HK seeks to cash in on frenzy for Chinese biotech

Chinese drug companies have been on a tear in the U.S. stock market. Now, entrepreneurs and investors betting on the Asian country’s fledgling biotechnology industry see another reason for optimism.

The stock exchange in Hong Kong – home to the world’s fourth-largest equity market – is in the midst of weighing a proposal that would allow biotech companies to list even before they turn a profit. If those plans go through, it would pave the way for more Chinese health-care firms to raise money via initial public offerings, giving them easier access to funds for research.

Annual spending on prescription medicines has crossed USD100 billion in China as the incidences of diseases like diabetes and cancer have surged. The Asian country has lagged behind the U.S. and other developed markets on innovation, and Beijing has said it wants to build homegrown champions in the health-care industry. The proposed Hong Kong listing rules would provide a boost to those plans, while helping the exchange list more of China’s so-called new-economy companies that are particularly attractive to international investors.

Without access to the Hong Kong market, such pre-profit companies “will likely go to America, but now Hong Kong comes in with its advantages in geography and language,” said Lu Xianping, founder of Chipscreen Biosciences Ltd., a Shenzhen-based drug developer. Chipscreen is preparing for an IPO and weighing options including mainland China and Hong Kong, according to Lu, whose company has one cancer drug on the market in China and is developing other oncology and diabetes therapies. Bloomberg