Despite mixed-income for the first ten organizations to benefit from regulations that allow drug developers to list in stocks in Hong Kong before selling any product for their patients, Chinese biotech businesses are on the list of Hong Kong’s stock exchange.
After launching a $4 billion board for Chinese pharmaceutical companies in the previous year, six Chinese biotech organizations submitted applications. In the first half of 2019, China’s businesses provided five of the 10 biggest initial public offerings in the field of biotechnology.
The offerings from Hong Kong are a challenge to Nasdaq, which earlier included so-called pre-revenue Chinese biotech, and as a stimulus for China’s rapidly growing biotech industry, which has produced dozens of businesses with a value in excess of $1 billion.
The Tasly Pharmaceutical Group in China is to float its biopharmaceutical unit to raise about US$ 1 billion in the largest upcoming Hong Kong list. Chi-Med, a cancer pharmacist, will raise up to $500 million as well.
One year earlier last week, Ascletis Pharma, a Chinese cancer developer, became the first firm to be listed on the Hong Kong stock exchange under a regulation listing pre-revenue biotech businesses that do not sell their medicines because they are in development.
But the company’s share dropped 40 percent in the next two months, while the next two biotech quotations which are still trading below giving rates, along with Ascletis, have hurt shareholders.
Brad Longar, who manages exchange-traded funds that monitor the US and Chinese biotech businesses, said that the decreases in the initial listings were the result of “unrealistic” evaluations obtained during rounds of personal funds ahead of IPOs.
“After the listings, firms were forced to reset their expectations and IPO’s to a more sensible assessment,” Mr. Loncar said. The output of the firms listed in Hong Kong has enhanced, with six of the last seven offered to trade at a cost of its IP Offering price. “Hong Kong values are still greater than Nasdaq, but they are at a point which is suitable for the Hong Kong market and local shareholders are comfortable with.”
The most efficient Hong Kong biotech supplies to date is Junshi Biosciences, which raised approximately $400 m in a December IPO, up 31% from its list.
In its June listing, Hanson Pharma, which produces generic drugs and develops new therapies, has raised $980 m and its shares have increased from its beginning to 12%.
Hanson was able to list HK$23.5 billion (USD$3 billion) for reform before Hong Kong, but up to the moment, according to the calculations of the Financial Times, the 10 biotechnology companies listing under the new rules have raised investors ‘ returns by 2.4%.
That’s below the general market, with Hong Kong’s Hang Seng benchmark index rising by 9 percent over the same period, indicating investors remain careful about the industry. It also lags behind the index of Nasdaq biotech, which this year is up 8%.
Retail investors rely on the Hong Kong market for much of the liquidity. They tend to favor more stable stocks than biotech firms, whose valuations may rise or fall depending on medical trial achievement or failure.
One Chinese biotech founder said he found it simpler to interact with investors in the US because they had a stronger knowledge of state-of-the-art science while investors in Hong Kong “only comprehend proven objectives or therapies.”
According to S&P Global, many are approaching such a test, with most biotechs listed in Hong Kong anticipated publishing test outcomes for their lead medication applicants in the next 12 to 18 months.
“Biotech is Hong Kong’s fresh idea. Everyone on the market continues to learn, “Cui Cui, a Citi analyst, said. “Companies need to persuade investors through foreign cooperation and marketing deals for their products.” As well as raising cash for research and medical studies.”It made investors more rational and prudent,” Xu Qian, a Detong Capital partner, said.
This month’s Shanghai stock exchange introduced the Star Market for Science and Technology stocks, the first mainstream Chinese exchange to be able to list pre-revenue firms that will compete with Hong Kong for biotech bids.
But the Hong Kong board has more liquidity, while the frequency of global biotech cooperation implies that Chinese firms often prefer to increase cash in Hong Kong dollars that are freely convertible, unlike the renminbi.
Several Chinese biotechs have announced plans to list in Hong Kong in the latest weeks, including Shanghai Henlius, SinoMab Bioscience, and Alphamab Oncology.
“The market in Hong Kong will stay the first option because it provides Chinese firms a premium instead of receiving the Chinese discount on Nasdaq,” Ms. Cui said. “The benefit with respect to the StarBoard is that the funds are outside the continent.”
