China, IPOs

Billion-dollar biosim maker mulls $500M Hong Kong IPO

A Chinese biosimilar maker valued at $1.5 billion might be the first to list its stock on Hong Kong’s exchange under new rules allowing startups and biotechs to go public.

The company, called Shanghai Henlius Biotech, could do an IPO raising $500 million as early as the second half of this year, according to unnamed sources interviewed by Bloomberg.

A listing like this could be a first for Hong Kong’s stock exchange. Until recently, Hong Kong did not allow pre-revenue and pre-profit companies to list, as they were a perceived risk to investors. But this cut out the bulk of biotechs operating in the red while developing drugs. The strict rules led Chinese biotech companies like BeiGene to raise capital in the US. On the Nasdaq, BeiGene’s stock has grown nearly 310% over the past two years, bringing its market cap up to $6.3 billion. Not bad for a company with barely any revenue, and none from product sales as of their latest 10-K.

New rules announced in December (and taking effect this year), however, allow companies that haven’t earned revenue or profit to apply for IPOs in Hong Kong — as long as they’re valued at HK$1.5 billion (US$192 million). The companies must meet some criteria first, like being at least two-years old and having some patents.

“Biotech was chosen as the initial focus in widening market access for early stage companies as the sector tends to be strictly regulated under a regime that sets external milestones on development progress,” the Hong Kong stock exchange wrote in a statement to the South China Morning Post.

Since the new rules were announced, about two dozen tech startups and biotech companies have made inquiries directly through the exchange or have engaged investment banks and professional consultants to ask about raising capital in Hong Kong, SCMP reports.

Shanghai Henlius makes monoclonal antibody biosimilar drugs, including a copycat of Roche’s cancer therapy Rituxan that got priority review last month. The company is a joint venture launched by Shanghai Fosun Pharmaceutical and Henlius Biopharmaceuticals in 2009. It raised $140 million last month from investors including Jacobson Pharma Corp. in a deal valuing the company at more than $1.5 billion.

Illustration: Skyscrapers in Hong Kong. Shutterstock

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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