Suzhou-based biotech firm Ascentage Pharma has raised HK$410m ($53 million) in a Hong Kong IPO according to a deal term sheet, as trendy biotech listings prevail amid social tensions.
The developer of cancer and hepatitis treatments has sold 12.2 million shares, or 5.9% of the enlarged share capital, at the top of the HK$32.20 to HK$34.20 indicative range. There is also a greenshoe option of 1.8 million shares.
Sino Biopharm has come in as a cornerstone investor with a $20 million allocation.
Ascentage Pharma is the 16th Hong Kong IPO to launch this month – double the number of listings in September.
This respite from a market downturn is likely only temporary. While the number of IPOs has increased, overall deal value is only a quarter of what it was last month according to Dealogic data.
Even if the city's fractured social landscape shows little sign of healing, biotech firms are still being lured to float on the HKEX.
They have benefitted from HKEX listing regime reforms which have made Hong Kong the second-largest biotech fundraising centre in the world and second only to the US, according to Dealogic.
To qualify under what is called Chapter 18A, a biotech firm must develop at least one core product, in addition to one or more patents. The company must also prominently disclose the potential failure of its products to investors from the beginning.
Since it launched in April last year, 15 biotech firms have taken advantage of the regulatory shift and raised about $6.2 billion, the HKEX said in September. More than half of these companies have not made any sales, and this includes Ascentage Pharma.
Ascentage intends to use the majority of proceeds raised to finance the clinical trials of five drugs being developed to treat haematologic malignancies in cancer patients. Most of the remaining capital will be used to commercialise leukaemia therapy HQP1351 in China and the US.
HQP1351 is the sixth Ascentage Pharma treatment to receive FDA clearance for clinical trials in the US based on data collected from tests on subjects in China. According to the prospectus, it is the only therapy developed by the firm to move beyond early clinical development.
While promising, the long-term viability of HQP1351 – and Ascentage – is uncertain. “The company is still in the early stages of development hence it has significant R&D risks relative to other biotech listings in Hong Kong,” analyst Ke Yan of Singapore-based intelligence firm Aequitas Research wrote on Smartkarma.
Back in June, Yan also noted that the firm was far removed from any possibility of commercialisation; its success hinges on bringing HQP1351 to market.
Bank of America Merrill Lynch and Citi are joint sponsors of the IPO and joint global coordinators alongside Huatai.