Innovative pharmaceutical companies are vying for IPOs on the Hong Kong Stock Exchange: competing for BD tickets and riding the wave of new regulations.
Text | Hai Ruojing
At the entrance of the Hong Kong Stock Exchange, there are queues of innovative pharmaceutical companies waiting to go public.
On September 28, Jingyin Pharmaceutical, a small nucleic acid pharmaceutical company, submitted its prospectus for a Hong Kong IPO. Its post - investment valuation in the previous round was $250 million. In the two weeks from September 15 to now, six innovative pharmaceutical companies, including Aikebaifa, Xinyuansu Pharmaceutical, and Xianweida, have joined the sprint for a Hong Kong IPO.
Since Ying'en Biotech went public in April this year, the once - dormant Hong Kong innovative drug sector has been activated by high - frequency BD transactions and a surging IPO boom. The public offering parts of the new shares of Weilizhibo and Yinnuo Pharmaceutical have received over 3,000 times of subscriptions. Their stock prices doubled or tripled on the first day of listing, reversing the embarrassing situation of pharmaceutical companies breaking their issue prices upon listing in Hong Kong in the previous three years.
"We'll take it one step at a time and pray that the market can last," said the IR head of a pharmaceutical company that recently submitted its prospectus. Pharmaceutical companies waiting to go public generally hope to seize this wave of listing opportunities.
"Now everyone feels very urgent. Because the market is hot and the issuance window is rare, no one is sure what the market will be like when their own company passes the hearing," said Liu Yiming, the managing partner of the Shanghai office of Kobre & Kim. "In addition, the current horizontal competition in the innovative drug field is also quite fierce. In the metabolic field, for example, several pharmaceutical companies developing GLP - 1 targets have gone public, and several others are in the process. The number of secondary - market investors who can understand innovative drugs in the market is limited. If they invest in a competitor, they may not have the appetite to invest in another company in the same track."
Therefore, everyone is racing against time. Entrepreneurs are visiting the Hong Kong Stock Exchange in groups to learn about the 18A regulations and the latest capital policies; many investment institutions are organizing closed - door meetings on the theme of Hong Kong IPOs to try to speed up the listing process of their invested companies; service providers such as law firms and investment banks are also in their "peak season" and are working around the clock before submitting prospectuses.
Change in Valuation Logic, Biotech Companies Accelerate Their Sprint
The enthusiasm of innovative pharmaceutical companies to list in Hong Kong in 2025 is comparable to the two historical small peaks in 2018 and 2021. "I think it's even busier now than before. There are often several projects to submit prospectuses at the same time, and we'll have meetings with brokers, auditors, etc. for several consecutive days. The extremely high - intensity work has also helped us build a fighting friendship," said Liu Yiming.
Many innovative pharmaceutical companies currently in the sprint have distinct characteristics. Different from the innovative pharmaceutical companies with valuations of tens of billions in 2018, their post - investment valuations in the last round are mostly concentrated between 3 billion and 5 billion yuan. For example, the valuation of Yaojieankang in the last round of financing before listing was 4.59 billion yuan, and the valuations of Jinfang Pharmaceutical and Xianweida Biotechnology in the last round were 3.1 billion yuan and 4.9 billion yuan respectively.
The change in the valuation range reflects the change in the narrative logic of the capital market. Initially, the Hong Kong Stock Exchange introduced the 18A rule to attract companies with new drug R & D capabilities to list and raise funds, such as Innovent Biologics and Junshi Biosciences. At that time, the mainstream practices were to do fast follow in international mature targets or treatment fields; or to introduce assets from overseas through license - in for development in China, such as Zai Lab and CStone Pharmaceuticals.
Previously, investors preferred the stories of "platform companies" and "Big Pharma". However, the complete chain of innovative drug development is too long. For start - up companies to independently complete the R & D, production, access, sales and other links, the input - output ratio is not high. When the capital winter came, many once - famous innovative drug star companies fell to the bottom, and there were even situations where "the valuation was lower than the company's cash reserves".
Now, the Hong Kong market pays more attention to the value of innovative drug assets. "If the pipeline is excellent and has potential, Biotech companies will probably need to cooperate with large pharmaceutical companies through BD for development; or promote production and commercialization through CDMO and CSO, rather than making heavy - asset layouts by themselves. So the scale of newly listed companies is generally much smaller, which actually gives more room for imagination in the future, especially in popular treatment fields." said Liu Yiming.
Catalyzed by the market enthusiasm, the innovative pharmaceutical companies that went public in the past two months have all had a "good start". The grey - market trading of Jinfang Pharmaceutical, Yinnuo Pharmaceutical, Weilizhibo, etc. had over - subscriptions of 2,500 - 5,500 times, directly boosting their market values by 1 - 2 times on the first day of listing. Taking Weilizhibo as an example, with the pursuit of investors, the final fundraising increased from $100 million to $189 million (about HK$1.29 billion), nearly doubling the over - fundraising, and also reserving sufficient funds for subsequent multi - pipeline development.
In order to catch this wave of listing windows in Hong Kong and raise funds efficiently, more than 60 medical and pharmaceutical companies have submitted their prospectuses for the first or second time since 2025. Among them, innovative pharmaceutical companies account for half, and there are also many companies in the B - round financing stage.
"If a company is legal and compliant, has relatively complete disclosures, and actively responds to regulatory inquiries, the listing process will be promoted relatively quickly," Liu Yiming introduced. On the contrary, if a company has compliance flaws or does not accurately understand the regulatory questions, the process may be delayed.
