XtalPi Raises Over HK$3.2 Billion in Early 2025 to Advance AI+CRO Model: Can the Strategy Deliver Sustainable Profitability?

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In February 2025, XtalPi Holdings Limited announced the placement of 342 million shares at HKD 6.10 per share, raising a total of HKD 2.088 billion. In January, the company had already raised HKD 1.13 billion through a placement. The two rounds of financing totaled over HKD 3.2 billion. The funds will be used to expand the AI platform into interdisciplinary fields such as materials science, implement the "Artificial Intelligence+" innovation consortium projects, and enhance automated laboratories to improve the efficiency of “dry-lab and wet-lab integration” (computation + experimentation).

In recent years, increasingly advanced information technology has been applied at the biological level, leading to a significant abundance of relevant data and tools. This has enabled AI-driven drug discovery to expand into more diverse development directions and broader application spaces. With the explosive popularity of deepseek, the AI pharmaceuticals market is also gradually reaching new heights.

Public data shows that from 2015 to 2023, a total of 75 molecules applied AI drug discovery technology for development and entered clinical research. In 2023, 67 pipelines were in clinical research, with 45 pipelines in Phase I clinical trials, 19 pipelines in Phase II clinical trials, and 2 pipelines in Phase III clinical trials.

Compared to overseas, China's AI pharmaceuticals industry started relatively late but is catching up strongly. The peak of entrepreneurship in China's AI pharmaceuticals occurred in 2021, with 27 companies founded that year; more than 28 companies are still in the seed and angel rounds. In the first half of 2022, the overall situation of China's AI market was at a low point, with declines in both the number of newly established companies and financing amounts. From the end of 2022 to 2023, the AI pharmaceuticals market rebounded. In 2024, XtalPi Holdings Limited, the first AI pharmaceutical company, successfully listed on the Hong Kong Stock Exchange, marking a new phase for the industry.

Similar to overseas AI pharmaceutical companies, the business models of AI pharmaceutical companies in China are also divided into three categories: AI+Biotech, AI+CRO, and AI+SaaS. The representative company of AI+Biotech is Insilico Medicine. After its last round of financing in August 2022, Insilico Medicine was valued at $895 million. Currently, Insilico Medicine has a total of 31 internal pipelines, with the fastest pipeline having entered phase II clinical trials. XtalPi Holdings Limited is a representative company of AI+CRO. In addition to providing CRO services, the company has also established more than ten pipelines through self-developed or collaborative research.

Compared with traditional drug research and development, AI-driven drug discovery has more advantages in terms of time and efficiency. For instance, traditional drug R&D requires 4-6 years to synthesize and test approximately 5,000 candidate molecules; whereas AI-based methods can screen billions of molecules, narrowing down the number of molecules that need to be synthesized and tested to hundreds within 2-3 years.

Traditional manual methods require verification and optimization through repeated experiments in the laboratory, while AI drug discovery can reduce the number of molecules that need to be validated in the lab through computer simulations, saving time on validation and testing.

As a pioneer in China's AI pharmaceuticals industry, XtalPi Holdings has achieved initial success, with the number of revenue-generating projects from its drug discovery solutions and intelligent automation solutions continuing to increase annually. It has provided services to over 300 biotechnology and pharmaceutical companies and research institutions globally, including 16 of the top 20 biotechnology and pharmaceutical companies worldwide.

From 2021 to 2023, the number of revenue-generating projects from the company's drug discovery solutions were 18, 47, and 81, respectively, while the number of revenue-generating projects from intelligent automation solutions were 168, 246, and 423, respectively. The company’s revenue also grew rapidly, with XtalPi Holdings Limited's revenue reaching 0.63 billion yuan, 1.34 billion yuan, 1.74 billion yuan, and 1.07 billion yuan in 2021, 2022, 2023, and the first half of 2024, respectively, representing year-over-year growth rates of 76.22%, 113.55%, 30.06%, and 34.35%.

Despite the considerable growth rate, no AI-developed drugs have reached the market yet. Pharmaceutical companies are cautious about investment, outsourcing orders are limited in value, and company revenues are still insufficient to cover expenses such as R&D and sales, leaving them in a state of ongoing losses. Taking R&D expenses as an example, in 2021, 2022, 2023, and the first half of 2024, the company's R&D expenses reached 213 million yuan, 359 million yuan, 481 million yuan, and 210 million yuan respectively, all higher than the company’s revenue during the corresponding periods.

In terms of customer retention rate, due to the long and continuous clinical cooperation cycle and high switching costs, customers usually do not easily change their CRO partners, showing a certain level of stickiness and a high retention rate. XtalPi's retention rate has fluctuated between 51% and 67% over the past four years, whileWuXi AppTec、TigerMed、PharmaronTraditional CRO enterprises generally have a customer retention rate of over 90%. This may reflect issues such as unstable AI model performance and long delivery cycles. If customer stickiness cannot be improved, the sustainability of growth is questionable.

Notably, XtalPi's co-investments in companies such as JiTai Pharmaceuticals and Xigr Biotech are both clients and investees. In the 2022 Pre-A round of financing for Moda Bio, XtalPi was one of the lead investors. While such related-party transactions may temporarily boost orders, they could raise questions about financial independence, with the need to verify market-driven customer acquisition capabilities in the long term.

In the short term, the HK$3.2 billion financing has secured it a strategic window of 2-3 years. In the long run, technological barriers, ecosystem integration, and pipeline conversion efficiency will be the key determinants of success. Whether XtalPi can, with the backing of capital, successfully close the loop of "technology-commercialization-profitability" will decide if it becomes the next WuXi AppTec or just a fleeting also-ran in the race.

Editorial Responsibility: Company Watch