Columbert passed the HKEX hearing after its first prospectus, and most of the Biotech, which successfully landed on the HKEX through 18A in the past year, has undergone several updates, has the capital market begun to thaw in 2023? Is the 18A bonus back?
On June 4, the official website of the Hong Kong Stock Exchange showed that Kelun Bertai has submitted post-hearing information, which means that Kelun Bertai has passed the hearing and will soon land on the Hong Kong Stock Exchange, and the Hong Kong Stock Exchange may soon welcome the second biopharmaceutical company listed through Rule 18A in 2023.
It is worth noting that Korumbertai is also one of the few unprofitable biopharmaceutical companies since 2022 that passed the hearing in its first prospectus filing.
(Image source: HKEX official website)
Over the past year or so, the tentacles of the capital winter have stumbled on the pace of biotech companies landing in the secondary market. According to the statistics of E drug managers, the number of listed companies in Hong Kong stocks passing the 18A rule in 2022 is less than one-third of the number of applications, while before 2021, the number of the two was almost the same.
Some people believe that this is not unrelated to the liquidity of the Hong Kong stock market, and the listing is broken, and the valuation of the primary and secondary markets is inverted like an iron door, which makes biotechnology companies prohibitive. At the same time, the science and technology innovation board encourages the frequent emergence of new policies for hard technology, attracting a large number of innovative medical device companies, both in terms of liquidity and valuation.
As the first stock market in China to open the landing of unprofitable biotechnology companies, is the 18A dividend of Hong Kong stocks really no longer there?
lapse
According to the statistics of public information of the Hong Kong Stock Exchange, after the introduction of the Chapter 18A listing rules of the Hong Kong Stock Exchange in 2018, it attracted a large number of biotechnology companies to rush, and by 2021, the number of companies applying and the number of listings both peaked, from 14 and 7 in 2018 to 43 and 17.
But the good times did not last, and it is clear from the 2021 data that the number of biotech companies listed through HKEX 18A is already far below the number of applications. This phenomenon is even more prominent in 2022, not only the number of applications has been greatly reduced, but the proportion of successful listings is also no longer the same, 22 companies submitted application materials throughout the year, only 6 were successfully listed, and the vast majority of them were not successfully listed because the application materials were invalid.
It is reported that the process of Hong Kong stock IPO includes seven links, such as submission of form, hearing, road show, IPO, announcement of placing results, grey market trading and formal listing, of which the submission to hearing takes the longest time, taking about 3~6 months, during which the Listing Committee reviews and evaluates the new listing application to determine whether the applicant is suitable for an initial public offering. If the company fails to complete the hearing or listing within 6 months, the application materials will automatically expire, and if it wants to continue to list, it needs to supplement the latest financial data.
Of course, there are some examples of this. Bio-Thera is the only unprofitable biotech company that has voluntarily withdrawn its listing application since the introduction of Regulation 18A on the Hong Kong Stock Exchange in 2018. Interestingly, in 2020, Bio-Thera was also the only unprofitable biotechnology company that failed to go public due to the failure of application materials. In 2021, Bio-Thera submitted the form again, but finally decided to terminate the issuance of Hong Kong shares, and the reason for the termination was explained in the announcement as "in view of the company's current operating situation". However, it is worth noting that Bio-Thera has successfully passed the fifth set of standards on the science and technology innovation board in August 2020 to land on the A-shares, and is also the second company to be listed using the fifth set of standards.
Another obvious feature is that a group of biotech companies seem to be setting off a wave of "abandoning Hong Kong and returning to A" so far in 2022. On the one hand, some companies choose to "switch" to the STAR Board after the application materials for Hong Kong stocks expire, and on the other hand, the biomedical IPOs on the STAR Board show a trend of piling.
For example, in 2021, the IPO review status of the Beijing Life Science and Technology Innovation Board was changed to Inquiry after the application materials were invalidated. Coincidentally, Hanyu Medical also chose to terminate its Hong Kong stock listing in September 2021 when it had already passed the hearing of the Hong Kong Stock Exchange, and on March 1 this year, Hanyu Medical's application for listing on the Science and Technology Innovation Board was accepted, and the sponsor was CICC.
Both companies are engaged in the research and development of medical devices, with Beixin Life mainly focusing on precision diagnosis and treatment devices for cardiovascular diseases, and Hanyu Medical mainly focusing on structural heart disease interventional devices and electrophysiological products.
