IPO backup plan

Temasek-backed Transcenta mulls HK-China dual IPO listing

After announcing a $100 million Series B+ funding, the biotech company’s CEO tells FinanceAsia it is now in full IPO preparation mode with Hong Kong as its preferred destination. However, a dual listing is not out of the question.

It’s been almost two years since the Stock Exchange of Hong Kong (HKG) permitted the public listing of biotech issuers without a track record of profitability. To date, 14 companies in that sector have taken the plunge, of which nine listed in 2019.

Another one to the list looks very likely to be Transcenta. The Suzhou-headquartered biotherapeutics company, which has yet to turn a profit but has raised $230 million in private funding, is aiming for a Hong Kong IPO in around 18 months.

“Hong Kong will be our first choice for IPO,” CEO Xueming Qian told FinanceAsia in an exclusive interview. Qian said he was focusing his time now on building up a fully fledged investor relations team to support the push and conducting interviews to bring in a chief financial officer.

“We are talking to candidates now. We also have some thoughts on underwriters for the listing,” Qian said, adding that he had employed J.P. Morgan to warm up overseas investors to Transcenta’s story.

IMPRESSIVE BACKERS

Qian’s comments come on the back of a successful $100 million Series B+ round of fund raising, led CR-CP Life Science Fund and Fortune Capital and announced last week (January 8). New investors included Epiphron Capital, CCT China Merchant Buyout Fund, and China Equity Group. China Renaissance acted as the exclusive advisor on the deal.

The company already boasts and impressive roster of existing shareholders, including Lilly Asia Ventures, Temasek, Hillhouse Capital, Teng Yue Partners, Sequoia Capital China, and ARCH Venture Partners. The most recent round of funding will be split between developing its product suite and preparation for an IPO, Qian said.

For Chinese biotech firms aiming for global business, Hong Kong is a sensible first option. Although a listing on the Nasdaq – which also allows for non-profitable companies to get on the bourse  – is not out of the question, Qian expressed a preference to be closer to where the business’ home base is.

DUAL LISTING CONSIDERATIONS

Qian also said that while Hong Kong was clearly the primary target, a potential dual listing in China was on the cards. Key investors such as Fortune Capital is testament to that thinking as they have experience bringing companies to the IPO stage in both Hong Kong and China. “[They] can help us to aim for dual listing in both Hong Kong and the Chinese domestic market,” Qian said.

A dual listing makes sense as a defensive play. Biotech companies now trading on the Hong Kong bourse are having a mixed time of it. For example, CanSino Biologic’s stock price has almost doubled since its IPO in March last year (HK$58), while Ascletis is now trading only about one-third of its IPO price (HK$2.93).

Biotechnology is a high-risk sector and, according to HKG data, it’s mostly institutional investors who are prepared to gain exposure to it. Such investors tend to give a lower valuation to biotech companies. Comparatively, companies who have listed on China’s STAR Market on average can double their stock price on the first day of the IPO, according to public data obtained from the Shanghai Stock Exchange.

“As a fully integrated company with research and manufacture ability, Transcenta meets the taste of some investors in Europe and the US as we can balance the risk,” Qian said.  

TIMING

The exact timing of the IPO will be largely decided by when the company will reach its clinical milestone, Qian said. Transcenta is developing the second-generation antibody for Claudin 18.2 protein isoform and bifunctional antibody of PDL1-TGFβ. Both products can be used to treat cancer. The company is also developing Blosozumab in China, a product in-licenced from Eli Lilly to cure osteoporosis.

Transcenta was founded in January 2019 with the merger of HJB and MabSpace. HJB was focused on bioprocessing technology that accelerates manufacturing, while MabSpace provides discovery, clinical-stage research for biologic medicines.

¬ Haymarket Media Limited. All rights reserved.

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