Core Viewpoint - The stock price of Huazhang Biotech (02396.HK) dropped over 40% in the first two trading days after its IPO, with a significant decline of 29.32% on the first day. The company, which is not yet profitable, focuses on PDGF drugs for conditions like diabetic foot and burns, but has not received any product approvals since its establishment in 2012 [1][2]. Financial Performance - Huazhang Biotech reported revenues of 472,000 yuan in 2023 and 261,000 yuan in 2024, with zero revenue for the first nine months of 2025. The net losses for the same periods were 105 million yuan, 212 million yuan, and 134 million yuan respectively. Although the loss for the first nine months of 2025 decreased compared to the previous year, this was primarily due to cost management rather than operational improvements [3][4]. - The company has a cash and cash equivalents balance of approximately 73.79 million yuan as of September 30, which, given a monthly cash burn rate of about 17 million yuan, provides only about 4.34 months of operational runway [1][3]. Funding and Valuation - The IPO proceeds are seen as "emergency" funding, with 61.8% allocated to ongoing clinical and commercialization projects Pro-101-1 and Pro-101-2, 18.8% for R&D and quality control equipment, and 10.0% for working capital [1][2]. - The company has undergone multiple funding rounds, with valuations increasing from approximately 805 million yuan in May 2021 to 3.3 billion yuan in May 2023. However, the A and B rounds included redemption clauses that could lead to significant financial obligations if the IPO did not occur by the end of 2026 [2][3]. Product Pipeline - The core focus of Huazhang Biotech is on two PDGF candidate drugs: Pro-101-1 for deep second-degree burns, which is in the final stages of a Phase IIb trial and aims to start Phase III in Q3 2025, and Pro-101-2 for diabetic foot ulcers, currently in Phase II, with a target for market submission around 2030 [4][5]. - Pro-101-1 has not met statistical significance in its primary endpoint during the Phase IIb trial, raising concerns about its clinical acceptance and market competition, as there are already established alternatives in the market [4][5]. Market Potential - The diabetic foot treatment market in China is projected to reach approximately 38.3 billion yuan in 2024, with a lack of approved specialized drugs. Currently, only one product, Su Bi Yi ointment, is approved for diabetic foot treatment [5][6]. - The potential market size for PDGF in burn treatment is estimated at around 6.66 million yuan by 2033, while the diabetic foot market for PDGF could reach about 580 million yuan. If Huazhang Biotech captures 30% of the diabetic foot PDGF market, it would correspond to annual sales of approximately 174 million yuan, which may not justify its current valuation of 3.3 billion yuan [6].