Sichuan Biokin Pharmaceutical Co., Ltd. (688506) has found itself at the center of a financial reporting controversy, with its 2025 annual results showing a staggering RMB1.78 billion milestone revenue recognition from its Bristol-Myers Squibb (BMS) partnership that appears to have vanished from the year-end balance sheet without any corresponding cash inflow. This accounting discrepancy raises fundamental questions about the company's financial disclosure practices and the rigor of its IPO sponsors' due diligence processes.
The company, which listed on Shanghai's STAR Market in January 2023, has positioned itself as a modern biopharmaceutical enterprise focused on oncology, with strategic investments in three major technology platforms: ADC, ARC, and GNC. At the end of 2023, Biokin entered into a landmark global strategic collaboration with BMS, with a total transaction value potentially reaching USD8.4 billion — the largest overseas licensing deal in China's innovative drug sector history. This substantial upfront payment recognition transformed the company's 2024 financial performance dramatically, with revenue surging to RMB5.822 billion and net profit attributable to shareholders reaching RMB3.708 billion. However, the subsequent quarters painted a different picture, as 2025 and Q1 2026 both returned to losses (with a net loss of RMB1.054 billion in 2025) due to declining license fee income and escalating R&D expenditures. The company's current A-share market capitalization stands at approximately RMB125 billion.
Where the money trail goes cold
Under the double-entry bookkeeping system, every revenue recognition must correspond to an increase in assets (such as cash, accounts receivable, or contract assets) or a decrease in liabilities (such as advance payments or contract liabilities). Yet Biokin's massive BMS milestone revenue recognized in 2025 appears to have simply "disappeared" from the balance sheet, potentially constituting a major financial irregularity that warrants close scrutiny from investors and regulators alike.
According to IFRS 15 (Revenue from Contracts with Customers) and China's Accounting Standard No. 14, when an enterprise recognizes revenue upon satisfying performance obligations and the customer has not yet paid, the company must recognize corresponding receivables or contract assets. In 2025, Biokin recognized RMB1.776 billion in milestone revenue as a single line item, yet its year-end "Trade and Other Receivables" breakdown shows the entire "trade receivables" category at merely RMB77.719 million. Even when adding prepayments to suppliers and recoverable VAT, the total "trade and other receivables" amounts to only RMB415 million.
Given that the company recognized RMB1.776 billion in milestone revenue in 2025 without receiving cash (as evidenced by negative operating cash flow), why does the year-end accounts receivable stand at a mere RMB77.72 million? How can this RMB1.776 billion asset vanish from the balance sheet without generating any cash inflow? These contradictory figures raise serious questions about the accuracy and completeness of the company's financial disclosures. Such a fundamental breakdown in financial reconciliation — should the joint sponsors and overall coordinators, including CLSA, Jefferies, CICC Hong Kong Securities, Deutsche Bank Hong Kong, and SDIC Securities (Hong Kong), have identified this issue during their internal review and quality control procedures?
Premature revenue recognition or aggressive accounting judgment?
Setting aside the reconciliation issues, the timing of this RMB1.776 billion milestone revenue recognition is equally puzzling and may suggest premature revenue recognition designed to embellish financial statements or mislead investors through discretionary accounting estimates. The prospectus (application version) discloses that the milestone trigger condition was "initiation of the first Phase II or III trial of the licensed product as 1L or 2L treatment in the United States on or before December 31, 2025." The issuer states that "as all three global Phase II/III trials of the licensed product in the United States had begun patient dosing on or before December 31, 2025, we recognized revenue for the first clinical trial milestone under the BMS agreement in 2025."
From a clinical medicine and drug development professional perspective, "First Patient In" (FPI) merely marks the starting point of a lengthy clinical trial journey. In internationally accepted pharmaceutical cooperation agreements, variable consideration for milestone payments must satisfy the strict condition that "it is highly probable that a significant reversal will not occur." Without obtaining any substantive clinical endpoint data (such as ORR, PFS, OS), without demonstrating the drug's efficacy and safety in the target population, and with BMS having not yet actually remitted payment — is it aggressive accounting practice to recognize the full RMB1.776 billion as current period revenue based solely on this single, preliminary action of "beginning patient dosing"?
Did the sponsors (CLSA, Jefferies, CICC, Deutsche Bank, and SDIC Securities) thoroughly review the original terms of the BMS agreement? Is the specific revenue recognition condition for milestone payments merely "first patient dosing" without any subsequent follow-up requirements? Was BMS directly confirmed regarding its payment intention and timeline for this amount?
The high-deposit, high-loan anomaly demanding investor attention
The prospectus data paints a financial picture that defies normal business logic. While holding substantial idle liquidity, the company has been aggressively borrowing from banks, with both borrowing scale and interest expenses growing explosively — a classic "high deposits, high loans" pattern that securities regulators view as among the highest-risk financial anomalies. At the end of Q1 2026, Biokin held RMB4.217 billion in time deposits and RMB2.168 billion in wealth management products (financial assets measured at fair value through profit or loss), totaling RMB6.385 billion in fully idle, available funds. Yet during the same period, the company maintained RMB4.149 billion in bank borrowings, generating RMB26.56 million in interest expenses in just the first quarter of 2026.
This financial structure inevitably draws comparisons to notorious cases of financial fraud in China's capital markets (such as Kangde Xin and Kangmei Pharmaceutical) that employed similar "high deposits, high loans" tactics. The commercial rationality of these related transactions remains questionable — do they potentially harm the interests of listed company shareholders?
As Biokin advances its "A+H" dual listing strategy, having submitted its H-share listing application to the Hong Kong Stock Exchange on August 6, 2026 (its third attempt at a Hong Kong IPO, following an initial filing in July 2024 and a voluntary deferral in November 2025 due to market conditions), the company plans to use the proceeds primarily for advancing global clinical trials of core products such as Yizekang and T-Bren, upgrading production facilities, and expanding overseas operations. The company's financial reporting practices will undoubtedly face heightened scrutiny from both Hong Kong and mainland regulators, as well as from prospective investors evaluating the credibility of its disclosures.