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IPO

IPO

Ascentage Pharma is the latest mainland biotech firm to pick Hong Kong for fundraising

Company’s chairman says city is ‘new to the game’ and stakeholders will have plenty of ‘lessons to learn’

PUBLISHED : Thursday, 29 March, 2018, 8:19am
UPDATED : Thursday, 29 March, 2018, 4:03pm

Anti-tumour drug researcher Ascentage Pharma has become the latest Chinese biotechnology company to choose Hong Kong for going public, in further evidence that an impending listing rules revamp will help the city take market share from New York, the primary listing exchange for firms without revenue in the nascent sector. 

The Suzhou-based company’s board had decided on Tuesday to pursue an initial public offering in Hong Kong, Song Ruilin, the executive president of the China Pharmaceutical Innovation and Research Development Association, told the China Healthcare Investment Conference in Shanghai on Wednesday. 

Yang Dajun, the Ascentage chairman, confirmed Song’s announcement at the event but said he could not comment further. 

China fast tracks IPO by leading biotech firm WuXi AppTec, in race as Asia’s hub for fundraising

The company joins a growing number of firms that have decided to tap Hong Kong’s equity market to raise funds for the development of new drugs and innovative medical products. 

Ascentage completed a second private sale of shares 14 months ago, raising US$72 million. It was led by the Future Industry Investment Fund, a private equity fund by the financial-to-energy conglomerate, State Development and Investment Corporation. 

Bourse operator Hong Kong Exchanges and Clearing on Friday closed a month-long consultation on a listing rules reform, which will allow biotech companies without revenue and large technology companies with multiple classes of shares carrying different voting rights to list in the city for the first time, as soon as early summer, according to its chief executive, Charles Li Xiaojia. 

He said HKEX was aiming to overtake New York’s Nasdaq within five years when it comes to the number of Chinese biotech company listings and market capitalisation. 

Hong Kong plans to overtake Nasdaq as listing destination of choice for Chinese biotech firms

The listing reform is also aimed at allowing Hong Kong to capture a greater share of the global IPO market, after the city lost it global IPO market crown, which it retained in 2015 and 2016. It fell to the No. 3 position last year, overtaken by New York and Shanghai.

Many Chinese technology and biotech companies have listed in New York in the past few years, partly because of a ban on dual-class shareholding structures in Hong Kong and a strict requirement by the city’s bourse that all listed companies must have certain revenue and profit track records. 

Hong Kong also faces rising competition from Shanghai. WuXi AppTec, the leading mainland biotech company that privatised in New York two years ago, has been given the green light to relist on the A-share market through an IPO in Shanghai, just seven weeks after filing its application. 

Reward and risk: the two faces of Hong Kong’s new listing rules for biotech firms

To qualify for a Hong Kong listing, biotech candidates must have a market valuation of at least HK$1.5 billion (US$191.13 million) at the time of listing, one “sophisticated” pre-IPO investor, a product that has passed a phase one clinical trial primarily aimed at showing its safety, and has regulatory approval to begin phase two to prove its efficacy. 

Many people, including the stock exchange itself, will have to pay tuition [fees] … we should not judge the success of Hong Kong’s biotech IPO market by the performance of the first wave of listings in the first year. We have to look at it over the next three, five or 10 years
Yang Dajun, chairman, Ascentage Pharma

Another Hong Kong listing hopeful, Hua Medicine, which develops new treatments for Type 2 diabetes, said on Tuesday it had closed fourth and fifth rounds of private share sales, and had raised a total of US$117.4 million. Its investors include the Singapore sovereign fund, GIC Private Limited, Adrian Cheng Chi-kong, the executive vice-chairman of Hong Kong property developer New World Development, and Ping An Insurance (Group)’s venture capital unit, Ping An Ventures. 

The funds raised will fully fund the company through the completion of its two-phase three clinical trials, and the commercial launch in China of a product that treats patients’ impaired blood glucose sensor function and addresses the underlying cause of Type 2 diabetes, the company said. 

Hua plans to raise at least US$400 million through an IPO in Hong Kong in the second half of this year, with the help of investment banks Goldman Sachs and CLSA, Reuters reported this month. 

Why Hong Kong is in a sweet spot to harness Chinese biotech listings

Other Hong Kong listing hopefuls include Shanghai Tasly Pharmaceutical, Shanghai Henlius Biotec, a unit of Hong Kong and Shanghai-listed Shanghai Fosun Pharmaceutical (Group), as well as US-based cancer-detection technology developer Grail. 

While HKEX’s reform will open many opportunities for Chinese and Asian biotech companies to broaden their fundraising channels, Ascentage’s Yang said that unlike the more mature US biotech equity market, which has four decades of operating experience, Hong Kong is new to the game and stakeholders will have plenty of “lessons to learn”. He said a long-term view was needed. 

“Many people, including the stock exchange itself, will have to pay tuition [fees] … we should not judge the success of Hong Kong’s biotech IPO market by the performance of the first wave of listings in the first year. We have to look at it over the next three, five or 10 years.”

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