Chinese Biotechs Flock to IPO in Hong Kong

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2019 was a bumper year for biotech companies listing on the Hong Kong Exchange (HKEx), with nine pre-revenue biotechs and eight revenue-generating biotech and biotech-related firms, mostly originating from mainland China, listing last year. The average amount of funds raised by these was a whopping four to five times higher than the US average, with the largest listing raising over USD 900 million. These firms’ projected average daily turnover stood at USD two million. It is therefore little wonder that Hong Kong is now being considered the world’s second-largest funding hub for biotech.

 

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With the goal of removing barriers and encouraging research breakthroughs, the HKEx revised the listing rules which enable pre-revenue and pre-profit biotech companies to list on it, furthermore establishing a biotech advisory panel to provide advice on listing applications from biotech companies. HKEx hopes to continue to foster diversity in the companies that list there and aims to provide a welcoming funding ecosystem.

 

PharmaBoardroom has spoken with the CEOs of five of the 17 companies that listed on the HKEx in 2019, here are some of their insights:

 

9 May: Viva Biotech Holdings

 

 

From our CRO success, we have built a strong financial buffer and robust cashflow to fund our ‘equity-for-service’ and cash investment model

Cheney Mao, chairman & CEO, Viva Biotech

 

Viva is a biotech incubator committed to helping new biotechs succeed from day one.  Viva incorporated this equity-for-service model to complement its existing fee-for-service CRO model.

Its chairman and CEO Cheney Mao emphasized the successes of the company’s business and investment models, “Viva Biotech is well-positioned from a technical perspective. From our CRO success, we have built a strong financial buffer and robust cashflow to fund our ‘equity-for-service’ and cash investment model. For this model to work, it is all about cashflow. The company not only has to survive but it has to be highly profitable. We are fortunate because our positioning within the CRO sector is highly competitive and therefore, we have been highly profitable, with gross margins of more than 50 percent.”

 

30 May: Frontage Holdings

 

 

Following our IPO and with our ambitious growth strategy, we have an even better platform for our employees to grow and advance, which is very exciting and motivating

Tianyi Zhang, SVP, Frontage Holdings

 

Frontage is a full service, global pharmaceutical CRO lab offering laboratory services which support drug discovery and development, including drug metabolism and pharmacokinetics (DMPK), safety and toxicology, bioanalytical services and chemistry, manufacturing and controls (CMC).

Frontage Senior Vice President Tianyi Zhang commented on the ways the recent IPO will bolster the company’s growth: “Our successful IPO has generated more opportunities for us since we no longer have to worry about funding. In China, we plan to expand into new service offerings, including pre-clinical areas like GLP toxicology, DMPK and so on… Following our IPO and with our ambitious growth strategy, we have an even better platform for our employees to grow and advance, which is very exciting and motivating. Prior to our IPO, our initial target was to achieve a growth rate well above the industry average every year. But now we have higher expectations and a new strategy to expand our positioning and service offerings. We hope that in all aspects – company size, revenues and employee number – we will double or even triple our existing scale.” 

 

28 October: Ascentage Pharma

 

 

There are simply no shortcuts. You cannot invest in something that is low-risk and high-return

Dajun Yang, chairman, executive director & CEO, Ascentage Pharma

 

Ascentage Pharma is a biotech that focuses on apoptosis, an area in cancer therapeutics that is still relatively underexplored. The company has three molecules in the next-generation kinase inhibitor space, all of which are validated targets with products already on the market, and is the first Chinese biotech to have in-licensed a molecule from MSD.

CEO Dajun Yang spoke about the inherent risk present in innovation in an interview with PharmaBoardroom, “Innovation entails risk. Innovation is not a buzzword for raising capital, it is a long-term, fundamentally risky business… For companies working in more crowded or popular areas, perhaps there is less risk on the R&D side because their targets have been validated and proven but they will face risks when it comes to the commercial side. Once their products are approved, will there be demand for them on the market if they have to compete with many other similar products? This kind of commercial risk might end up becoming more costly for investors and biotech companies…Biotech innovation requires long-term planning, focus and persistence over decades, not just years. In China, over the past few years in particular, it seems that there are some people that expect quick returns and quick money from this sector. There are simply no shortcuts. You cannot invest in something that is low-risk and high-return.”

 

12 November: SinoMab Bioscience

 

 

Many start-ups in Hong Kong began with professors but they often lack the knowledge to commercialize their ideas into viable products

Shawn Leung, CEO, SinoMab Bioscience

 

SinoMab is a Hong Kong based clinical stage biopharma company focusing on the development of therapeutic monoclonal antibodies (mAbs). PharmaBoardroom spoke with CEO Shawn Leung back in 2017, more than two years before the company listed on the HKEx, in which he highlighted the importance of implementing knowledge into action in order to be viable.

“Biotechs are a cash-burning machine. This is the most difficult part – because many people can have a good, or even great, idea but you cannot just say you have this idea. You need to produce or realize it. Many start-ups in Hong Kong began with professors but they often lack the knowledge to commercialize their ideas into viable products. It is not just about money and technology, it is about the know-how, for instance, relating to the implementation of necessary industry procedures like Good Manufacturing Practice (GMP) for production and Good Clinical Practice (GCP) for clinical trials.”

 

12 December: Alphamab Oncology

 

 

We also have our sights set on developing our drug candidates for more developed markets like the US and Japan, which could mitigate the risk in the China market

Xu Ting, founder, chairman & CEO, Alphamab Oncology

 

Alphamab is a protein engineering company with the aim of being a highly differentiated oncology biotech, developing late-stage oncology products such as subcutaneous injectable PD-L1 candidates and bispecifics.

Its founder, chairman and CEO Xu Ting shared his confidence in the company’s future growth while speaking with PharmaBoardroom several months before its IPO: “We have been able to complete our financing round because we have a robust pipeline and strong in-house R&D driven business model with the data to back ourselves up. We also have our sights set on developing our drug candidates for more developed markets like the US and Japan, which could mitigate the risk in the China market. I firmly believe that this is the right time, and Alphamab is the right company with the right leadership team to succeed.”

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