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TradeGo, LeadLeo and Frost & Sullivan jointly released2024Hong Kong stocks for the year18ABiotech companies issue an annual report on investment activities
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Led by Frost & Sullivan, a global growth consulting firmfrost &The 18th Frost & Sullivan China Growth, Innovation and Leadership Summit & 3rd New Investment Conference (hereinafter referred to as The '2024 Frost & Sullivan New Investment Conference' was held in Shanghai from August 28th to 30th, 2024.
Wan Yong, Chairman of SULLIVAN TELE-TREND CLOUD TECHNOLOGY and Chief Executive Officer of TradeGo
At the New Investment Summit in Life Sciences, Wan Yong, Chairman of SULLIVAN TELE-TREND CLOUD TECHNOLOGY and Chief Executive Officer of TradeGo, officially released a joint report with Frost & Sullivan, Co-authored by LeadLeo Research Institute, Boao Forum for Asia Global Health Forum Conference and other institutionsThe 2024 Hong Kong Stock Exchange 18A Biotech Companies Issuance and Placement Report (hereinafter referred to as the 'Placement Report').
"Living Report" aims to analyze Hong Kong stocksThe layout and trends of the 18A biotech industry are systematically reviewed. It is aimed at shareholders of companies planning to go public or already listed, capital market intermediaries, and market investors, providing them with a more comprehensive and in-depth understanding of the Hong Kong stock market's 18A biotech sector. The research guide offers insights into market valuation, pipeline assessment, capital dynamics, corporate strategy, etc.
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1
Industry Full Analysis: Growth Driven by Innovation, Diversified Development in Biotechnology Sector
01
Panoramic Scan of 18A Biotechnology Company
With the rapid development of the global biotechnology industry and the continuous emergence of innovative technologies, biotechnology companies are becoming an important force driving economic growth. Against this backdrop, the Hong Kong Exchanges have launchedChapter 18A provides a unique listing channel for biotech companies, offering them a broader financing platform and market space. As leaders in the biotech field, 18A companies demonstrate strong competitiveness and market influence with their unique listing conditions, financial strength, financing capabilities, and market positioning.
sinceIn 2018, the Hong Kong Stock Exchange introduced Chapter 18A of listing rules, allowing unprofitable biotech companies to list on the exchange after going public. As ofOn March 31, 2024, a total of 64 biotech companies completed their listings based on this criterion. Among them, the financial performance of 12 companies improved to meet the requirements of Chapter 8 income testing of listing rules, successfully qualifying for the 'B' status.
02
Market Analysis of the Pharmaceutical Track
Pharmaceuticals are the main track, focusing on new drug research, development, production, and commercialization. As ofAs of March 31, 2024, there are 48 companies in the pharmaceutical industry, including sub-markets such as small molecule drugs, antibody drugs, peptide drugs, nucleic acid drugs, cell and gene therapy, and human vaccines.
With the development of the global pharmaceutical market, driven by economic growth and China's demand for pharmaceutical health care, China's pharmaceutical industry has developed rapidly. Small molecule drugs, with their therapeutic advantages, account for nearly90%. Most small molecule drugs can penetrate cell membranes to target intracellular proteins and have oral bioavailability, allowing them to deliver drugs directly and efficiently to patients. Compared with biologics, small molecule drugs have more predictable pharmacokinetic and pharmacodynamic characteristics, making the corresponding drug treatment methods simpler. Compared with other therapies, the stability and oral characteristics of small molecule drugs enable patients to take their medication almost anytime and anywhere without the need for specific storage, significantly increasing patient compliance with medication.
In the pharmaceutical sector, the fastest-growing subsector in China is cell and gene therapy. The Chinese market has accumulated relatively mature experience in new drug research and development.The launch of CGT drugs is also advancing continuously, and the industry has great potential for development in the future. The market scale of CGT in China increased from 0.3 billion yuan in 2019 to 3.28 billion yuan in 2023, and it is expected to further increase to 51.37 billion yuan by 2028.
03
Analysis of the Medical Device Track Market
As ofAs of March 31, 2024, there are 16 companies in the medical device sector, including sub-markets such as interventional devices, in vitro diagnostics, surgical robots, AI medical imaging, and diabetes management devices. Among them, interventional devices is the sub-industry where companies are most actively deploying, with a total of 11 companies listed. The sub-industry of AI medical imaging has developed rapidly as the penetration rate of artificial intelligence in the healthcare field continues to increase. From 2020 to 2030, the penetration rate of AI in CT scans is expected to increase from 1.2% to 44.8%, in MRI from 0.0% to 40.2%, and in ultrasound from 0.6% to 40.8%. In the future, as the application of artificial intelligence matures in most therapeutic fields, it will be possible to achieve synchronous disease diagnosis for multiple treatment indications using a single medical imaging examination.
Eagle Eye Technology as"The first AI healthcare stock", Provides comprehensive and multi-faceted artificial intelligence solutions for early screening and management of chronic diseases, myopia prevention and control, etc. It is a leader and pioneer in the field of global retinal image artificial intelligence. Eagle Eye Technology was founded inLaunched in April 2024 The country's first fundusAI Medical Consortium , jointlyForty-eight primary healthcare institutions in Haidian District have jointly launched the construction of an artificial intelligence fundus diagnosis and treatment collaboration platform. The platform has screened 20,125 people at Haidian Hospital and its community clinics, and referred 34 cases for major positive diagnoses.
"Living Report" on Hong Kong stocksThe sub-industries of 18A have been systematically analyzed, covering 11 industry tracks including small molecule drugs, peptide drugs, and AI medical imaging. The market scale, core drivers, and future development prospects of each track have been comprehensively analyzed. For more detailed content, please refer to the full report.
