The latest: InnoCare Pharma Ltd. (9969.HK) said it expects to report its net loss soared about 13 times to 910 million yuan ($134 million) last year, according to a profit warning on Sunday.

Looking up: The company reported a net loss of 834 million yuan for the first three quarters of last year. Thus, its full-year forecast implies a significant improvement in the fourth quarter, with its loss shrinking to about 76 million yuan.

Take Note: The company’s bigger loss last year owed mainly to a 27% increase in in R&D spending, and the impact of exchange rate fluctuations between the yuan and U.S. dollar. The latter resulted in an unrealized exchange loss of approximately 307 million yuan.

Digging Deeper: Founded in 2015 and listed in Hong Kong in 2020, InnoCare’s flagship product, Orelabrutinib, is used to treat lymphoma and autoimmune diseases. The drug has recorded significant revenue growth in recent years after receiving approval from China’s National Medical Products Administration (NMPA) in December 2020. In the first three quarters of last year, sales of the drug jumped 129% to 400 million yuan year-on-year, accounting for 90.6% of the company’s total revenue. However, the company’s R&D costs also increased due to a significant increase in its products entering clinical trials. As a result, InnoCare has never made a profit since its listing.

Market Reaction: After opening 6% higher, InnoCare shares gave back all of those gains and more on Monday morning and were down 1.4% to HK$14.12 by the midday break. The stock now trades at the upper end of its 52-week range.

Translation by Jony Ho

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