Ask AI · How Does Beijing Yingbiology’s Overseas Revenue Recognition Method Affect IPO Review?

Produced by | Entrepreneur’s Frontline

Author | Meng Xiangna

Editor | Hu Fangjie

Copy Editor | Xing Jing

Reviewer | Song Wen

On March 31, 2026, the Beijing Stock Exchange’s Listing Committee will convene its 34th deliberation meeting of 2026 to review the IPO application of Shanghai Baiying Biotechnology Co., Ltd. (hereinafter referred to as “Baiying Biotechnology”).

This national-level “specialized, refined, distinctive, and innovative” “little giant” enterprise, which focuses on the CRO (contract research organization) field for early antibody research, switched to the Beijing Stock Exchange after withdrawing its IPO application from the ChiNext Board of the Shenzhen Stock Exchange, presenting an impressive set of results. Revenue rose from RMB 260 million in 2022 to RMB 402 million in 2024, of which the CAGR of CRO service revenue—including services such as antibody and protein expression—reached 25.8%, significantly higher than comparable businesses like Zhizhi Pharmaceutical, GenScript Biotech, and WuXi Biologics.

However, beneath the appearance of rapid growth in performance, and through details in the prospectus and the two rounds of regulatory inquiries, Baiying Biotechnology still has many unanswered questions regarding three core issues: the authenticity of its performance, the compliance of its equity incentives, and the accuracy of aggregating R&D expenses—making it a “roadblock” on its path to going public.

1. Revenue authenticity in doubt, with third-party collections adding risk

In recent years, Baiying Biotechnology has maintained steady growth in performance, but it is precisely this rapid growth that has led the Beijing Stock Exchange, in both rounds of inquiries, to continuously drill down around the core issue of the authenticity of its revenue.

As a CRO company focused on antibody and protein expression and on antibody discovery and optimization, Baiying Biotechnology mainly provides customized technical services to biopharmaceutical companies, while also engaging in the production and sales of research reagents such as generic antibodies and recombinant proteins.

As of now, the company has provided services to over 2,500 pharmaceutical companies across more than 20 countries and regions. Its customer base includes well-known domestic pharma companies such as Tianjing Bio, Inbeyond Pharma, and Hengrui Pharmaceutical, as well as international pharma giants such as AstraZeneca, Moderna, and AbbVie.

The performance data shows that Baiying Biotechnology’s revenue increased from RMB 260 million in 2022 to RMB 402 million in 2024. In that period, the CAGR of CRO service revenue—including services such as antibody and protein expression—reached 25.8%, which is significantly higher than the relevant businesses of comparable companies like Zhizhi Pharmaceutical, GenScript Biotech, and WuXi Biologics.

（Figure / Company’s reply letter）

Along with revenue growth, the company’s net profit attributable to the parent also rose from RMB 60 million in 2022 to RMB 123 million in 2024.

In the first half of 2025, the company’s performance continued to grow. It achieved revenue of RMB 247 million, up 29% year over year, and net profit attributable to the parent of RMB 83 million, up 56% year over year.

From the perspective of revenue structure, antibody and protein expression services are the company’s core revenue source. From 2022 to the first half of 2025, their revenue proportions were 83.12%, 74.38%, 82.81%, and 81.11%, respectively, for each period.

（Figure / Company’s IPO prospectus）

What is noteworthy is that in recent years, Baiying Biotechnology’s performance expansion has been highly dependent on overseas market scale-up.

Financial data shows that from 2022 to 2024, the company’s overseas principal business revenue surged from RMB 66.72 million to RMB 220 million, and the share of overseas revenue in principal business revenue also jumped sharply from 25.7% to 63%. Meanwhile, as overseas customer scale expanded, the company’s revenue recognition policies differentiated between domestic and overseas transactions drew deep attention from regulators.

（Figure / Company’s IPO prospectus）

According to disclosures in the prospectus and the replies to inquiries, Baiying Biotechnology adopted different revenue recognition timing for domestic and overseas business: domestic customers used “receipt of a customer acceptance confirmation email” as the basis for revenue recognition, while overseas customers used only “the Company’s unilateral sending of a completion/closing email to the customer” as the confirmation timing.

In rigorous auditing practice, using unilateral sending of completion notices as evidence of transfer of control has relatively weaker probative force, objectively reducing the binding nature of revenue recognition.

In response, Baiying Biotechnology stated that its revenue recognition policy was formulated comprehensively based on the contract terms, the transaction conventions for domestic and overseas business, the characteristics of business processes, and actual operating conditions, and that it complies with the agreed terms, business characteristics, and industry conventions, with no significant differences from comparable companies in the same industry.

In addition, Baiying Biotechnology also has third-party collection scenarios. Some overseas customers place orders and make payments via third-party platforms, while other customers designate group finance companies or related parties to make payments on their behalf.

According to the inquiry reply letter, in the first half of 2025, the amount of third-party collections involving overseas transaction platforms, payments made by natural persons on behalf, and designated group collections, etc., reached RMB 42.31 million—an amount that surged to 17.14% of revenue for the period.

