Chinese Biotechs Choose Hong Kong over New York for IPO

Driven by Hong Kong's initiative and reforms to attract more listings, more biotech firms are turning away from New York IPOs.

Anna Vodopyanova
    Apr 26, 2018 11:09 AM  PT
Chinese Biotechs Choose Hong Kong over New York for IPO
author: Anna Vodopyanova   

Ascentage Pharma and Innovent Biologics Inc., two Chinese makers of biopharmaceutical products, aborted their plans to trade in New York and turned to Hong Kong for initial public offerings.

The Hong Kong Exchanges and Clearing Market (HKEX) has been considering relaxing its requirements for biotech companies in an attempt to increase its share of the global IPO market. Last month, HKEX completed its listing reforms and will allow biotech companies without revenue and a history of profits enter its market starting April 30.

The city's new listing regime, its familiarity with Chinese firms, potentially higher valuations, and its convenient time zone for mainland executives led companies to choose Hong Kong over New York, sources said.

Innovent and Ascentage, which previously planned to file for IPOs in New York, joined a growing list of biotech companies targeting IPOs in Hong Kong, which includes Shanghai Henlius Biotech, backed by Chinese conglomerate Fosun International, diabetes-focused drug developer Hua Medicine, and U.S.-based cancer detection start-up Grail.

Innovent, a privately held Chinese company in Suzhou, announced today it had raised $150 million in Series E funding. Among its investors was the giant Fidelity Investments in a partnership with Singapore state investor Temasek. This year, the company hit $1 billion in valuation and aimed to raise $200 million in New York for its shares.

Founded in 2011, Innovent has a portfolio of 16 potential products for treating cancer, autoimmune disorders, and other diseases. Seven of the products are in clinical development. The company has partnered with Eli Lilly and Co. (Nasdaq: LLY) to co-develop three cancer treatments in China and overseas.

In Hong Kong, Innovent is looking to raise between $300 million and $500 million.

Ascentage, founded in 2010, focuses on therapeutics for cancers, hepatitis B and aging-related diseases. The company has seven products in clinical development, and 17 approved for clinical studies in China, the United States, and Australia. Besides Oriza Ventures, it also counts Chinese state-backed SDIC Fund Management among its investors.

Ascentage is aiming to raise up to $300 million, sources said.

"We were ready to file [for IPO] in the United States, but we have shifted to Hong Kong for listing as the HKEX opens its doors to us," Ascentage's chairman Yang Dajun told Reuters.

"This is great news for biotech firms which are based in China and want to tap more Chinese and Asian investors," he said of Hong Kong's rule change, but declined to elaborate further about his firm's IPO plan.

The rush to enter trading in Hong Kong is making some market participants question if Asian investors can adequately cope with the complexities of biotech sector investing.

"The U.S. has very mature investors for the sector, but the Asian investors are quite new to it," said Li Hang, head of Greater China equity capital markets at investment bank CLSA.

Innovent and Ascentage have yet to log any revenues.

(Reuters contributed to this article)