China, IPOs

Hong Kong clears way for pre-revenue biotech IPOs, plans to accept listing applications by May

A much anticipated rule change in Hong Kong’s stock exchange will take effect at the end of this month, marking a new era where qualified biotechs can list on the bourse before earning revenue.

Charles Li

Hong Kong Exchange and Clearings will start accepting listing applications under new rules on April 30, chief executive Charles Li told local reporters Friday, on the heels of consultation results expected to come out on April 24. That will officially remove a major impediment for biopharma companies looking to raise capital in the public market, which had previously led BeiGene to list in New York rather than closer to home.

Since the amendments were proposed in December, a number of companies have reportedly begun to consider an IPO in Hong Kong, ranging from high profile Chinese firms (Innovent, Ascletis, Hua Medicine, Tasly and Shanghai Henlius Biotech) to well-known US biotechs carrying huge valuations (Grail and Moderna). There’s also been suggestions that Nasdaq-listed Chinese companies such as Zai Lab would consider a secondary listing in the city.

Under new rules, pre-revenue biotechs can apply for IPOs as long as they are valued at HK$1.5 billion (US$192 million), backed by a senior investors, and have a Phase I study under their belt with a green light to embark on Phase II. Other criteria include being at least two-years old and having some patents.

While consultations for rule amendments usually last for six months, HKEX shortened the time frame in light of apparent consensus approving of the changes and with consideration about the IPO window.

To address investor concerns, HKEX also devised more stringent regulations and a streamlined delisting process for these companies.


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