Innovative pharmaceutical companies are vying for IPOs on the Hong Kong Stock Exchange: competing for BD tickets and riding on the wave of new regulations.
Text | Hai Ruojing
At the entrance of the Hong Kong Stock Exchange, there are lines 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, with a post - investment valuation of $250 million in the previous round. In the two weeks from September 15 to the present, several innovative pharmaceutical companies, such as 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 new shares of Weilizhibo and Yinnuo Pharmaceutical have received over 3,000 times of subscriptions, and their share prices doubled or tripled on the first day of listing, reversing the embarrassing situation of pharmaceutical companies "breaking the issue price on the day of 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 director 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 a sense of urgency. 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 Corrs Chambers Westgarth. "In addition, the current horizontal competition in the innovative drug field is relatively fierce. In the metabolic field, 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; several investment institutions are organizing closed - door meetings on the theme of Hong Kong IPOs to try to accelerate the listing process of their invested companies; service providers such as law firms and investment banks are also in their "peak season", working overnight before submitting the prospectus.
Valuation Logic Changes, Biotechs Accelerate the 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. 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 built up a fighting friendship among us," Liu Yiming said.
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, the post - investment valuations of their last rounds are mostly concentrated between 3 billion and 5 billion yuan. For example, the valuation of Yaojie Ankang 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 transformation of the narrative logic in 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 internationally 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 hit rock bottom, and there were even cases where "the valuation was lower than the company's cash reserve".
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." Liu Yiming said.
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 2,500 - 5,500 times of over - subscriptions, 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 - raised funds, which also reserved sufficient funds for the subsequent development of multiple pipelines.
To catch this wave of the Hong Kong listing window 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 Series B financing stage.
"If a company is legal and compliant, makes 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 defects or fails to accurately understand regulatory questions, the process may be delayed.
He further explained that sometimes companies may face some non - subjective compliance issues, such as "the business involves the scope of foreign investment restrictions or prohibitions". The importance of this issue in the due diligence for listing is higher than that in private equity financing.
Moreover, to improve communication efficiency, the Hong Kong Stock Exchange has now set up 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, which is convenient for companies to respond in a targeted manner. "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 Stock Issuance 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 promoted 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 first - 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.
Regarding the value assessment of innovative drug pipeline assets, although there are models such as NPV (Net Present Value) in the industry for calculation, it is still full of variables and ambiguities. In contrast, the assessment and pricing from peer buyers, especially multinational pharmaceutical companies, are particularly valuable for reference. Beyond - market - expectation BD upfront payments and total packages not only bring considerable cash flow to the company, but also mean that the buyer recognizes the potential of the product to go global and the company's product development ability.
Therefore, different from the situation in the US 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 authorities quite recognize the license - out model. Although these companies BD their important assets, the domestic rights and interests they retain can still meet the requirements for listing in Hong Kong. Second, from the value perspective, the company can still obtain considerable financial returns through milestone payments, sales commissions, etc. in the future. Third, these companies often have multiple product assets, 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 upfront payments and co - development models, how to stipulate the buyer's due diligence obligations in the subsequent development of the assets to ensure financial and human input to promote 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 EOC Pharma, Xianweida Biotechnology, and RiboBio have all achieved BD authorizations, and they are in 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 offering or international placement, and most of them faced the embarrassing situation of "breaking the issue price". 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 the 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 "re - allocated" 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 re - allocation ratio under the re - allocation mechanism. At the same time, Mechanism B was introduced, allowing issuers to fix the proportion of the public offering at a low level, such as 10%. No matter how popular the retail investors' subscriptions are, the share of institutional investors will be guaranteed.
This change has, to some extent, activated the enthusiasm of institutions to participate. 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 Bio, which was issued under the old rules before, was only 1.13 times.
The enthusiasm of institutions has been ignited, and the game among 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 shares" 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 double enthusiasm from 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 new drug assets in the Hong Kong market are no longer comparable, which is also the confidence of many industry insiders in the long - term trend of the Hong Kong new drug sector.