Hong Kong is still positioned as #1 IPO destination for Chinese biotech companies

18 May, 2020 14:28
source: Singularity Financial

Singularity Financial Hong Kong May 18, 2020 – by Zohar Lee

A Chinese medical devices provider,Peijia Medical Ltd., surged 74% in its Hong Kong trading debut on Friday (May 15) in the best opening performance this year for an initial public offering over $50 million.

Peijia Medical produces replacement heart valve and vascular repair devices, opened at HK$26.80 versus its offer price of HK$15.36. The company raised $302 million in its IPO and is the latest biotech firm to attract strong investor demand in the financial hub as the coronavirus pandemic spotlights inadequacies in China’s health-care system.

Investors have been piling into companies focusing on improving everything from cancer detection to drugs and online diagnosis. Peijia Medical got orders from retail investors for 1,184 times the amount of stock initially made available to them, triggering a reallocation mechanism that gives 50% of the deal to individual investors up from the initial 10%. That retail subscription is the highest for a biotech IPO in Hong Kong since the bourse changed its listing rules in 2018 to attract more firms from the sector, according to data compiled by Bloomberg.

“Hong Kong is still positioned as the number one IPO destination for leading Chinese biotech companies, especially those seeking overseas listings, thanks to its mature and stable legal system and abundant international capital,” said Tang Jing, who helps Chinese biotech companies raise capital and pick IPO venues as vice-president of the health care and life science investment banking team at China Renaissance. “However, we saw a change in the dynamics last year, which is speeding up this year due to rapid policy moves.”

Last year, Shanghai’s financial regulators allowed drug developers that have yet to earn a revenue or profit to raise funds via initial public offerings (IPOs) on the Science and Technology Innovation Market (Star), followed recently by a similar green light on the ChiNext stock market in Shenzhen. The changes on the Shanghai and Shenzhen bourses match Hong Kong’s April 2018 listing rule reform, which propelled the local stock exchange to become the world’s second-largest market for biotech IPOs after New York.

“The strong response to the IPO also demonstrates the biotech sector’s resilience to the market uncertainty of recent months,” said Stanley Xie, Herbert Smith Freehills Kewei joint operation partner, who worked on the deal.