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Researchers work inside a laboratory at BeiGene’s research and development centre in China. Photo: Bloomberg
BusinessBanking & Finance

BeiGene’s Shanghai stock debut flops as excessive premium, running losses keep investors at bay

  • Stock closes 16.4 per cent lower after plunging as much as 19 per cent in intraday trading following its US$3.4 billion onshore stock offering
  • Stock still trades at 22 per cent premium over its Hong Kong-listed securities, versus the market average of 39 per cent in 2021
China stock market
Iris Ouyang
Iris Ouyangin Shenzhen
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Chinese cancer drug developer BeiGene slumped on its market debut in Shanghai, as investors shunned the stock for its excessive premium over similar securities listed in Hong Kong.

The stock declined as much as 19 per cent before ending 16.4 per cent lower at 160.98 yuan on Wednesday. The biotech company raised 21.6 billion yuan (US$3.4 billion) by selling 115 million new shares at 192.60 yuan each, making it the biggest stock offering on the city’s Star Market this year.

Following Wednesday’s closing prices, the onshore shares trade at 21.8 per cent above its so-called H shares, or Hong Kong-listed securities. They fell 7.6 per cent to HK$162, or the equivalent of 132.14 yuan in Hong Kong. On average, shares of mainland companies trade at about 39 per cent premium this year over their own securities in Hong Kong, according to Bloomberg data.

Concerns over the delisting risk of Chinese companies traded in US exchanges clouded its IPO. The US market regulator this month moved to finalise a plan to force foreign companies to open their books to audits or face expulsion in three years. Didi Global this month decided to delist from New York, barely five months after its debut, after being probed by Chinese authorities for cybersecurity risks.

Beigene’s Shanghai IPO was preceded by a 20 per cent slide this month in both its Hong Kong- and Nasdaq-listed shares. Those jitters prompted retail investors to abandon around 1 million IPO shares worth about 199 million yuan before its debut.

The biotech company has three commercial therapies for cancer treatment: Brukinsa, a small molecule inhibitor for the treatment of various blood cancers; tislelizumab, an antibody immunotherapy for the treatment of various solid tumour and blood cancers; and pamiparib, a selective small molecule inhibitor. It has about 40 clinical candidates under research or trials.

Still, the Beijing-based biotech firm remains unprofitable. It has accumulated losses of 30 billion yuan up to June 30, according to its prospectus, adding that losses may widen in the short term.

The China Insurance Investment Fund and Guangzhou GET Technologies Development are among the top holders of Beigene’s A shares, with about 4.2 per cent each, before any exercise of overallotment option in its onshore stock offering.

Baker Brothers Life Sciences, an associated party of New York-based hedge fund Baker Bros Advisors and Hillhouse’s HHLR Fund are among its biggest holders of foreign-traded securities, according to its exchange filings. Baker Bros took part in the drug maker’s 145.8 million stock placement last year.
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