3SBio gears up for drugs battle with $400 million equity move

After grabbing the spotlight this year with a big licensing deal, the Chinese drug developer is now raising extra funds for R&D and shedding a non-core subsidiary

Key takeaways:

• 3SBio is proactively boosting its capital with a share placement while fully divesting from a hair-loss unit that had been a cash generator in the past
• The moves come after 3SBio shares soared more than 400% this year, boosted by the high-profile sale of drug rights to Pfizer in May

By Molly Wen

Buoyed by a stock rally, Chinese drug developer 3SBio Inc. (1530.HK) is bulking up on funds to meet the challenge of delivering next-generation cancer medicines.

Fresh from a blockbuster rights deal with drugs giant Pfizer earlier this year, 3SBio has announced a subsidiary spin-off and a HK$3.12 billion ($400 million) share placement in the space of just two weeks.

After its market value rose above HK$70 billion, the company announced on Dec. 2 it was placing 105 million shares, or about 4.14% of its enlarged share capital, to raise additional money to invest in the highly competitive field of innovative drugs. The shares were priced at HK$29.62, a 6.5% discount to the previous closing price, with net proceeds after fees estimated at HK$3.09 billion.

The company’s shares fell 4.61% on day of the placement news and another 3.04% in the next session but are up more than 400% in the year to date, underscoring market confidence in the brand’s long-term prospects.

Just a couple of weeks earlier, 3SBio had revealed plans to hive off a money-spinning subsidiary that specializes in hair-loss treatments, Mandi International, as it doubles down on developing novel bio-pharmaceutical drugs for cancer and auto-immune conditions.

At first glance, 3SBio does not appear to be short of cash. In May, the company granted Pfizer (PFE.US) international rights to a bispecific antibody drug targeting the PD-1/VEGF pathways for an upfront payment of up to $1.25 billion (8.8 billion yuan), setting a Chinese record for such deals. That downpayment is expected to be booked in the third quarter. Meanwhile, 3SBio turned a first-half net profit of 1.36 billion yuan, indicating a solid financial foundation.

Why did 3SBio choose to raise more capital right now? Based on the company’s statement, the aim is to build an R&D cash buffer to develop its candidate drugs and expand its share of the innovative medicine market.

Of the placement proceeds, 80% will go towards R&D costs such as funding ongoing clinical trials in China and the United States, expanding the use of existing drugs to treat further conditions, and boosting global infrastructure and facilities. The remaining 20% will be used as working capital.

This plan aligns with 3SBio’s strategic shift in recent years toward prioritizing innovation. From 2022 to 2024, the company’s R&D expenditure rose from 690 million yuan to 1.33 billion yuan, while the research bill in the first half of 2025 was 15% higher than in the same period a year earlier. The company has 30 experimental drugs in its pipeline, including 27 innovative treatments spanning oncology and autoimmune diseases. Among them, four candidates are undergoing parallel clinical trials in China and the United States and are being readied for regulatory filings, with hefty sums needed to synchronize the cross-border development.

Parting company

Meanwhile, 3SBio is divesting from its Mandi subsidiary, the leader in China’s hair-loss treatment sector for a decade with a 71% share of the market for the alopecia medication minoxidil. Mandi logged first-half revenues of 743 million yuan, with a gross margin of 81.1% and net profit reaching 174 million yuan.

Despite the financial benefits, Mandi’s consumer healthcare profile does not fit the strategic focus on novel pharmaceuticals. Hence 3SBio is divesting its entire 87.16% stake and spinning off Mandi as an independent listed entity,in a process known as distribution in kind, in which shareholders will be directly assigned a pro-rata stake, leaving the parent with no equity interest.

This clean break differs from the approach adopted by other companies such as WuXi Biologics (2269.HK), which retained a controlling stake when it hived off WuXi XDC (2268.HK), a unit specializing in antibody-drug conjugates.

Developing viable new drugs is a capital-intensive enterprise, and parent companies typically retain cash-generating businesses to subsidize their R&D. Cutting ties with Mandi underscores 3SBio’s resolve to transform into a pure-play pharmaceutical company, bolstered by cash reserves and a late-stage drug pipeline.

Despite appearing flush with cash, the company must prepare in advance for potentially substantial funding needs going forward, after divesting its cash-generating operations.

At present, 3SBio trades at a price-to-earnings ratio of approximately 28 times, lagging the roughly 60 times for another established innovator, Hengrui Pharma (1276.HK; 600276.SH), and suggesting future upside potential.

As the company secures capital and executes the spin-off, investors will be keen to see whether 3SBio can press ahead with its drug ambitions and deliver meaningful breakthroughs.

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