He further explained that sometimes companies may face some non - subjective compliance reasons, such as "the business involves the scope of foreign - investment restrictions or prohibitions", and the importance of this issue in the due diligence for listing is higher than that in private equity financing.
Moreover, in order to improve communication efficiency, the Hong Kong Stock Exchange has now set some convenient rules. For example, after issuing the first - round inquiries, it welcomes advisors such as law firms and brokers to have oral telephone communications with it to explain the core of the inquiries, so that companies can reply more targeted. "Familiarizing with the rules and using the rule conveniences can promote the listing of projects more efficiently."
Biotech Pricing Depends on BD, New Hong Kong Listing Rules Become a Policy Tailwind
BD going global is the direct catalyst for the "bull market" of innovative drugs in Hong Kong this year; it is also one of the key reasons why many new stocks can be issued beyond expectations after Ying'en Biotech. Therefore, whether large - scale BD transactions can continue to occur and whether the previous transactions can be effectively advanced to key milestones have become the basis for the industry to judge whether the current Hong Kong market can last.
At the macro level, based on the analysis of several front - line investment institution partners in China, currently, the available funds in the hands of global multinational pharmaceutical companies may be as high as $1.2 trillion; and in the next five years, the revenue reduction due to the expiration of the patent cliff may be about $150 billion, and this figure will soar to $400 - 500 billion in the next ten years. Therefore, from the buyer's perspective, MNCs will still actively search for assets globally to develop original R & D pipelines to fill the gap. This is a huge opportunity for Chinese new drug assets.
Specifically for the value assessment of innovative drug pipeline assets, although there are models such as NPV (Net Present Value) in the industry for calculation, there are still many variables and ambiguities. In contrast, the assessment and pricing from peer buyers, especially multinational pharmaceutical companies, are particularly valuable for reference. The BD upfront payment and total package exceeding market expectations not only bring considerable cash flow to the company, but also mean that the buyer recognizes the product's potential to go global and the company's product development ability.
Therefore, different from the situation in the United States where the stock price of Biotech companies will fall after selling good assets, the market value of Chinese Biotech companies will rise significantly because of BD transactions.
"Currently, both investors and regulatory agencies quite recognize the license - out model. Although these companies BD their important assets, the domestic rights and interests they retain can still meet the listing requirements in Hong Kong. Second, from the value perspective, the company can still continue to obtain considerable financial returns through milestone payments, sales commissions, etc. Third, these companies often have multiple products, and the market expects them to continue to replicate the successful experience of going global with other products." Liu Yiming analyzed.
So, at the BD negotiation table, in addition to the upfront payment and the co - development model, how to stipulate that the buyer fulfills its due diligence obligation in the subsequent development of the asset to ensure financial and human input to advance the pipeline to subsequent milestones is also a key negotiation clause.
Among the many new drug companies waiting to list that submitted prospectuses this year, companies such as EMO Biosciences, Xianweida Biotechnology, and Ribobio have all achieved BD authorizations, and they are in the currently popular treatment fields such as oncology and metabolic diseases. In addition, Bowang Medical, which reached a new BD deal with Novartis in September, and Yilian Biologics, which licensed its ADC drugs to Roche, will also submit prospectuses for listing in Hong Kong in the future, and they are all promising listing targets.
From 2022 to 2024, it was normal for innovative pharmaceutical companies going to the Hong Kong Stock Exchange to have a subscription multiple of less than 10 times in the public or international placement, and most of them faced the embarrassing situation of "breaking the issue price". In order to enable institutional investors to have stronger "pricing power" and evaluate the company's valuation from a professional perspective, the Hong Kong Stock Exchange implemented new issuance rules in August this year. The implementation of these new rules has also had a direct impact on the subscription multiple of new stocks and the stock price.
Under the old rules, if the over - subscription multiple of the public offering exceeded a certain threshold (such as 100 times), up to 50% of the shares in the international placement (mainly for institutional investors) would be compulsorily "clawed back" to retail investors. This mechanism posed great uncertainty to large international institutional investors.
After August 4 this year, the Hong Kong Stock Exchange implemented new issuance rules, adjusting the initial issuance share and the claw - back ratio under the claw - back mechanism. At the same time, it introduced Mechanism B, allowing the issuer to fix the proportion of the public offering at a low level, such as 10%. No matter how popular the retail investors' subscription is, the institutional share will be guaranteed.
This change has, to a certain extent, activated the enthusiasm of institutional participation. Yinnuo Pharmaceutical chose to fix 10% of the shares for retail investors, and its international placement received a high - multiple subscription of 10.67 times, while the international placement subscription multiple of PaiGe Biopharm under the old rules was only 1.13 times.
The enthusiasm of institutions has been ignited, and the game of retail investors has entered the "elite level". Since the "pool" of the public offering has become smaller and fixed, the winning rate has dropped sharply, and "subscribing for new stocks" is like buying lottery tickets. However, individual investors with financial strength will increase their bets in various ways to try to win the subscription. Therefore, the dual enthusiasm of institutions and retail investors has boosted the new stocks to achieve amazing increases.
On September 29, 2025, the Hang Seng Biotechnology Index (HSHKBIO) of the Hong Kong stock market closed at 17,112 points, about 60% of the peak in June 2021. However, after four years of development, the quality and global competitiveness of Hong Kong new drug assets are no longer comparable. This is also the confidence of many industry insiders in the long - term trend of the Hong Kong new drug sector.