Here's a story about what happens when the party ends. Geneplus Technology (Shaoxing) Co. Ltd., a Chinese biotech specializing in genetic testing and precision medicine, is about to find out whether Hong Kong investors still have an appetite for AI-focused healthcare companies, or whether the sector's glory days are behind it.

The company's trajectory tells you everything you need to know about China's precision medicine evolution over the past decade. Geneplus started in 2015 providing gene sequencing and analysis services to medical research institutions and clinical teams. Back then, precision medicine was cutting-edge stuff, the kind of thing that sounded like science fiction to most people. The company built out a technology platform and gradually accumulated expertise across genomics, bioinformatics, and related scientific fields.

Then Covid happened, and like many diagnostics companies, Geneplus hit the jackpot. The company rapidly scaled up virus testing services, and by 2022 revenue peaked at nearly 1.82 billion yuan (about $260 million) with an annual profit of 372 million yuan. Not bad for a company that had been quietly building precision medicine capabilities for years.

The Post-Pandemic Hangover

But here's the thing about pandemic windfalls: they don't last. As Covid-related demand faded in 2023, reality hit hard. Revenue plunged 74% to just 473 million yuan as the test kit business evaporated. Suddenly, Geneplus had to figure out what it actually was beyond a Covid testing operation.

The answer, apparently, is precision diagnostics for oncology and organ health. The company reallocated resources toward these areas and accelerated the launch of in vitro diagnostic products. Revenue rebounded 17.8% to 557 million yuan in 2024, and first-half 2025 turnover rose 12.6% to 285 million yuan. The core business is stabilizing, though at a much more modest scale than those heady pandemic days.

Right now, Geneplus revenue is heavily concentrated in precision diagnostics, which accounted for 78.3% of revenue in 2024. Clinical research and practical applications contributed about 16.7%, while drug development services, the segment with potentially higher margins, was only around 5% of turnover. According to third-party data in the IPO documents, Geneplus ranked third in China's precision diagnostics industry by revenue in 2024, with a market share of around 2.7%.

The Profitability Problem

Here's where things get interesting. Geneplus managed a profit of 54.1 million yuan in 2023 even as Covid demand waned, but then swung to a net loss of 424 million yuan in 2024. Losses widened from 109 million yuan in the first half of 2024 to 414 million yuan in the same period of 2025, primarily due to a fair value loss of 362 million yuan. On an adjusted basis, though, losses actually narrowed from 88.2 million yuan to 47.7 million yuan.

The silver lining? Gross margin has kept climbing, from 41.9% in 2022 to 68.5% in the first half of 2025. This suggests the losses aren't about a broken business model. They're mostly driven by upfront investments in R&D, sales expansion, and platform construction. The company is spending money to make money, as they say.

But the balance sheet tells you why Geneplus is heading to the IPO market right now rather than waiting for profitability. At mid-year, the company held only 96 million yuan in cash and cash equivalents, while net current liabilities stood at nearly 1.78 billion yuan. Operating cash flow for the first half was negative 34.8 million yuan. Translation: they need money, and they need it soon.

A Tougher Market Than Expected

The timing could be better. The AI healthcare sector hasn't crashed, but investor enthusiasm has definitely cooled. iFlytek Healthcare (2506.HK), which listed late last year, reported revenue growth of more than 30% in the first half of 2025 and losses that shrank 42%. Yet its shares have fallen 13% year to date, trading at a price-to-sales ratio of around 11 times. Meanwhile, Airdoc (2251.HK) has seen its share price plunge 82.3% since its 2021 debut and is down another 2.6% this year.

The valuation premium that AI healthcare companies once enjoyed has largely dissipated. Investors are no longer willing to pay up for technological promise alone. They want to see credible paths to profitability, and they want to see them soon.

What Geneplus Has Going For It

To be fair, Geneplus isn't without assets. The company has technological depth, years of accumulated data, established relationships with hospital and clinical networks, and moderate growth in its core diagnostics business. The rising trajectory of gross margins indicates a shift toward higher value-added products. The underlying fundamentals aren't gloomy, exactly.

But the challenges are equally clear. Revenues remain relatively modest, the business is still heavily skewed toward diagnostics, and the segments with higher upside like drug development services haven't yet delivered a meaningful earnings boost. Sustained losses and tight cash flow leave little room for error or delay.

As Hong Kong's AI healthcare valuations have grown more rational, investor expectations for Geneplus will likely hinge on whether the company can clearly articulate plans to improve cash flow and advance toward breakeven in the next couple of years. If Geneplus can leverage its platform strengths to expand beyond diagnostics and into higher-margin businesses, there's room for the valuation to grow.

But if it can't, well, there are plenty of other AI healthcare companies trading at significant discounts to their IPO prices. Investors have options. Geneplus is about to find out just how selective they've become.