Insilico Medicine, fundamentals are not bad - December 2025 IPO analysis

$INSILICO(03696.HK)

Sponsors: Morgan Stanley Asia Limited, CICC Hong Kong Securities Limited, GF Capital (Hong Kong) Limited

Offer Price: HKD 24.05

Fundraising Amount: HKD 2.277 billion

Total Market Cap: HKD 13.406 billion

Board Lot: 500 shares

Minimum Subscription: HKD 12,146.27

Subscription Period: December 18, 2025 - December 23, 2025

Grey Market Date: December 29, 2025

Listing Date: December 30, 2025 (Tuesday)

Total Offer Shares: 94.6905 million shares

International Placement: 85.221 million shares (90.00%)

Public Offering: 9.4695 million shares (10.00%)

Allocation Mechanism: Mechanism B

Interest Accrual Days: 1 day

Stabilizing Agent: Morgan Stanley

Issue Ratio: 16.99%

P/E Ratio: -100.75

Company Profile

Founded in 2014, Insilico Medicine is a global leader in AI-driven drug discovery and development, with its core relying on the self-developed generative AI platform Pharma.AI to build an efficient and innovative drug R&D system. The company has produced over 20 clinical or IND-stage assets, including 3 licensed to international pharmaceutical and healthcare companies with total contract value up to $2.1 billion (including up to $110 million upfront payment and $1.9 billion milestone payments), and 1 self-developed asset advanced to Phase II clinical trials, with pipeline progress at industry-leading levels.

The company adopts a project-based business model, focusing on external licensing and collaboration, covering three scenarios: self-developed candidate drugs, co-development with partial IP retention, and collaboration without IP retention. Its unique dual-engine model combines generative AI platform with deep in-house R&D capabilities, enabling candidate drugs to progress from target discovery to preclinical candidate (PCC) confirmation in just 12-18 months, far superior to the traditional 4.5-year average cycle. The platform has expanded to advanced materials, agriculture, nutrition products, veterinary drugs and other fields, with 787 patents and applications, 122 trademarks and applications, and 20 registered software copyrights globally, continuously leading industry development through technological innovation.

For the three years ended December 31, 2024, and the first six months of 2024 and 2025:

Revenue: approximately $30 million, $51 million, $86 million, $60 million, $27 million, YoY -54.00% in H1 2025;

Gross profit: approximately $19 million, $39 million, $78 million, $56 million, $23 million, YoY -58.75% in H1 2025;

Net profit: approximately -$222 million, -$212 million, -$17 million, $8 million, -$19 million, YoY -339.29% in H1 2025;

Gross margin: approximately 63.39%, 75.36%, 90.38%, 93.49%, 83.84%;

Net margin: approximately -735.82%, -413.52%, -19.92%, 13.45%, -69.98%.

Source: LiveReport Big Data

As of June 30, 2025, the company had $212 million in cash and -$37 million in operating cash flow.

Source: Prospectus

II. Cornerstone Investors

Insilico Medicine's cornerstone investors include multinational pharmaceutical companies, international investment funds and well-known domestic asset management institutions, specifically Eli Lilly and Company, Emerging Markets Healthcare Partners LLC, Huang River Investment Limited, Infini Global Master Funds, Oaktree Fund, RTW Funds, Temasek Holdings (Private) Limited, Wells Fargo Fund Management Co., Ltd., Wells Fargo Asset Management (Hong Kong) Limited, ChinaAMC (Hong Kong) Limited, Harvest Global Investments Limited, UBS Fund, Schroders, Pacific Asset Management Co., Ltd., Taikang Life Insurance Co., Ltd., and E Fund Management Co., Ltd.

The subscription ratios of these cornerstone investors vary, with Oaktree Fund, Temasek Holdings (Private) Limited, UBS Fund, and Schroders each accounting for 5.13%, the highest among all investors; Infini Global Master Funds accounted for 3.42%; Eli Lilly and Company, Huang River Investment Limited, ChinaAMC (Hong Kong) Limited, Harvest Global Investments Limited, Pacific Asset Management Co., Ltd., and Taikang Life Insurance Co., Ltd. each accounted for 1.71%; RTW Funds and E Fund Management Co., Ltd. accounted for 1.37%; Wells Fargo Fund Management Co., Ltd. accounted for 0.91%, Wells Fargo Asset Management (Hong Kong) Limited accounted for 0.80%, and Emerging Markets Healthcare Partners LLC accounted for 0.68%. The lock-up period for all cornerstone investors is June 30, 2026.

There are 6 underwriters in total

2. Lottery Rate and New Share Analysis

(From AIPO)

Current margin financing has been oversubscribed by 120.87 times.

The required principal and financing amount for each tier of Group A are shown in the table below:

Group B requires a subscription amount of HKD 7.29 million. The required principal and financing amount for each tier of Group B are shown in the table below:

According to the prospectus, based on the offer price of HKD 20.05, the total listing expenses are approximately HKD 252 million, with a fundraising amount of HKD 2.277 billion, accounting for about 11.05% of the total, which is considered average compared to the fundraising amount.

Should we subscribe? Let's analyze below:

Before its IPO, Insilico Medicine underwent multiple rounds of financing, with core data from each round showing significant value growth characteristics: In 2018, Series A raised $6 million with a post-money valuation of $54.4 million, at a cost per share of HKD 2.58, representing an 89.27% discount to the offer price; in 2019, Series B raised $36.8 million with a post-money valuation of $106.8 million, at a cost per share of HKD 3.25, a discount of 86.49%; in June 2021, Series C1 and C2 raised $68.2 million and $18.68 million respectively, both with a post-money valuation of $570.3 million, at costs per share of HKD 8.84 and HKD 12.30, discounts of 63.23% and 48.85%; in November 2021, Series C+ raised $15 million with a post-money valuation of $585.3 million, with some shares at HKD 8.84 and HKD 12.30, consistent with Series C1 and C2; in May 2022, Series D raised $60.2 million with a post-money valuation of $860.2 million, at a cost per share of HKD 15.22, a discount of 36.71%; in July 2022, the second closing of Series D raised $34.5 million with a post-money valuation of $894.7 million, at the same cost per share of HKD 15.22, a discount of 36.71%; in February 2025, Series E raised $122.8 million with a post-money valuation climbing to $1.3305 billion, at a cost per share of HKD 20.09, a discount of only 16.44%.

From the financing trend, the company's financing amount and post-money valuation have continued to grow with each round, with the cost per share gradually increasing and the discount to the offer price narrowing, reflecting the market's increasing recognition of the AI drug R&D sector and the company's technological strength.

With an issue market cap of HKD 13.406 billion and total fundraising of HKD 2.277 billion under Mechanism B, it's highly likely to be oversubscribed! Inclusion in Stock Connect is no problem.

Recently, a wave of new listings has emerged, looking very lively, but in reality, few are worth subscribing to. As the year approaches, many companies are rushing to list to take advantage of the year-end market, and HKEX is pushing hard for performance, becoming the world's top fundraising exchange this year.

Those listing at this time are mostly aiming for Stock Connect, all before December 31. The latest batch of new shares must list no later than December 31, with December 30 as the latest dark pool date, meaning lottery results must be out by December 29. With holidays on December 25-26, the last day for subscription is December 24, and the subscription must start by December 19 to enter March's Stock Connect. Any delay means waiting until September next year. Of course, new shares listing after December 19 may just be saving a fiscal year's financials, but if aiming for March's Stock Connect, subscription must start by December 19. We've calculated the timing very clearly.