China, IPOs, Market

As the maiden biotech IPO on the HKEX fizzles, some investment experts see an upside in tempering the hype

The Hong Kong Exchange grabbed the biotech world’s attention when it changed the rules on a new listing, letting companies without revenue jump into the market. That happened while the Chinese biotech industry suddenly became one of the hottest investment games in the world. And together those two trends were supposed to light a fire you could clearly see from every continent.

But the flames have died down much faster than anticipated.

Ascletis became the canary in the coal mine with their pioneering IPO. And while it was a clear success by any measure, raising a then-record $400 million, the stock is now down 44%. And the fervor raised by the prospect of overnight riches has cooled considerably in much less time than it took to build.

Brad Loncar

“You want the first one to go well, and it’s gone terrible,” said Brad Loncar of Loncar Investments told Reuters, which chronicled the sudden change. Loncar just launched a new China-based biotech ETF, which is up 8%. “You have to create value, and right now it (Ascletis) is trading on sentiment in front of a group of investors who don’t have experience with companies that don’t generate a profit.”

Jonathan Wang

Jonathan Wang, senior managing director and co-founder of the Asia fund at healthcare investor OrbiMed Advisors, sees the good in all this. Too fast and too furious on an exchange like this could create a bubble. 

And bubbles have a tendency to burst.

“It’s actually good news to have everyone cooled down after months-long hype and excitement around the industry,” he told the wire service.

Reuters counts at least 10 more IPOs in the queue.


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