Reform year of medical IPO: should we go to Hong Kong or NASDAQ?

After the new rules of Hong Kong stock exchange were issued in 2018, four unprofitable biotechnology companies have been listed successively, and the performance of the first three (Geli pharmaceutical, Baiji Shenzhou and Hualing pharmaceutical) was not satisfactory at the beginning Too many people want to know whether the attitude of investment institutions towards the new rules of HKEx is too radical? Are the barriers to entry too low? Is Hong Kong's capital market ready? More people want to find out from the mouths of investment bankers with Wall Street backgrounds who have joined biotech companies to become CFOs in recent years At the summit of medical and life science and technology, there were many people competing with each other or expressing their own opinions on such important issues as whether the rules formulated by the Hongkong stock exchange were too low, and whether enterprises should go to Hong Kong or NASDAQ after listing Here are some core shared content Is the entry rule set by HKEx too low? Zhang Li, a partner of Dinghui investment, said, "first of all, the reason why people think the threshold is low is that the comparison is more based on a shares A-share is a review system; NASDAQ does not have such a review system It is a capital driven market economy So in my opinion, it is reasonable that the Hong Kong market has done something different from a shares Throughout the market, at such a time node, not only Hong Kong stocks, including a shares and US stocks are very volatile Such market changes are affected by the overall macro-economy, such as deleveraging The effect of deleveraging appeared in the capital market two years ago, which made the real economy less and less investment Two years ago, the signal has been released, and the market as a whole is expected to decline However, most investors in Hong Kong stock market are institutional investors Under the rational investment of institutional investors, the value will surely return " There is at least one consensus among investors that "health" is always a sunrise industry Even though it seems that the performance of Companies in Hong Kong's biomedical sector in the secondary market is not so ideal, as long as the biomedical enterprises have investment value, the capital market will certainly provide a channel Shao Chunyang, a partner of JUNHE law firm, has handled the IPO projects of two biomedical enterprises He said, "the examination and approval of the research and development of biomedical enterprises by the stock exchange is relatively strict, including the patents and intellectual property rights of the research and development products Not all enterprises can be listed casually For example, in the research and development of a product, is it necessary to develop multiple product lines? Once an enterprise opened a lot of product lines, the money in front was used up, the money in the back could not be received, and the money in the follow-up could not be financed, resulting in difficulties in the operation of the enterprise Enterprises should consider comprehensively how much financing is needed at what stage, how to finance, when the value of product R & D can be realized and when the profit can be realized " Li Bin, senior partner of Huiqiao capital group, who participated in the investment of two listed innovative pharmaceutical companies (Baiji Shenzhou with a market value of US $7.6 billion and Hualing pharmaceutical with a market value of HK $8.3 billion), has both primary market and secondary market experience His attitude towards the Hong Kong market is, "as a newly opened market, no one knows where the bottom line of the Hong Kong market is Whether Hong Kong or the mainland, the boundary between the primary market and the secondary market was blurred at the beginning of the formation of this market All of you are talking about whether the Hong Kong market is ready or not, whether the market threshold is too high or too low, are just the ideas of the primary market circle " Compared with the projects in the U.S market, the quality of the projects in the domestic primary market is uneven, which naturally leads to the situation that the valuation of many companies is falsely high Wang Fei, manager of Jinglin asset fund, once worked as a secondary market in the United States His feeling is that "compared with China, biotechnology listed companies in the United States are much cheaper and better in corporate governance After the new rules of the Hong Kong Stock Exchange come out, companies that only complete the clinical phase can also be listed, which is a neutral event in itself However, if the threshold is set at the level of completing clinical phase III, objectively speaking, few companies in China can be listed The transition from primary market to secondary market needs a process It may take more than one year from the completion of primary market investment to the next round of financing The intermediate valuation change has been upward in the past few years, so there is no possibility of losing money However, in the current secondary market of biomedicine, the situation is not optimistic Subsequent entrants need to be considered carefully " How long will it take for the Hong Kong market to recover? Going to Hong Kong or NASDAQ? In the secondary market, Hong Kong is in a disadvantageous market environment Hong Kong's Hang Seng Index has fallen by about a quarter in the past nine months From a longer time line, the index of Hong Kong's stock market today is lower than ten years ago - compared with more than 20 times of NASDAQ, nearly 30 times of A-share, and the average PE of Chinese companies in the Hang Seng index is only 11-12 times The problem of valuation hanging upside down is frequent, and CFOs agree on it - the market is changing, and this is only a temporary situation Many primary market investors rush into the biomedical market frantically and constantly increase the market value, which makes it easy to hang upside down in the place where the primary and secondary markets connect (IPO) Billy Cho has more than 20 years of experience in the pharmaceutical industry and is currently worth $1 billion It will be commercialized this year With regard to the phenomenon of upside down market valuation, Billy Cho has his own opinion: "in the past 20 years in the United States, no matter what aspect of biological innovation, it has a lot to do with the support of capital Investors are long-term They are all for these companies to grow with themselves Now in Greater China, it's a bit like NASDAQ 30 years ago We don't know how to judge a valuation Now more and more capital and talents come to China I have full confidence in the future Chinese market Valuation ultimately depends on the ability to generate cash flow, so a good, functioning ecosystem can obtain capital support from the public and private " Before joining Hualing pharmaceutical, Lin Jiecheng worked in Bank of America Merrill Lynch Securities Company Asked whether listed companies should go to Hong Kong or NASDAQ, Lin Jiecheng said, "investors are the most impatient group of people As a new stock market, there will be a new growth worry The specific situation should be analyzed in detail Each portfolio is different, and the management and control methods of different fund managers are also different Hualing pharmaceutical chose to list in Hong Kong, the main consideration is that we sell drugs and pharmaceutical markets in China " In this regard, as the first stock after the new rules of Hong Kong stock market, Geli pharmaceutical has been an overseas structure since the first day of establishment, and its goal is to list on NASDAQ However, after the new rules came out, Song Li changed its strategy Wu JINZI, founder and CEO, changed the listing place in line with Lin Jiecheng's thinking "As a company based in China and going to the world, Geli's market is mainly in China, so from the perspective of capital, listing in Hong Kong is more beneficial to the company." Tan Bo, CFO of Sansheng pharmaceutical, has experience in both NASDAQ and Hong Kong Sansheng pharmaceutical's decision to withdraw from Nasdaq and choose Hong Kong stock market was more difficult about five years ago At that time, PE of A-share market reached 70 times, much higher than that of Hong Kong stock market When Sansheng was delisted, its market value was close to 400 million US dollars At present, its market value is more than 3 billion US dollars In the face of the market value of Sansheng has increased more than eight times in five years, Tan said, "Sansheng has been listed on NASDAQ in the United States for more than five years, with the highest 20 stocks and the lowest 5 stocks American investors are unfamiliar with China's policy environment, which results in Sansheng's valuation on NASDAQ is lower than that of A-share Of course, this also has the influence of China equity and other aspects In this case, we still choose to go back to places that investors are familiar with It was 2015, and Hong Kong had a great opportunity, so we went public " Then, if zaiding pharmaceutical, which was listed on NASDAQ in 2017, is likely to go back to Hong Kong for listing, Billy Cho's reply is, "it's hard to tell When we did IPO, we had no choice but NASDAQ Any choice is a double-edged sword On the one hand, it is a very mature market and a rising emerging market Our P / E ratio will be relatively high in Hong Kong But our partnership structure is very consistent with Nasdaq's requirements for corporate governance transparency It is wise for us to choose Nasdaq for zaiding pharmaceutical "