Chinese biotech sector is blowing hot as M&A and IPO deals surge amid Covid-19 pandemic
- IPO deals in the broad health care sector have surpassed all of 2019 volume amid a surge in demand from investors
- Many US dollar investment funds have been looking for opportunities, with five buyers chasing one target on average: Datasite
Some 19 deals worth US$3.1 billion were recorded in the sector that focuses on the research and development of novel drugs and medical devices from January to June this year, compared to 16 transactions totalling US$1.74 billion in the preceding six months, according to data compiled by Mergermarket.
“Many US dollar investment funds have been eager to grab hold of opportunities in biotech,” said Toto Ku, head of Greater China at Datasite, which operates virtual data rooms for sellers and buyers to discuss deals in a secure environment. “On average, we saw five companies pursuing one M&A target.”
“Many investors have reallocated money from cyclical industries to health care,” said Zhu. “Even if there will be a slowdown in the rest of the year, capital-market fundraising in the sector will reach a historical high.”
I-Mab Biopharma, a US-listed oncology and autoimmune disease drugs developer, last week closed a US$418 million financing with Asian and US biotech funds. The firm also announced on the same day an up to US$1.9 billion deal to license US-based drugs developer AbbVie the rights to develop and commercialise one of its oncology drug candidates globally, except mainland China, Hong Kong, Macau and Taiwan.
Shanghai, Shenzhen shape up as rivals to Hong Kong in biotech IPOs
The growing interest in M&A deals in the sector underscores the view that the US-China trade war will not derail the long-term trend for more cross-border drugs development cooperation.
While “possible temporary troubles” may be expected, such ventures typically require global partnerships to succeed, said Michael Fu Feng, head of China Everbright’s health care fund.
Fu expects Hong Kong to retain its advantage in attracting top biotech listing candidates after its 2018 listing reforms to allow pre-revenue firms to sell shares to the public. This is despite measures by Shanghai and Shenzhen bourses to match Hong Kong’s listing rules.
“Hong Kong provides both high valuations and greater flexibility to move quickly on business spin-offs, dual listings and secondary shares sale,” he said. “The market has plenty more room to grow.”