（Figure / Company’s reply letter）

This special payment route further increases the difficulty of verifying revenue authenticity. In its inquiry letter, the Beijing Stock Exchange explicitly required Baiying Biotechnology to explain the internal control measures for third-party collections and whether there were issues such as fictitious transactions or adjusting the aging of accounts receivable.

In response, the company said there is no issue of fictitious transactions or adjusting the aging of accounts receivable, and that the arrangements have necessity and commercial reasonableness and align with the operating characteristics of the industry.

In cross-border CRO service scenarios, the one-sided basis for revenue recognition combined with a large amount of third-party collections that separate business flows from cash flows not only objectively expands the flexibility for end-of-period revenue to be shifted across periods, but also significantly raises the threshold for an audit firm to verify the authenticity of transactions.

2. Gross margin rate and R&D expense ratio higher than peers, with regulators questioning profitability quality

For CRO companies whose foundation is technical services, the core support for profitability quality lies in building technical barriers and optimizing cost control capabilities—both together determine an enterprise’s core competitiveness and sustainable development ability in the industry.

However, in terms of expense control and gross margin performance, Baiying Biotechnology shows characteristics that clearly deviate from the overall industry trend, which is also why it has become a key focus of attention during the Beijing Stock Exchange’s IPO review.

Looking at gross margin performance, Baiying Biotechnology’s profitability has stayed at a high level and continued to rise, forming a stark contrast with the declining trend among comparable peers.

From 2022 to 2024, the company’s gross margin increased steadily from 65% to 69.5%, and in the first half of 2025 it still remained high at 68.44%.

Meanwhile, in the same period, the comparable peers’ CRO service integrated gross margin showed a continuous downward trend, gradually falling from 67% in 2022 to 52%, and the gap between the two widened year by year. This divergence prompted regulators to conduct in-depth inquiries into the reasonableness of its gross margin.

（Figure / Company’s IPO prospectus）

What is noteworthy is that while maintaining a high gross margin rate, Baiying Biotechnology’s R&D expense ratio has remained higher than that of its comparable peers. For the Beijing Stock Exchange’s IPO review, the authenticity and reasonableness of R&D investment are the core metrics for testing a company’s capabilities in scientific and innovative attributes, and also a key direction for regulatory inquiries.

The company stated that the high gross margins primarily come from three core factors: upgrades in technical processes and automated production that improve efficiency and lower unit costs; order scale growth that creates scale effects and releases staff productivity; and cost control through self-production and substitution of raw materials, while also noting that the proportion of overseas business with high gross margins continues to increase—multiple factors together keep the gross margin rate at a high level.

In addition, due to the continued growth of R&D expenses and a R&D expense ratio significantly higher than that of comparable companies such as WuXi Biologics and GenScript Biotech, together with issues like cross-mixing of R&D staff and production staff and unclear identification of R&D personnel, the company has been subjected to multi-dimensional and multi-layered key inquiries by regulators, with the relevant doubts directly pointing to the true quality of its R&D investment.

Specifically, data shows that from 2022 to the first half of 2025, Baiying Biotechnology’s R&D expense ratio was 10.4%, 12.6%, 11.6%, and 9.6%, respectively. Even though it declined somewhat in the first half of 2025, it still remained significantly higher than the average level of comparable companies in the same period.

（Figure / Company’s IPO prospectus）

In response to the issues of a high R&D expense ratio and mixed personnel, Baiying Biotechnology explained that before October 2022, due to relatively tight staffing and production equipment, to ensure production activities could proceed smoothly, there were cases where the R&D department assisted production.

From 2022 to the first half of 2025, the number of R&D personnel signing labor contracts with R&D positions was 113, 136, 99, and 80, respectively.

But in reality, the number of dedicated R&D personnel actually engaged in R&D activities whose share of R&D hours was 50% or above was only 61, 104, 99, and 80. These two sets of figures show a clear gap, reflecting the company’s insufficient R&D personnel dedication.

In addition, historically the company also had situations where production personnel assisted R&D. From 2022 to the first half of 2025, the proportion of R&D costs transferred due to outsourced production departments was around 10% of R&D expenses.

（Figure / Company’s reply letter）

The Beijing Stock Exchange’s inquiry focus centers on three points: first, clarifying the scope for recognizing R&D personnel and the standards for dividing dedicated vs. part-time roles; second, explaining the specific circumstances in which non-R&D personnel participate in R&D; and third, verifying the accuracy of R&D hour statistics, payroll accounting, and cost carryover.

Although Baiying Biotechnology made replies from the perspectives of systems, processes, and data, attempting to clarify the boundaries between R&D and production, based on the Beijing Stock Exchange’s review logic and practical CRO industry operations, its explanations still contain doubts and cannot fully eliminate regulatory and market skepticism.

On the one hand, there is a high degree of overlap among personnel, equipment, and business processes across R&D, production, and CRO service stages. The division between R&D expenses and production costs highly depends on employees’ self-reported R&D hour data and internal system records, without objective, verifiable external evidence, and thus has strong subjectivity.

This increases the room for manually adjusting R&D expenses and operating costs by methods such as adjusting R&D hour statistics and cost allocation ratios—making it harder to ensure the authenticity and accuracy of the relevant data.