The dividends are gone
Some people believe that since the opening of the Chapter 18A listing rules by the Hong Kong Stock Exchange in 2018, a large number of unprofitable biotechnology companies have rushed one after another, and the number of applications has increased year by year, but the review efficiency of the Hong Kong Stock Exchange has not kept pace with the application rhythm, which has led to the frequent failure of listing application materials for 18A companies since 2021. Some relevant staff of the Hong Kong Stock Exchange denied this view, and told E drug manager Rong Media that it is mainly the choice made by most applicant enterprises according to the investment and financing environment.
In fact, in the capital winter that everyone lamented, the phenomenon of inversion of valuation in the primary and secondary markets abounds, and the IPO is "not fragrant" when the listing is broken, and investors have tightened their "money bags" listed companies to make prudent choices according to the current environment, and it is not difficult to understand the suspension of IPOs. However, behind the phenomenon, there are views that question whether the 18A rule dividend is no longer what it used to be.
This is evident from the scale and valuation of the fundraising. According to statistics from E Drug Manager Rong Media, the average net initial fundraising of the six biotechnology companies listed through Rule 18A in 2022 was only HK $305 million, and the highest was only HK $671 million. The above-mentioned two companies, Beixin Life and Hanyu Medical, intend to raise a total of 1.274 billion yuan and 1.722 billion yuan on the science and technology innovation board, respectively, which is almost equivalent to the sum of these six companies. In terms of valuation, 4 out of 6 companies are still in a broken state, and some companies have even lost more than 80% of their market value. Li Qiushi, founding partner of Cid Boyuan Capital, also acknowledged this fact, "There is a lot of pressure on Hong Kong stock issuance. ”
However, there are also views that the listing process of the Hong Kong Stock Exchange is a market-oriented inquiry and trading process, so the issuance of new shares on the Hong Kong Stock Exchange is more like "the process of buying and selling at the price desired by the seller". However, the successive market environment has discouraged many investors, and Yin Zheng, managing partner of Sany Innovation Investment, believes that this is a very standard market-oriented behavior. He told E Pharma Manager Finance Media, "Another reason is that the US dollar and the Hong Kong dollar implement a joint exchange rate, which is a de facto fixed bundle, which can be understood as the Asian version of the US dollar, the Federal Reserve's continuous interest rate hikes, the global capital flow tightening, and the impact on the Hong Kong stock market will follow." ”
The liquidity of the Hong Kong stock market is tight, but the science and technology innovation board encourages new policies frequently, and it is not difficult to understand that "abandoning Hong Kong and going to A". In June 2022, the SSE officially implemented the "Guidelines for the Application of the Rules for the Review of Issuance and Listing on the Science and Technology Innovation Board of the Shanghai Stock Exchange No. 7 A Medical Device Enterprise Application of the Fifth Set of Listing Standards" to support "hard technology" medical device enterprises that have not yet formed a certain revenue scale to issue and list on the STAR Board.
"Price is the advantage of the STAR Board." Yin Zheng bluntly said that from the perspective of investors, higher pricing, higher valuation, better liquidity, smoother exit, naturally more motivation to switch from Hong Kong stocks to the science and technology innovation board. But he also believes that truly high-quality assets will not worry about being issued in Hong Kong stocks, and as the Fed's interest rate hike slows down, the liquidity of the Hong Kong stock market will improve, and the IPO situation will also ease.
Fast forward to 2023, and as the investors mentioned above, Hong Kong stocks are still attracting truly valuable innovation. The head-to-head test of the herpes zoster vaccine LZ901 of the green bamboo organism that broke the "window period" has shown the same efficacy as imported products, and the incidence of adverse reactions is much lower than that of imported products. Within a year, it reached three ADC cooperation with Merck, and the total transaction volume of more than 10 billion US dollars Kelun Pharmaceutical's subsidiary Kelun Botai also regarded Hong Kong stocks as the first place for IPOs. It is reported that the Series B financing completed before the launch of the IPO is valued at up to 10 billion yuan. In addition to Kelun Botai has passed the hearing, innovative drug companies such as Quanxin Biologics, Yiming Onco, and Laekna Pharmaceutical have all submitted their forms in Hong Kong stocks, and the application materials of these companies have been processed.
For biotechnology companies, the past of financing by "storytelling" a few years ago is no longer traceable, whether it is Hong Kong stocks or A-shares, regulators and investors are more professional, only real innovation can not be influenced by the environment, naturally there will be capital will pay for the real value of innovation.