leaving ample authorization for potential future share placements.

The placement agreement includes a 90-day lock-up period, temporarily restricting the supply of shares, but the dilution pressure from this and potential future financing remains a long-term consideration.

Reviewing its post-IPO fundraising activity, the company has conducted four equity financing rounds in July 2023, May 2024, June 2025, and July 2026.

Over three years since listing, its cumulative equity fundraising is close to HK$7 billion, placing it among the higher tiers of Chapter 18A-listed biotech firms in Hong Kong in terms of both fundraising frequency and scale.

Slowing Revenue Growth and Persistent Losses

Operational data shows a deceleration in the company's growth momentum, with profitability yet to be achieved.

In 2025, the company generated operating revenue of RMB 2.058 billion, representing a year-on-year growth rate of only 6.46%, a significant slowdown from the 25.48% growth in 2024 and 91.62% in 2023.

Revenue primarily relies on milestone payments from licensing agreements with overseas pharmaceutical companies, a source of income that lacks stability and continuity, while the company's own commercialized products have not yet formed a substantial revenue base.

Losses have concurrently widened, with the company reporting a net loss of RMB 382 million in 2025, and a loss after adjusting for non-recurring items of RMB 508 million.

While the company maintains a relatively high gross margin of 71.86%, it is insufficient to cover expenses for clinical trials, R&D, and commercialization efforts.

Annual R&D expenditure reached RMB 1.32 billion, accounting for over 64% of revenue and constituting the primary source of cash consumption.

Regarding cash flow, operating activities resulted in a net cash outflow of RMB 180 million in 2025, indicating that core operations are not generating positive cash flow, and overall operations remain highly dependent on external equity financing.

As of the end of 2025, the company held cash and cash equivalents of RMB 3.244 billion, which, combined with the proceeds from this placement, provides sufficient short-term liquidity.

However, at the current pace of R&D expenditure and without a significant ramp-up in commercial revenue, new funding requirements may arise within 2-3 years.

Focus on Pipeline Investment Amid Commercialization Uncertainties

The use of proceeds from this placement is clearly defined: 80% of the net amount (HK$2.179 billion) is allocated to new drug R&D, clinical trials, regulatory submissions, production setup, and product commercialization; 15% is for internal technology upgrades and external collaborations to expand the pipeline; and only 5% is for supplementing general working capital.

The company's core focus is on the ADC (antibody-drug conjugate) field, deriving interim income from collaborations with multinational pharmaceutical companies like Merck.

However, this licensing model has inherent limitations: the pace of clinical progress and trial data directly determine payment schedules, and if any pipeline candidate underperforms clinically, both revenue and asset valuation would face pressure.

On the commercialization front, several self-developed products have gained approval, but the domestic ADC landscape is becoming increasingly crowded with homogeneous competition, as products targeting similar mechanisms are being submitted for approval in clusters, gradually intensifying pricing pressure.

Furthermore, capacity construction and sales channel development require continued capital investment.

The translation of pipeline assets from clinical stages to stable cash flow involves a long cycle, and whether substantial R&D investments can translate into scaled revenue remains uncertain.

Concentrated Ownership and Related-Party Business

In terms of ownership structure, the parent company, Kelun Pharmaceutical, will hold approximately 62.53% of the shares after the placement, exercising absolute control.

There are extensive related-party transactions between the listed company and its parent in areas such as R&D, raw materials, and production, leading to long-standing market concerns regarding the fairness of transfer pricing and the degree of business independence.

Under this highly concentrated ownership structure, the overall group strategy may be prioritized over the interests of minority shareholders in the listed entity, and the dilutive effects from ongoing capital activities warrant continued attention.

From an industry perspective, it is common for unprofitable Chapter 18A biotech companies in Hong Kong to be reliant on financing.

If market sentiment towards the biotech sector weakens, the discount required for future fundraising by the company could widen.

Simultaneously, events such as clinical trial failures for pipeline candidates or underperformance in commercial sales could directly impact the company's financial reserves and market valuation.