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Should the industry rejoice or think carefully about the easing signals in the capital markets?
In the sluggish stock market atmosphere in 2022, the Hong Kong Stock Exchange made a
move.
On October 19, the Hong Kong Stock Exchange issued a consultation paper proposing to expand the existing listing regime in Hong Kong to allow special technology companies to list in
Hong Kong.
As early as a month ago, the market had relevant news that the Hong Kong Stock Exchange was planning a new 18C charter plan to lower the revenue threshold of large technology companies in artificial intelligence, new materials, chips and other fields, making it easier for them to meet the listing conditions
.
Now that the boots have landed, many investment bosses must have breathed a sigh
of relief.
Compared with the technology companies that ushered in the listing "gift package", the biopharmaceutical industry is still struggling with the difficulty of financing in the capital market and the pain of high drawdown, and on October 19, the benchmark US stock NASDAQ Biomedical Index (XBI) fell by nearly 5%, which is undoubtedly another negative signal
for biotech companies.
Can the trough period of pharmaceutical companies also be solved by the capital market loosening valve? If Hong Kong stocks are already performing like this, can a hotter and more discussed capital market, such as Singapore, make the industry warm up in the cold winter?
01 With the expansion of the Hong Kong Stock Exchange, can the "trapped" medical stocks turn over?
With the expansion of the Hong Kong Stock Exchange, can the "trapped" medical stocks turn over? Before the arrival of this wave of listings, the last "highlight period" of the Hong Kong Stock Exchange was in 2018, which was also a year
in which the biomedical industry sprung up in the capital market.
Li Xiaojia, former Chief Executive Officer of HKEX, once said, "The development of biotechnology enterprises is generally facing great challenges with long R&D and approval cycles and large capital needs, and Hong Kong hopes to give full play to the advantages of the capital market to promote the great development of the biotechnology industry and provide investors with new investment opportunities
.
" ”
In 2018, HKEX amended the Listing Rules and introduced Chapter 18A to allow unprofitable biotech companies to list.
Since then, the Hong Kong Stock Exchange has quickly become the second choice
of a large number of biopharmaceutical companies in addition to US stocks.
In particular, the listing of star pharmaceutical stocks such as BeiGene and Innovent Biologics has attracted the attention of the entire pharmaceutical investment market, and a large number of pharmaceutical companies have listed in Hong Kong, raising a total of more than HK$
100 billion.
In addition, many pharmaceutical companies have begun to adopt the "A+H" dual listing model to contact international funds and a wider investment community through the Hong Kong market, solve financing needs and deepen their international visibility
for business expansion.
By 2021, among the 20 18A IPOs, more than half of the biopharmaceutical companies have experienced a first-day breakdown
.
Taking stock of the changes in Hong Kong stocks of pharmaceutical companies in 2022, as of October 2022, more than 60% of the 13 pharmaceutical companies listed in Hong Kong had stock prices below the issue price, and the largest decline was medical device company Runmed, which lost more than half
of its market value.
The share price is as of October 20, 2022
Capital is always pursuing greater profits and smaller risks, and the significance of the Hong Kong stock market for fundraising for innovative biopharmaceutical companies has been broken, which has undoubtedly caused a wave of market panic to spread
.
"I don't think there will be any significant improvement
in the short term.
" On the issue of liquidity, Wu Ming, a medical industry investor, said that as an international market, the Hong Kong market is affected by international capital, Sino-US relations and other factors, and many overseas investors have previously judged that "risks are increasing"
in China.
In this case, will Singapore, which has been increasingly hotly discussed since 2022, be the next "racecourse" to bring pharmaceutical companies out of the current valuation dilemma and quickly recover?
02 Pharmaceutical company Plan B, next stop in Singapore?
Pharmaceutical company Plan B, next stop in Singapore? Singapore is seen by many as the place where the
next "18A" was born.
From Guangzhou Baiyun Airport, Singapore, dubbed "Po County", can be reached in just 4 hours, and in the first half of 2022, investors from all walks of life flocked to this "pearl" city
in Southeast Asia.
There have been rumors that Hong Kong's financial assets and dominant position are shifting to Singapore, especially after the listing of new energy vehicle NIO on the SGX, the SGX's popularity has grown
day by day.
As Singapore's originally strong field, biomedicine has also attracted the attention of the
pharmaceutical industry.
Xie Caihan, chief representative of the Beijing representative office of the Singapore Exchange, once said that technology, medical care and new energy-related industries are more popular
in the Singapore capital market.
As one of the world's four largest free trade ports, Singapore is the only developed country in Southeast Asia and is also regarded as a "bridgehead" covering the entire Southeast Asian market, from which it takes two hours to reach Jakarta, the capital of Indonesia, or Ho Chi Minh City
, Vietnam.
Since 2021, French pharmaceutical company Sanofi, German vaccine company BioNTech, Moderna of the United States, Sinovac and other pharmaceutical companies have settled in Singapore, using this place as a fulcrum to enter the Asian market and radiate Southeast Asia and Australia
.
