Shares of Sino Biopharmaceutical Ltd. plummeted over 10% in Hong Kong trading on Monday morning, after the Chinese drug maker announced a major licensing agreement that will require significant upfront payments.

Sino Biopharm said one of its subsidiaries has signed an exclusive deal with YZY Biopharma to develop and commercialize the drug candidate M701 in mainland China. Under the terms of the deal, Sino Biopharm will pay around RMB315 million ($44 million) upfront to YZY.

The company could also be on the hook for up to RMB700 million ($98 million) in additional milestone payments tied to future sales of the drug. Investors appeared to view the substantial upfront cash commitment as weighing on Sino Biopharm's near-term finances, sparking the sharp sell-off in the stock on Monday.