Shanghai’s STAR Board Lures Biotechs Away From Hong Kong

face
main_img

Competition is heating up among Asian stock exchanges hoping to lure the hottest prospects in Chinese biotech to list there. The newest competitor, Shanghai’s STAR Board, has already attracted over 100 companies, some of which have reconsidered listing on the Hong Kong Exchange, wary of the HKEX’s lukewarm performance.

 

As recently as one year ago, Hong Kong was the indisputable top destination for Chinese biotechs looking to file initial public offerings, drawn to the Hong Kong Exchange (HKEX) by new rules allowing biotechs to list there. This elevated Hong Kong to become the world’s second largest biotech funding hub. So far, several biotech companies have gone public on HKEX: Ascletis Pharma Inc., BeiGene Ltd., Hua Medicine Ltd., Innovent Biologics Inc. ,Viva Biotech, CanSino Bio, Junshi Biosciences, Frontage Holdings, CStone Pharmaceuticals Co. Ltd., among others. Many more firms are awaiting HKEX listing, including Mabspace, Stealth Biotherapeutics and AOBiome Therapeutics. In addition, Hansoh Pharma raised USD 1 billion on its HKEX listing

 

However, despite the warm reception, shares have been dropping from their initial offering prices; shares in Ascletis have dropped from HKD15 to around HKD6.40. These drops are leading to lukewarm investor interest, which is making some biotechs think twice before listing on the HKEX, and some postponing their previously planned listings. This series of postponements has hurt investor confidence, and the Hang Seng Index, the main indicator of the overall market performance in Hong Kong, has fallen 10 percent in 2019. Additionally, Hong Kong has been affected by ongoing public protests over a recent anti-extradition bill, causing e-commerce giant Alibaba to postpone its USD 15 billion HKEX listing.

 

A number of biotechs have announced that they are staying in mainland China and listing in Shanghai instead. On 13 June, the Shanghai Exchange launched the Science and Technology (STAR) Board, a stock trading market dedicated to pre-revenue, high-tech companies including biopharma firms. A so-called ‘China Nasdaq,’ the board’s aim is to drive the country’s economic development through innovation in technology and bring tech companies back to the mainland. 

 

As of the end of June, 131 companies had filed for a listing, and as of August, 29 biotechs have been given the regulatory green light, which is sure to attract many more in the upcoming months. The STAR Board’s rules were created with biotechs in mind. Companies that do not have three years of consecutive revenues will be eligible for listing, provided they reach an estimated valuation of CNY4bn (USD 577.8 million) or higher. To be eligible, biotechs must have obtained at least a Phase II clinical study approval for an innovative product. Once deemed eligible, the STAR Board will allow a company to register an application and receive clearance for a listing within 20 days, bypassing the need for government approval. On the STAR Board, companies will face less regulation on initial listing prices than they would in Hong Kong.

 

On the STAR’s first day of trading, companies saw their shares jump from between 84 to 400 percent higher than their IPO prices, with an average gain of 140 percent, according to the Financial Times. Shenzhen Chipscreen Biosciences was among the first to list, issuing 50 million shares at CNY20.4 (USD2.89) each. On the first day of trading, the price surged five-fold to CNY125 and closed the day at CNY95.3. As of 20 August, Chipscreen was trading at CNY90.8, still over four times its initial price, and the positive reception and high valuation have bolstered investor confidence in the STAR Board.

 

Chipscreen is a biotech focused on oncology, metabolic disease, autoimmune diseases and endocrinology, its blockbuster being anticancer drug Epidaza (chidamide), which has long had plans to list in order to bolster its growth and its branding. The company’s CEO Lu Xianping recently told PharmaBoardroom that “As a profit-making company, we are now able to self-finance our various R&D programs. But organic growth alone will not be enough for us. The China Securities Regulatory Commission recently released new guidelines to allow truly innovative companies, especially companies ready to support the Chinese national innovation vision, to be listed on mainland stock exchanges even if they are not yet profitable.”  

 

The high valuations on the STAR Board are attracting more biotechs to list there, such as Nanjing Frontier Biotechnologies. Frontier develops HIV treatments, one of which is already approved in China, and offers its platform to outside companies that develop long-acting formulations. Frontier changed its original plan of a listing in Hong Kong, later filing for a USD285 million listing on the STAR Board and has since cleared related regulatory reviews.

 

Frontier isn’t the only biotech changing course on its IPO plans. Tianjin-based Tasly Biologics, a subsidiary of Tasly Biopharma, has reportedly decided to postpone its IPO on the HKEX, citing recent poor performance and uncertain valuations. The decision comes as a surprise after being among the first key players to stoke enthusiasm for the HKEX in its early days. Shanghai-based I-Mab Biopharma, dedicated to immuno-oncology and immuno-inflammation, is also deciding against listing in Hong Kong and will file for an IPO in the US. China MediTech Ltd. is also postponing a planned Hong Kong IPO and will file listings in London and on Nasdaq in the US.

 

However, despite this early success, some experts believe that the STAR Board’s initial buzz will wear off and that Hong Kong is still more attractive to biotech firms looking to access international funds, while the STAR Board is driven largely by domestic Chinese capital. 

Add Your Comment


You must be logged in to post a comment.

Related Content

Latest Report