China genomics giant BGI targets A-share IPO

BGI, one of the world’s largest genome sequencing firms, plans to list in China to help fund growth and acquisitions but it is unclear if the IPO will see light in 2016.

BGI, one of the world’s largest genome sequencing companies, is targeting an A-share Chinese listing to help raise capital for development and acquisitions, some of them overseas.

However, it is unclear when the eye-catching initial public offering will see light.

The company, which previously abandoned plans to list in Hong Kong, aims to launch the IPO by the end of the year, Mao Mao, BGI's newly appointed chief science officer, told Chinese media last week.

But one person with knowledge of the matter told FinanceAsia that BGI is “very unlikely” to go public within the year, given the current slow pace of approvals for new Chinese IPOs.

According to the preliminary prospectus filed with the China Securities Regulatory Commission in December, the genomics, bioinformatics, and technology company plans to float its shares on Shenzhen’s ChiNext, a Nasdaq-style and tech-friendly board with a long line of companies eager to join it.

About 250 companies were waiting in the ChiNext pipeline as of last Friday but only 11 new ChinNext listings have been seen so far this year. That's in the wake of the CSRC's four-month IPO ban after last summer’s stock market crash, which only ended in November and continues to reverberate.

Dealogic data shows 55 companies listed on ChiNext in the second quarter of last year, ahead of the ban.

The second quarter should give a clearer indication of the state of the market and pace of approvals since the the first three months of each year generally tend to be quieter, not least because of the Chinese New Year holiday. But the person with knowledge of the matter said he was not holding his breath.
“BGI is more likely to list in the middle of next year at the earliest,” the person said.

The traditionally research-orientated company, which is headquartered in Shenzhen but was formerly known as the Beijing Genomics Institute, has appointed Citic Securities as sponsor and lead bookrunner and UBS as financial adviser for its A-share IPO.

According to its preliminary prospectus, the company plans to sell at least 40 million shares or 20% of its enlarged share capital, having already merged two core subsidiaries, BGI Dx and BGI Tech.

Hong Kong

BGI’s A-share listing plan comes after the company gave up on a Hong Kong listing. The company in 2014 reportedly planned to raise about $400 million from an IPO of BGI Tech and at the time hired Citigroup and Morgan Stanley to help arrange the transaction.

However, with net earnings at the unit tumbling from Rmb98.7 million ($15 million) in 2013 to Rmb6.5 million in 2014, BGI reportedly scrapped the plan.

BGI was set up in Beijing in 1999 as a non-profit research institute with the blessing of the China Academy of Sciences, a top Chinese think-tank. It soon developed into a big player in Chinese DNA analysis service and also participated in the Human Genome Project.

The company is ambitious in terms of its aspirations for advanced drug discoveries and genetic research and could potentially transform the country’s underdeveloped healthcare sector.

“The era of the internet is outdated as we are basically entering the next era of [life sciences]” Yin Ye, chief executive of BGI, said at the Genomics and Cloud Technology Alliance Conference in Shenzhen on Monday.

Yin Ye, CEO of BGI, speaks at the Genomics and Cloud Technology Alliance Conference.
(Photo credit: BGI)

BGI last month completed the first part of its “Three Million Genomes Project”, which it launched in 2011 to sequence the DNA of one million people, one million micro-organisms, and one million plants and animals. The one million person programme was completed through BGI’s sequencing-based non-invasive prenatal (NIFTY) tests worldwide, which could help to prevent birth defects and diagnose orphan diseases based on the findings, according to the company.

CEO Yin said 5.6% of China’s 16 million to 20 million newborns each year have birth defects, which are generally genetic and are hard to detect with standard medical practices. “That’s about 1 million babies with disabilities [in China] every year and many of them don’t have much help…That’s what big biological data can help,” he said.

Rooted in China, the young company is also looking to expand overseas. “Most Chinese companies go overseas through mergers and acquisitions…We will adopt a similar approach,” Yin said in response to a question by FinanceAsia on Monday, adding that BGI will target gene-related assets globally, including applications and technologies. 

BGI in 2013 purchased Complete Genomics, a Nasdaq-listed human genome sequencing platform, for about $118 million after it raised Rmb1.4 billion by selling a 42% stake in BGI Tech to a consortium of private equity and venture capital investors one year earlier. Among them are China Everbright, Jack Ma-backed Yunfeng Capital, Sequoia Capital, and Shenzhen Capital Group.

In 2014, BGI sold a near-20% stake in BGI Dx, its healthcare subsidiary, to a group of 19 institutional investors and raised about Rmb2 billion. 

The combined valuation of BGI Dx and BGI Tech was Rmb19.1 billion as of the first half of 2015, according to the preliminary prospectus.

The proceeds raised from the planned IPO would help the company to invest in research and development, acquire assets domestically and overseas, and cover the entire value chain from gene sequencing to cellular and gene therapy, according to the preliminary prospectus.

BGI have about 5,000 employees in 55 countries worldwide, with an average age of 27, according to its website.

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