Core Insights - The company Wangshan Wangshui has received approval for its "domestic Viagra" TPN171, while simultaneously accelerating its IPO process, indicating a critical moment for the company in 2025 [1][2] - Despite the high valuation of 4.4 billion RMB, the company faces significant financial challenges, including a drastic decline in main revenue and ongoing cash flow issues [1][4] Company Overview - Wangshan Wangshui, established in 2013, focuses on discovering, developing, and commercializing small molecule drugs, with a pipeline of nine innovative assets targeting viral infections, neuropsychiatric disorders, and reproductive health [2] - The company’s core products include VV116, LV232, and TPN171, which are considered to have first-in-class or best-in-class potential [2] Financial Performance - VV116, a COVID-19 oral medication, significantly boosted the company's revenue, contributing 92% of total revenue in 2023, leading to the first annual profit of 6.427 million RMB [4][6] - However, in 2024, the company experienced a 97% drop in external licensing revenue, resulting in a revenue decline to 11.83 million RMB and a net loss of 21.76 million RMB [4][6] - By the first four months of 2025, external licensing revenue further decreased to 27,300 RMB, with a monthly average income from VV116 dropping below 70,000 RMB [5][6] Revenue Structure - The company's revenue is derived from external licensing, CRO services, drug sales, and intellectual property transfers, but none of these have become stable core pillars for sustainable operations [7] - Drug sales increased from 67,400 RMB in 2023 to 259,400 RMB in the first four months of 2025, but this growth is primarily driven by generic drugs, not innovative products [7][8] Valuation Concerns - The company's valuation of 4.4 billion RMB implies a price-to-sales ratio of approximately 18 times for 2024, significantly higher than the generic drug sector average of 5-6 times, raising questions about its sustainability [8] - TPN171, while seen as a key product for the IPO, faces intense competition in the erectile dysfunction market, which is dominated by established products [8] Debt and Cash Flow Issues - As of April 2025, the company has 72.83 million RMB in cash against 231 million RMB in current liabilities, indicating a significant liquidity crisis [9][11] - The company's cash flow health is deteriorating, with a net outflow of 10.9 million RMB in 2024, leading to concerns about its operational sustainability [9][10] Production Capacity and Expansion Plans - The company plans to use IPO proceeds for core product development and factory expansion, despite currently having a 98% idle production capacity [12][13] - The new factory in Lianyungang is set to produce 1 billion capsules and 600 million tablets annually, but the actual utilization rate is below 2% [12][13] Client Dependency Risks - The company relies heavily on a few major clients, with the top five clients contributing over 90% of revenue, which poses significant operational risks [8][9]