Biopharma Discounts: Seizing Growth in Asia's Innovative Drug Landscape

In a world where healthcare innovation races to meet rising demand, Asian biopharmaceutical companies are emerging as undervalued engines of growth. Among them, Suzhou Zelgen (SHSE:688266) and Sichuan Kelun-Biotech (SEHK:6990) stand out, trading at discounts of up to 42.3% and 33.3%, respectively. Their pipelines brim with breakthrough therapies targeting oncology, autoimmune disorders, and metabolic conditions—sectors poised to boom as Asia's aging population and urbanization drive healthcare spending. This article explores why these discounts represent rare entry points into companies primed to capitalize on $1.3 trillion of unmet medical needs in China alone by 2030.

The Undervalued Growth Play: Why the Discount?

Both companies are penalized by markets for near-term execution risks—regulatory delays, R&D burn rates, and share price volatility. Yet their discounted valuations mask structural advantages:
- Cash Flow Strength: Suzhou Zelgen's revenue is growing at 45.4% annually, while Sichuan Kelun-Biotech's R&D-fueled sales are up 25.5% year-over-year.
- Pipeline Catalysts: Launches of drugs like Zelgen's ZG-B10 (rheumatoid arthritis, 2026) and Kelun-Biotech's sac-TMT (breast cancer, already approved) could validate valuations.
- Strategic Partnerships: Kelun-Biotech's $970 million licensing deal for its anti-TSLP antibody with Windward Bio, and Zelgen's collaborations with global pharma giants, reduce execution risks and boost scalability.

Company Deep Dives: Where the Growth Lies

Suzhou Zelgen: The Cell Therapy Pioneer

Trading at CN¥115.25 (vs. a fair value of CN¥199.79), Suzhou Zelgen's discount reflects skepticism around its ability to monetize high-risk cell therapies. However:
- Revenue Trajectory: Q1 2025 sales hit CN¥167.64 million, a 54.8% YoY jump, with losses narrowing to CN¥28.26 million.
- Pipeline Depth: Beyond ZG-B10, its OptiDC™ ADC platform is advancing 30+ drug candidates, including therapies for solid tumors and autoimmune diseases.
- Catalysts: A June 2025 clinical trial approval for lung cancer therapies and its addition to the Shanghai Health Care Index signal investor confidence.

Sichuan Kelun-Biotech: The ADC Innovator

At HK$340.2 (vs. a fair value of HK$509.89), Kelun-Biotech's 33.3% discount is puzzling given its 40+ clinical-stage assets:
- FDA/NMPA Milestones: Its PD-L1 drug tagitanlimab gained a first-line NPC indication in January 2025, with sac-TMT's NSCLC expansion filings pending.
- Global Reach: The SKB378/HBM9378 asthma/COPD antibody deal with Windward Bio unlocks $970 million in value, while Merck partnerships accelerate ADC commercialization.
- DCF Validation: Simply Wall St's HK$554.89 DCF estimate suggests a 37% upside, supported by 30+ drug projects across oncology and immunology.

Valuation Metrics: Are the Discounts Justified?

While both stocks trade below fair value, investors must weigh risks:
- Kelun-Biotech's High P/S Ratio: At 37.7x, it's 133% above the industry average, reflecting aggressive growth expectations. A misstep in sac-TMT's FDA approval could compress multiples.
- Zelgen's ROE Constraints: Its 18.3% ROE lags peers, but its cell therapy and ADC pipeline could lift margins as scale improves.

The Bottom Line: Both companies trade at discounts that already price in near-term risks. Their cash-rich balance sheets (Kelun-Biotech raised US$250 million in June 2025) and sector tailwinds (China's 12.4% annual biopharma growth) argue for a long-term view.

Investment Thesis: Why Buy Now?

• Timing the Catalysts: Zelgen's ZG-B10 launch (2026) and Kelun-Biotech's sac-TMT FDA nod (expected 2026) could trigger valuation re-rates.
• Valuation Leverage: For every 10% revenue beat, Suzhou Zelgen's stock could rise 20-25%, given its high beta.
• Portfolio Fit: These are 3–5 year bets for investors comfortable with biotech volatility. Pair with dividend stalwarts like China Resources Healthcare for balance.

Risks to Consider

• Regulatory Delays: Any setback in sac-TMT's FDA approval or ZG-B10's Phase III trials could prolong the discount.
• P/S Ratio Pressure: Kelun-Biotech's premium P/S ratio may compress if sales growth slows.
• Market Sentiment: Biotech sectors are cyclical; a broader market downturn could amplify volatility.

Final Call: A Rare Entry Point

At current discounts, both Suzhou Zelgen and Sichuan Kelun-Biotech offer asymmetric upside: limited downside if catalysts are met, but 50-70% upside potential if pipelines succeed. For growth investors willing to weather short-term noise, this is a chance to own Asia's next generation of biotech leaders at bargain prices.

Actionable Strategy:
1. Dollar-Cost Average: Enter positions incrementally ahead of Q2 2025 earnings (Zelgen's Aug 20 report) and sac-TMT's FDA updates.
2. Set Triggers: Exit if P/S ratios rise to 45x for Kelun-Biotech or Zelgen's ROE drops below 15%.
3. Hold for the Long Game: These stocks are designed for portfolios with a 2026–2028 horizon, not day traders.

In an era where healthcare innovation defines longevity, these discounts are not a flaw—they're an invitation to own the future of medicine.

This article is for informational purposes only. Always conduct independent research or consult a financial advisor before making investment decisions.