Hua Medicine files for HK IPO under biotech fastrack

No details are available as to the size and pricing of the offering. Hua’s filing comes a month after Ascletis announced plans to list. While lawyers and bankers say they are receiving a lot of inbound inquiries from Chinese biotech companies that were previously targeting the US market, it is thought that no more than a dozen are in a position to consider IPOs.

Arch Venture Partners is the largest shareholder in Hua, with 15.07%, followed by Fidelity International – which has invested in the business through several entities, including Eight Roads Ventures and F Prime Capital – and Venrock Associates on 12.97% and 12.46%, respectively. All three took part in the company’s $50 million Series A round in 2011, alongside WuXi PharmaTech Corporate Venture and Sino-Alliance International.

Wuxi Apptec, the parent company of Hong Kong-listed WuXi Biologics, has an 8.92% stake in Hua. The group now makes VC investments as 6 Dimensions Capital, following the merger of WuXi Healthcare Ventures and Frontline BioVentures last year. The family of WuXi founder Ge Li also holds 3.37%.

Ally Bridge Group led a $25 million Series B round for Hua in 2015, with participation from new investors Frontline and TF Capital. Harvest Fund Management – which owns 7.91% of the company – led the Series C in 2016. The Series D and E rounds, which came to $117.4 million, featured Blue Pool Capital, GIC Private, AVICT Global, 6 Dimensions, Ping An Ventures, Mirae Asset Financial Group, and K11 Investments. Most of the existing investors re-upped in each of these rounds.

Hua has generated negligible revenue in recent years – most of it from government subsidies in support of R&D programs – and its net losses came to RMB362.4 million ($56.6 million) in 2016 and RMB280.7 million in 2017. However, the company has two treatments scheduled to finish phase three clinical trials next year. Other products are at the non-clinical stage.

Almost all these treatments focus on diabetes. Hua notes in its prospectus that there were 453 million diabetics globally by the end of 2017, 95% of whom had type two diabetes. In China alone, 120 million people suffer from the disease. Frost & Sullivan projects the China anti-diabetics market will grow from RMB51.2 billion in 2017 to RMB173.9 billion by 2028.

Even though Hong Kong has opened the door to zero revenue biotech companies as part of a wider effort to attract more listings from mainland China, there are still safeguards to ensure only high-quality businesses make the cut.

Candidates must have a minimum market capitalization of HK$1.5 billion ($191 million), enough working capital for at least 12 months, and secure the backing of a sophisticated investor – such as a PE firm specializing in healthcare or a major pharmaceutical player – at least six months before the IPO.

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• Topics
• Greater China
• Healthcare
• IPO
• China
• Hong Kong (China)
• Eight Roads
• 6 Dimensions Capital
• Ally Bridge
• Harvest Fund Management
• GIC Private