Two Chinese biotechnology companies dropped plans to get listed in New York and instead aim to raise up to $800 million in Hong Kong IPOs, seeking to cash in on new rules to woo early-stage drug developers, sources said.
Fidelity Investments-backed Innovent Biologics and Ascentage Pharma plan to float in the second half of 2018, they added.
They join a growing group of Chinese biotechnology companies planning IPOs in Hong Kong. The exchange in the city, as of Monday, will allow companies in the sector with no profits or revenues to list, though some participants wonder how the market, dominated by traditional companies, will cope with the new-age sector.
The new rules are part of a broader effort by Hong Kong Exchanges and Clearing (HKEX) to encourage more new economy companies to float in the city as it battles New York to be the world's largest listings hub.
By present, neither Innovent nor Ascentage has yet to generate any revenue.
Ascentage, which focuses on treatments for cancer, hepatitis B and age-related diseases, aims to raise up to $300 million, two sources said.
"We were already ready to file [an IPO application] in the U.S., but we have shifted to Hong Kong for the listing as the HKEX opened its doors to us," said Ascentage's chairman Yang Dajun.
This is great news for biotechnology companies that are based in the Chinese mainland and want to tap more Chinese and Asian investors, he said of Hong Kong's rule change.
Innovent, which counts mutual fund giant Fidelity and Singapore state investor Temasek among its investors, is looking to raise between $300 million and $500 million in Hong Kong, according to two other sources.
The two companies chose Hong Kong because of the city's new listing regime, its familiarity with Chinese companies, potentially higher valuations and its convenient time zone for mainland executives, the sources said.
That rush is making some market participants question if Asian investors can adequately cope with the complexities of investing in the sector.
"The US has very mature investors for the sector, but Asian investors are quite new to it," said Li Hang, head of greater China equity capital markets at investment bank CLSA.
Founded in 2011, Innovent has built a portfolio of 16 potential products for treating cancer, autoimmune disorders and other diseases, and seven of those are in clinical development.
Ascentage, founded in 2010, has seven products in clinical development and 17 in total approved for clinical studies in China, the US and Australia.
