According to Forbes, shares of AI drug discovery firm Insilico Medicine jumped 24.7% in their Hong Kong stock market debut on Tuesday, boosting its market cap to HK$16.7 billion ($2.1 billion). The company raised about HK$2.3 billion from selling 94.7 million shares, with cornerstone investors including Eli Lilly, Tencent, and Temasek. Founder Alex Zhavoronkov stated the goal is to be a “massive source of innovative drugs” and achieve “superintelligence” in discovery platforms. The company claims its AI can cut the time to produce a clinical trial-ready drug candidate to about a year from a traditional 4.5 years. However, in the first half of 2025, revenue fell 54% year-over-year to $27.5 million, swinging to a net loss of $19.2 million from a prior profit.
The Hype vs. The Reality
So, a nearly 25% pop on day one is a strong vote of confidence. And with backers like Lilly and Tencent, it’s clear big players see potential here. But here’s the thing: the entire AI drug discovery sector has been built on a promise that’s yet to be fully realized. As the article notes, not a single AI-discovered drug has gained regulatory approval since these companies emerged a decade ago. That’s the elephant in the room. Insilico’s argument is that licensing deals are the validation, pointing to its pacts with Exelixis and Menarini worth up to $2.1 billion. That’s not nothing. It proves pharma is willing to pay for the pipeline. But a licensing deal is not an FDA stamp. It’s a bet, not a certified product.
The Revenue Problem And The Path Forward
The financials reveal the inherent volatility in this model. That 54% revenue drop? It’s because 87% of their top line came from licensing fees, which are lumpy and milestone-dependent. It’s feast or famine. Only about 7% came from software subscriptions, which is the steadier, SaaS-style business. This tells you they’re still fundamentally a biotech bet, not an AI software platform. Their path to stability hinges on two things: advancing their own clinical assets, like the Phase 2-ready Rentosertib for lung disease, and signing more of those research partnerships like the $100M+ one with Eli Lilly. But running Phase 3 trials yourself is astronomically expensive, which is why Zhavoronkov is hesitating to “push the trigger.” The IPO cash gives them runway, but it gets burned fast in late-stage trials.
A Crowded Race With No Winner Yet
Look, Insilico isn’t alone. They’re in a sprint with other well-funded AI biotechs like Recursion, Exscientia, and AbCellera. The first company to actually get an AI-born drug across the regulatory finish line will claim a monumental victory and likely see its valuation skyrocket. Until then, it’s a race fueled by preclinical data, partnerships, and promise. The Hong Kong listing gives Insilico a war chest and a higher profile in Asia. But the core challenge remains the same for all of them: biology is brutally complex, and AI is great at narrowing possibilities, but it doesn’t eliminate the high failure rate of human trials. As Zhavoronkov himself admits, after you have a candidate, “you are moving at the same speed as everybody else.” The AI advantage shrinks dramatically when you hit the clinic.
The Bottom Line
This IPO is a milestone, but it’s just an entry ticket to the much harder, more expensive game. The stock jump reflects hope in the long-term thesis that AI will revolutionize R&D. But the recent revenue swing into a loss is a stark reminder of the near-term risks. For investors, it’s a binary bet: either you believe Insilico’s platform will be among the first to crack the code and deliver a real drug, or you think it remains a promising tool that struggles to find consistent profitability. The partnership deals show the industry is buying the story. Now, we all wait to see if the story becomes a proven, repeatable reality. The clock is ticking, and that $2.1 billion market cap is waiting for its proof.
