Another Profitless Biotech Firm to List in Hong Kong

Shanghai Junshi Biosciences Co. Ltd., a money-losing biopharmaceutical company, plans to raise up to HK$3.24 billion ($414.61 million) in a Hong Kong initial public offering (IPO) scheduled later this month.

The IPO makes Junshi Biosciences the latest company to raise funds under the new listing rules that allow biotech startups to list before they see a profit or revenue. Facing competition from financial hubs in Singapore and on the Chinese mainland, Hong Kong instituted new rules on April 30 that allow biotech firms to list on the city’s exchange even if they have yet to make a profit. Authorities changed the rules to make Hong Kong a more-attractive place to list for biotech startups, which often take years to begin showing a profit.

Junshi Biosciences, with 13 biologics in its development pipeline, manufactures immuno-oncology drug candidates and drugs for metabolic diseases, inflammation and autoimmune diseases, as well as neurologic diseases, according to its prospectus. Biologics are medicines made from living organisms and their components.

Junshi Biosciences has set a price range of HK$19.38 to HK$20.38 per share, which would allow it to raise up to HK$3.24 billion if the IPO prices at the top of its range, according to the prospectus. The company’s stock is set to start trading on Dec. 24.

On the mainland, Junshi Biosciences is currently listed on the Third New Board, China’s largest over-the-counter stock-trading platform operated by the National Equities Exchange and Quotations (NEEQ), on which it has a valuation of about 12.8 billion yuan ($1.85 billion). Once it lists in Hong Kong, Junshi Biosciences could see its market cap rise to 12.9 billion yuan to 13.6 billion yuan.

The company, like other biotech startups listed in Hong Kong, has reported no profit or sales revenue. From 2016 to 2017, it did not commercialize any drugs and therefore did not record any revenue from drug sales. Most of its revenue, which fell 70% last year to 1.15 million yuan, was earned by providing consulting services.

In 2017, the company lost 321 million yuan, 1.44 times its loss in 2016. In the first half of this year, it reported a loss of 273 million yuan, 76.5% more than in the same period in the previous year.

Junshi Biosciences has several drug products scheduled for commercial launch in 2019 and 2020, according to its prospectus.

The startup has followed in the footsteps of other Chinese biotech firms that have listed in Hong Kong. WuXi AppTec Co. Ltd., the hot biotech firm whose stock once rose more than sixfold after its Shanghai IPO in May, aims to raise another $1 billion in Hong Kong, where its stock is set to start trading on Thursday.

Some of these companies, however, have suffered sharp drops in their stock prices since listing. For example, Ascletis Pharma Inc.’s shares have plunged by more than 50% since its IPO in July.

Contact reporter Timmy Shen (hongmingshen@caixin.com)