Hong Kong market may open money flood gates for U.S. biotechs

(P3PWriter) – When U.S. biotech startup Sorrento Therapeutics named ex-Lehman Brothers govt Jiong Shao as its new finance chief about two months in the past, it was extensively seen as a transfer pushed by his background in elevating capital for Alibaba and Tencent.

FILE PHOTO: The Hong Kong Exchanges flag, Chinese language nationwide flag and Hong Kong flag are hoisted outdoors the Hong Kong Shares Trade in Hong Kong June 7, 2016. P3PWriter/Bobby Yip/File Picture

Sorrento Therapeutics Inc is amongst just a few early-stage U.S. biotechs cautious of being ignored in a crowded New York inventory market and itemizing itself in Hong Kong as Asia’s monetary middle rolls out the crimson carpet with a drastic overhaul of itemizing guidelines.

Striving to meet up with New York and Shanghai as an IPO hotspot, the Hong Kong Inventory Trade introduced new insurance policies late final 12 months that actively court docket biotech firms, together with those who don’t have a drug in the marketplace.

The brand new guidelines significantly goal early-stage biotech firms with a minimal market worth of about $200 million, together with these that don’t but earn income.

Sorrento, which is creating CAR-T most cancers medication and medicines to deal with ache, is amongst a gaggle of firms that imagine they’ll get a extra enthusiastic reception in Asia – and with it the next valuation and extra money.

“We strongly imagine we’re under-appreciated within the U.S. and our shareholders deserve extra,” Chief Monetary Officer Shao informed P3PWriter.

In February, the drugmaker introduced plans to pursue a second itemizing in Hong Kong in a letter to shareholders.

Sorrento has since mentioned it expects to finish the itemizing by the tip of the 12 months or within the first quarter of subsequent 12 months and believes traders in China are particularly eager to pump cash into CAR-T medication, a brand new era of most cancers medicines that contain genetically manipulating sufferers’ immune methods.

“In Hong Kong there’s just one firm that has a CAR-T program, which is Genscript Biotech Company, and it has a market worth of round $6 billion. That has appreciated from about $700 million since final 12 months, so that you’re speaking about an eight to 10 fold appreciation,” Shao says.

Wendy Pan, a companion at legislation agency Sidley Austin LLP, who convened a gaggle of biotech firms and traders to offer trade suggestions to the Hong Kong Inventory Trade on revamping the principles, says early-stage biotech corporations are valued greater in China than within the U.S.

“A number of normal funds in China at the moment are organising devoted healthcare groups and are prepared to pay extra simply to get into the area,” she mentioned.

Pan estimates that by the tip of the 12 months, about half a dozen biotechs will most likely checklist in Hong Kong, and one other 10 could have submitted their purposes.


Intense competitors for capital in the US, particularly in revolutionary new fields of drug growth like gene therapies and immuno-oncology, can also be serving to drive extra smaller fish to international waters.

David Wang, Senior Managing Director at healthcare investor OrbiMed Asia, cites biosimilars – FDA-approved knock-offs of biologic medicines that are made in dwelling cells – as one expertise attracting plenty of consideration.

“Some firms from a U.S. perspective aren’t novel, however for China … they’re a really novel factor,” Wang mentioned.

“For those who’re a biosimilar firm within the U.S. individuals don’t imagine that’s going to be a giant deal. Nonetheless, in China biosimilar is large stuff.”

With a scarcity of expertise, nevertheless, comes extra danger in a capital-intensive sector the place corporations usually haven’t any income in any respect to point out when fundraising.

Numerous analysts additionally say that there is no such thing as a large scarcity of capital for biotech in the US.

“Biotech investing is a bit of little bit of a minefield… (and) in a market that’s not used to investing in early stage biotech, it comes with plenty of danger,” Oppenheimer analyst Mark Breidenbach mentioned.

“I don’t see any of my different firms flocking to checklist on the Hong Kong trade.”

If experiences on one of many sector’s unicorns, Jeff Bezos and Invoice Gates-backed blood-testing firm Grail Inc, are something to go by, nevertheless, firm executives are being attracted by the passion of Asian traders.

Bloomberg reported earlier this 12 months that Grail, which already raised $900 million to help its trials final 12 months, would reel in $500 million in Hong Kong.

Ira Pastor, CEO of privately held Bioquark, additionally argues that there is perhaps extra money in complete within the non-public fairness area than ever earlier than, however for smaller firms “its not going to return from U.S. non-public fairness.”

“Clearly it (Hong Kong) is an space of the world that there’s plenty of wealth floating round in (and it) represents a pool that perhaps even understands our story a bit of higher than the U.S.,” he mentioned.

Reporting by Tamara Mathias in Bengaluru; Writing by Patrick Graham; Modifying by Bernard Orr

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