On the other hand, frequent historical involvement of R&D personnel in production and insufficient dedication also raises doubts that the company, in order to meet requirements related to its scientific innovation attributes, deliberately expanded the scope of “R&D personnel” and increased R&D investment.

3. A general manager gets 9% equity after 5 months on the job—commercial reasonableness in doubt

Beyond inquiries into the authenticity of performance and profitability quality, Baiying Biotechnology’s internal controls are also a key focus of regulatory scrutiny.

Baiying Biotechnology’s chairman and actual controller, Zha Changchun, directly holds 21.63% and indirectly holds additional shares through shareholding platforms such as Taizhou-to-ben, resulting in total control of 50.02% of voting rights. He is the company’s core decision-maker.

Born in 1983, Zha Changchun graduated from the Bioengineering program at Inner Mongolia University of Science and Technology. After graduation, he worked at biotechnological companies such as GenScript Biotech, Fute Biotechnology, and Tailida Biotech. Before joining Baiying Biotechnology, he had already served as deputy general manager at Tailida Biotech, accumulating nearly a decade of experience in technical R&D and corporate management.

It is noteworthy that Baiying Biotechnology’s predecessor, Taizhou Baiying Biotechnology Co., Ltd., was established in March 2012 with capital contributed by Zhang Meijuan, and was not directly initiated by Zha Changchun. In 2017, after Zha Changchun officially joined the company, he gradually completed consolidation of control through equity acquisitions and shareholding platforms, eventually becoming the controlling shareholder.

In the core management team, deputy general manager Zhu Yabo and Zha Changchun are alumni from the same university. Both also graduated from Inner Mongolia University of Science and Technology’s Bioengineering program and both previously worked at Nanjing GenScript Biotech. Director and general manager of Jiangsu Baiying, Xiang Lu, also previously worked in the Gene Department of Nanjing GenScript Biotech. The industry backgrounds of team members overlap significantly.

Meanwhile, company general manager Cheng Qianwen joined the company in November 2019. Only five months later, the actual controller Zha Changchun, through a resolution of the shareholders’ meeting, transferred the 9% equity interest he held (corresponding to a paid-in capital amount of RMB 342,800) to Cheng Qianwen in a “zero consideration” manner as an incentive.

Given that in 2019 the company was still in an early development stage, with annual revenue of only about RMB 22 million and net assets of about RMB 21 million—and considering the short time the key executives had been in their roles and the relatively small operating scale—explanations are still needed for the reasonableness and commercial necessity of granting a large amount of equity interest free of charge at once. Whether this arrangement implies nominee holding, disguised transfer of benefits, or other undisclosed benefit arrangements, and whether it affects the interests of minority shareholders, has also become a key point of market attention.

Moreover, after obtaining this 9% equity, Cheng Qianwen simultaneously served as director or general manager at more than ten external companies, including Shanghai Shengao Industrial, Shanghai Yijiu Cheng Investment, and Mairi Biotechnology. With a short onboarding time and multiple concurrent roles, the commercial reasonableness naturally triggers further regulatory questions.

（Figure / Company’s IPO prospectus）

In its reply, Baiying Biotechnology said that granting equity was intended to attract and retain core talent Cheng Qianwen and to make up for his insufficient compensation, and that Cheng Qianwen played a key role in strategic formulation, financing expansion, and so on.

（Figure / Company’s reply letter）

However, the issue of equity nominee holding that exists in the company’s history further intensifies regulatory and market doubts.

A company shareholder, Ye Jun, had an equity nominee holding arrangement that lasted for as long as 11 years. Since the company was established in March 2012, Ye Jun had, in succession, commissioned Zhang Meijuan and Qiu Tu Ying to hold the company’s equity on his behalf.

Ye Jun was a mid-level management personnel at the Taizhou Municipal People’s Hospital as a public institution employee. Later, he gradually rose to become director of the central laboratory and deputy director of the research affairs office. Under relevant regulations, as a public official, he is not allowed to hold shares of non-listed companies in violation of rules.

In response, the company explained that Ye Jun has a background related to biopharmaceuticals, looked favorably on the industry’s development prospects, and is also a longtime friend with the actual controller’s couple; therefore, they chose to invest.

However, in the Beijing Stock Exchange’s second round of inquiries, the company’s equity incentive behavior was not further questioned. Regulatory focus has shifted to core operating issues such as the accuracy of revenue recognition and the authenticity of revenue.

Under an examination philosophy centered on information disclosure for the registration-based system, whether Baiying Biotechnology can provide reasonable explanations sufficient to eliminate regulatory doubts regarding the above issues—or whether it will, to a large extent, affect the final outcome of its submission for review—is something that will likely significantly influence its fate.

Will it successfully get through, or will it end in failure? On March 31, the Beijing Stock Exchange’s Listing Committee will provide the answer.

As for this CRO company currently in a phase of rapid expansion, regardless of the outcome, how to ensure that high-growth performance can stand up to long-term testing by the market—and how to respond to external concerns with more standardized corporate governance and a more solid internal control system—are issues it must face on its future development path.

Note: The topic image in the article is from Jiemian’s image library.