He Xinqian, head of the Shanghai representative office of the Singapore Economic Development Board, once told the media that today, there are more than 24,000 production personnel and more than 2,000 researchers in Singapore's
biomedical industry.
For the biopharmaceutical industry, Singapore's vision is to achieve a diversified innovation ecosystem for players in various corporate sectors, from large biopharma to start-ups, by 2030, to become the preferred location for innovative therapies and new models, and to further strengthen Singapore's medium- and long-term R&D capabilities
.
In this vision, Chinese biopharmaceutical companies will be an important part
.
Wu Ming believes that as far as the current situation of the exchange is concerned, Singapore's traditional secondary market is small in scale and cannot be compared
with the Hong Kong Stock Exchange.
Originally, there were very few Chinese companies listed in Singapore, and even after listing, they basically failed to get much support
.
It cannot be ignored that at present, the primary market investment, especially the US dollar fund, is running to Singapore, and then from Singapore to dock some Middle East or Asia, including some Chinese Chinese mainland some funds
overseas.
In the view of Wang Cheng, a pharmaceutical investor who has been focusing on the primary market for a long time, the Hong Kong market has a stronger advantage than the "upstart" Singapore
.
He told E drug managers, first of all, Singapore has always been regarded as a springboard for Asia to the international market, the phenomenon of speculators has just appeared this year, compared with Hong Kong's pharmaceutical investment environment, Singapore's PE, VC atmosphere is not strong, everyone is more on the sidelines, secondly, Singapore's biggest problem is that the total population is small, the secondary market volume is smaller, the trading volume is less than 1/3 of the Hong Kong market, counting on it as an "antidote" for pharmaceutical stocks, I am afraid it is unrealistic
.
Wang Cheng said that the biggest confidence behind Hong Kong is that it is expected to be built into a global offshore RMB trading center, and under this premise, Singapore is more suitable as an alternative for asset allocation and will not shake Hong Kong's position
in the financial market.
03 The pharmaceutical industry is not only short of money
The pharmaceutical industry is more than just short of money Whether it is the Hong Kong Stock Exchange or the Singapore Stock Exchange, as a member of the capital market, it represents a broader fundraising channel
.
Under the "cold winter" of the industry, it is also the help
that the industry is looking forward to.
Yang Bingwen, a senior practitioner in the pharmaceutical industry, is quite worried about this, she believes that this round of cold winter formation is the product of the superposition of economic cycles, technology cycles, and policy cycles, which China and the United States are experiencing, but the industry is also clear that the killing valuation under this cold winter is that the bubble blown up by the capital market for the pharmaceutical industry is too large, and it is being rationally reconstructed, which is still in progress and is not over
.
Therefore, when capital, as a financial instrument, is a catalyst for adjusting the development of the industry, will it be harmful to the sustainable and rational development of the industry? She asked the
E drug manager.
Li Yishi, a senior partner at Haoyue Capital, once said that in a healthy biopharmaceutical industry environment, more companies should not survive because they can't raise money, but should be like the US market, when your molecules enter the clinic and do not get better data, investors and company executives think that there is no need to push the pipeline back, and the company will naturally dissolve.
But in the current Chinese market, the industry understands this logic, but it still takes time
for entrepreneurs and investors to accept it.
From the perspective of the progress of global R&D and marketing of innovative drugs, only about 12% of the drugs that enter the clinic can be finally approved for marketing, and many drugs stop at clinical phase
II every year.
That is to say, more than 90% of Biotech products can not be approved in the end, and some small companies with only a single product, if they lack the core technology of "can fight", the end is bound to die
.
In Yang Bingwen's view, as a long-cycle industry, the ups and downs of the medical industry do not depend 100% on which capital market to list, but whether pharmaceutical companies have innovative and differentiated products and suitable development strategies
.
In fact, there are many companies in the pharmaceutical industry that have been privatized and relisted after listing in the US stock market, Singapore and other places due to poor liquidity and low valuation, and only WuXi AppTec
has achieved a bright turnaround.
At a time when the capital market is constantly fluctuating, it is important to pay attention to the "barometer" of the capital market, but it is more important to consolidate internal strength
.
"Survival, involution, internationalization, layoffs, differentiated innovation, R&D tide and capital winter, collective procurement, innovation and transformation of traditional pharmaceutical enterprises, new cycle of the industry, domestic substitution", previously in the "2022 Top Ten Keywords in the Pharmaceutical Industry" poll held by E Pharmaceutical managers, the above ten words seem to reveal the urgency and call of Chinese pharmaceutical innovation enterprises to break the situation and get out of the cold winter, and also reflect their tenacity in continuous exploration
.
While waiting for Spring and Jingming, it is also the time when China's pharmaceutical innovation has entered a new cycle, and it is urgent to sort out the wind, reintegrate and reshape the
ecology.
It's time to sit down with all parties in the industry, reflect and share, talk about challenges, talk about solutions, cross courage, peek at the frontier, and explore ecological development strategies
in the new cycle.
(At the request of the interviewee, Wu Ming, Yang Bingwen and Wang Cheng are all pseudonyms in the article)
