Asia’s first pre-profit biotech listing Ascletis Pharma ends unchanged in debut trade
Ascletis Pharma, the first unprofitable early-stage biotechnology company to list in Hong Kong under revised rules, ended flat during its debut on Wednesday.
Shares of the Chinese maker of HIV, cancer and liver disease drugs closed unchanged from its initial public offering price at HK$14 after rising as much as 6.4 per cent in intraday trading. The Hangzhou-based drug maker posted a net loss of 86.9 million yuan (US$12.8 million) last year, according to its prospectus.
Ascletis Pharma’s first-day trading performance was better than smartphone maker Xiaomi, the first company with the dual-class structure to list in the city, though China’s pharmaceutical industry has been recently plagued by a scandal over vaccine production data forgery. Xiaomi dropped 1.2 per cent during its debut last month. However, since then the share has been trading stronger, having risen 6.3 per cent to HK$17.86.
“Given it is the first biotech stock under the new listing regime to debut, some retail investors would find it an attractive speculative bet,” said Louis Tse Ming-kwong, managing director of VC Asset Management, noting the stock had traded as high as HK$15.6 in the grey market earlier. “This is despite the recent product quality scandals in the pharmaceutical sector … stock investors tend to have short memories.”
Investors’ lukewarm appetite for hi-tech companies may be a setback for Hong Kong Exchanges and Clearing chief executive Charles Li Xiaojia. Still, he said the listing reform has attracted biotechnology and other technology firms to list in Hong Kong.
“Biotechnology firms and other innovative industry have a lot of room of development,” Li said after attending the listing ceremony of Ascletis on Wednesday morning.
Li said the HKEX would continue to work with the mainland regulator to allow the dual class shareholding companies to be able to be traded by the mainlanders via the stock connects.
Ascletis Pharma is the latest company to draw the attention of investors after the low profile debut of smartphone maker Xiaomi, after the city’s stock exchange loosened the listing rules to entice more hi-tech companies by allowing unprofitable companies and those with dual-class structures to float shares.
Hong Kong, which is struggling to defend its title as a financial hub in Asia, is facing increasing competition from the Chinese mainland and even Singapore in wooing the listings of companies with the fastest earnings growth.
While China’s securities regulator has introduced Chinese depositary receipts to attract companies like Alibaba Group Holding and JD.com, the Singapore Exchange has also started to accept companies with dual-class structures. The Singapore bourse currently does not accept applications from unprofitable companies.
As part of a wider listing rules revamp that took effect on April 30, biotechnology firms without profit or even revenue are allowed to apply for a listing on Hong Kong’s stock exchange.
Apart from Ascletis Pharma, seven biotech firms have so far submitted applications to list under the new rules, including Nasdaq-listed Chinese cancer treatments developer BeiGene, which is the first to apply for a secondary listing in Hong Kong.
Hong Kong still has a long way to catch up with the Nasdaq, which currently has 38 listed biotech companies based on Bloomberg data.
“The level of interest – eight having submitted formal application – has been higher than my expectation,” said Charles Chau Chi-chung, a partner at law firm Jones Day, who is helping biotech clients prepare listings in Hong Kong. “Earlier I expected five to be listed by the end of this year, now I would not be surprised if eight to 10 will make their market debut by then. So far, the listing candidates that have submitted applications tend to be relatively more established companies within the sector … they are also careful in their choice of sponsors to ensure success.”
The international tranche – accounting for 90 per cent – of Ascletis’ HK$2.98 billion shares offer was only 1.17 times subscribed, while its Hong Kong public offer – 10 per cent of the total – was eight times oversubscribed. It priced its shares at HK$14, the middle of an indicative range of HK$12 to HK$16.
With additional reporting from Enoch Yiu.