Chinese diabetes drug maker Hua Medicine is second firm to seek Hong Kong IPO under new rules

Chinese diabetes drugs developer Hua Medicine has become the second firm to apply to list in Hong Kong after the exchange changed its rules to allow biotechnology firms with no revenue to join as a way of attracting more listings.

The Shanghai-based company, founded by a former senior China executive of Swiss pharmaceutical giant Roche, aims to raise around US$200 million, according to two sources close to the deal. It will use the proceeds to fund clinical trials and commercialisation of a drug for the chronic disease linked to poor diet, obesity and lack of exercise.

It is conducting phase 3 clinical trials – the last phase before approval for sale can be granted – of an oral drug called Dorzagliatin, for the treatment of type 2 diabetes, it said in a preliminary listing prospectus filed to Hong Kong Exchanges and Clearing, the operator of the city’s stock exchange.

Hua acquired the rights to Dorzagliatin in 2011 from Roche for further development and potential commercialisation. Its founder and chief executive, Chen Li, was a former China chief scientific officer at Roche. The drug increases activity of the enzyme glucokinase, which potentially helps to lower elevated blood glucose levels.

Chinese biotech firm Hua Medicine raises US$117 million to go toward clinical trials for diabetes drug

The planned initial public offering’s joint sponsors, Goldman Sachs and CLSA, declined to comment. Hua did not respond to an email seeking comment.

The Hong Kong exchange changed its listing rules earlier this year as competition among bourses for new listings heated up. Earlier this month Hangzhou-based hepatitis C treatment developer Ascletis became the first biotech firm to file for a Hong Kong listing under the new rules.

China’s Hua Medicine mulls Hong Kong IPO as diabetes drug enters crucial clinical trial phase

Hua had obtained global patents on its drug and planned to bring it to market by 2020, targeting sales of about US$3 billion by 2025, which would give it about a 15 per cent share of China’s diabetes drug market, Chen told the South China Morning Post in an interview in January.

He also said the company planned to contract out future manufacturing to Wuxi AppTec, one of its shareholders.

According to market research firm Frost & Sullivan, mainland China had 120 million type 2 diabetes sufferers last year, or 27.6 per cent of the world’s total. The number is forecast to grow to 160 million in a decade. A separate study published by Journal of the American Medical Association last year said some 47 per cent of the Chinese adult population was estimated to have either diabetes or pre-diabetes.

The country’s market for diabetes treatments is projected to grow from 51.2 billion yuan (US$8 billion) last year to 173.9 billion yuan in a decade.

Up until March 31 this year, Hua Medicine had raised around US$210.5 million in funding. Among investors in the company are Blue Pool Capital, owned by Alibaba Group founder Jack Ma and vice-chairman Joseph Tsai. Alibaba owns the South China Morning Post.

Other investors include Hong Kong property developer New World Development’s executive vice-chairman, Adrian Cheng Chi-kong, Singapore’s sovereign wealth fund GIC and Ping An Ventures, the venture capital unit of China’s Ping An Insurance.

Hua posted a net loss of 322.3 million yuan for the first three months of this year on 6.1 million yuan of revenue, after a loss of 280.7 million yuan in the 2017 calendar year, when it had 11.7 million yuan of revenue, according to the prospectus.