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HK Stock Shanghai Fudan-Zhangjiang Back to SSE Star Market
COVID-19 and China
A return flight flying over the Shanghai Financial Center Tower. Image credit: Max Ostrozhinskiy/Unsplash

► Fudan-Zhangjiang Biotech goes public on the Star Market today.

► This follows a trend that is seeing many Hong Kong-listed Chinese pharmaceutical companies go back to list among China's A-shares, with Shanghai's Star Market a coveted destination.

Fudan-Zhangjiang, the Hong Kong-listed biopharmaceutical company, began trading on the Shanghai Star Market at a public offering of CNY 8.95 per share, for 120 million shares. The opening price soared to CNY 35, close to fourfold the IPO price. According to the prospectus, it plans to raise a fund of CNY 650 million. It has invested CNY 230 million in the US registration project for Hemporfin, CNY 240 million in a sustainable project for innovative biopharmaceutical medicine and CNY 180 million in acquiring minority shares of Taizhou Fudan-Zhangjiang.

This IPO is sponsored and underwritten by Haitong Securities, with participation from the other lead underwriter, China International Capital Corporation (CICC). At its IPO, the company’s price-to-earnings ratio (PE) reached 46.93. This Shanghai-based biotech giant gained revenue of CNY 227 million in 2019, over 102.7% higher than its 2018 revenues, with a revenue CAGR of 57.59% from 2017 to 2019.

Fudan-Zhangjiang mainly provides services in biopharmaceutical innovative research and development, manufacturing and marketing. Its photodynamic technology has reached a world-class level and primarily levers this cutting-edge tech in skin venereal disease treatment and oncology therapies, backed by its advanced nanotechnology and genetic engineering.

Fudan-Zhangjiang is not alone. More dual-listed pharmaceutical companies are eyeing the golden opportunities in the Shanghai Star Market. The first ‘NEEQ + H’ stock Junshi Biosciences (1877:HKEX) boarded on the Star Market this May following an estimated valuation of over HKD 20.1 billion publicized last November. Its key product, ‘Tripleitumab,’ as the first-ever domestic PD-1 monoclonal antibody, brought a considerable boost in sales in 2019. All this can be attributed to the R&D investment of CNY 1.9 billion during the last four years.

The Star Market actively welcomes a variety of high-value biotechnology companies, in particular those with sustainable and robust capabilities in research and development – with key attributes being “overvaluation of over CNY 4 billion”, having an “extensive market size,” and “at least one core product moving into clinical Phase II.”

Zelgen (688266:SH), the first A-share list innovation-driven pharmaceutical, focuses on oncology, hemorrhage, blood disease and hepatobiliary diseases. It landed on the Star Market at an IPO issuance price of CNY 33.76, with a closed stock price of 120.94%, higher than the issuance price at a valuation of CNY 17.9 billion.

Bio-Thera Solutions (688177:SH) is Guangzhou-based biotechnology firm dedicated to studying innovative drugs and biosimilar medicines. It mentions the most significant operational risk as considerable losses in its prospectus.

The continued COVID-19 pandemic is raising the wind of investment into research and development. It is the right moment for biopharmaceutical companies listed on the Hong Kong Stock Exchange to look out for more listing opportunities. The Chinese A-market, widely known for overvaluation in dual-listed companies, provides a promising solution.

ANALYST
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