2
Market Performance and Regulatory System: Hong Kong Stock Market under a DownturnSector 18A is at a new turning point
01
Performance of the Hong Kong biotech market
In 2023, Hong Kong stocks performed poorly, falling by 26.74% from the previous rebound high on January 30, 2023, to December 21. During this major downward cycle of Hong Kong stocks since 2021, the adjustment amplitude approached historical extreme levels. As of December 8, 2023, the PE valuations of the Hang Seng Index and the Hang Seng Technology Index were at extremely low levels below the 2% percentile for the past five years, indicating significant discounting of Hong Kong stocks.
From January to February 2024, driven by government stimulus policies, China's macroeconomy rebounded moderately, with industrial added value and fixed asset investment growth rates exceeding market expectations; The growth rate of social consumption has slightly slowed down compared to the whole year last year, and consumer demand still needs to be improved; in terms of real estate, sales, investment, starts, construction, and completion areas have all shown negative growth, indicating that real estate is yet to stabilize; inflation levels have improved slightly but are still at the bottom of the cycle. Overall, China's macroeconomic growth rate has stabilized and rebounded. With active policy stimulus, future growth rates are expected to further improve, thereby driving an improvement in Hong Kong stock market performance.
In the future, the stabilization and recovery of the Chinese economy, China's accommodative monetary policy, and the liquidity brought about by interest rate cuts by central banks in Europe and America are expected to jointly promote a rebound in Hong Kong stocks. Benefiting from the acceleration of infrastructure investment, the upstream raw material industry,The information technology industry, driven by the AI wave and the favorable impact of the Federal Reserve's interest rate cuts in the second half of the year, as well as industries such as non-essential consumer goods and healthcare, which are expected to achieve a double boost in performance and valuation, are expected to recover in market performance.
02
Performance of the 18A Biotechnology Market
By comparing the initial listing prices of listed companies and as ofLooking at the closing price on March 31, 2024, only four companies' stock prices are still above their issue prices. They are Xinda Biology, Kangfang Biology, Coronabio and Quanxin Biology respectively. The relative increases in their issue prices are as follows:169.7%, 188.3%, 155.8%, and 18.9%.
Looking at Hong Kong stocksThe overall market performance of 18A stocks has shown significant fluctuations in the stock prices of listed companies. From 2019 to 2021, due to external factors, the pharmaceutical industry was sought after by capital. With multiple rounds of capital investment, the pharmaceutical industry experienced a structural market recovery, with many companies hitting record highs. However, since 2022, as the favorable trend dissipated, the profitability of enterprises has struggled to match their stock prices, and the market has started to decline. In the state of market downturn, The market now tends to focus more on those companies that truly possess strong R&D capabilities in the field of innovative drugs and medical devices and are expected to commercialize their products. In the long run, with the continuous catalysis of multiple favorable factors such as policies and capital, it is expected that more pharmaceutical companies will seek long-term development through the capital market.
From the perspective of revenue In 2023, the listed Hong Kong stocks of 18 A-share companies achieved an overall revenue of over HK$50 billion, with more than 60 companies reporting operating income. Despite the overall loss, there is stillFour enterprises have achieved profitability. Among them, Kangfang Biotechnology has the highest profit, reachingRMB 2.03 billion; Fosun Pharma ranked second, achieving a profit of RMB 550 million.
03
Regulatory and Policy Support Analysis
In terms of policies, the regulatory authorities have clearly defined an incentive-oriented policy framework for innovation.The programmatic document '14th Five-Year Plan for the Pharmaceutical Industry Development' issued in January 2022 clearly proposes to strengthen research on key core technologies, vigorously promote innovative product development, improve industrialization technology levels, and attract global pharmaceutical innovation elements to gather domestically. In August 2023, the 'Action Plan for the High-Quality Development of the Pharmaceutical Industry (2023-2025)' and the 'Action Plan for the High-Quality Development of the Medical Equipment Industry (2023-2025)' were reviewed and approved, focusing on enhancing the resilience and modernization levels of the pharmaceutical industry and medical equipment industry.
In addition, regulatory authorities have introduced supportive policies for multiple aspects such as drug clinical trials, review and approval, medical insurance, financing, etc. While generally encouraging innovation, these policies also regulate disorderly competition in the industry and guide the direction of real and effective pharmaceutical innovation. For example, in terms of research and development:The 'Guiding Principles for the Clinical Research and Development of Antitumor Drugs Oriented towards Clinical Value' released in 2021 propose that in controlled trials, subjects should be provided with the best treatment methods/drugs that are widely used in clinical practice. This is expected to guide pharmaceutical companies in developing truly innovative drugs with clinical value.
3
Issuance data:Company 18A's IPO raised over 100 billion yuan
01
Detailed Explanation of the Issuance Data of Company 18A
sinceThe first biotech company went public on August 1, 2018, until March 31, 2024. ListedCompany 18A has a total of 64 branches, raising a total of HK$1111.18 billion. (assuming the over-allotment rights are not exercised), total market value of the issuanceHK$8,008.99 billion (assuming the exercise of the over-allotment rights is not carried out); calculated over the same time dimension, there were 633 new shares issued and listed on the Hong Kong Stock Exchange (including ChiNext, excluding transfer listings and introduction listings), raising a total amount of about HK$1.298 trillion (assuming the exercise of the over-allotment rights is not carried out), with 56 companies on the 18A list raising 8.56% of the total funds raised.
According toLiveReport big data shows that listed companies on the 18A board have generally conducted more frequent financings before going public, with significant valuation growth. The pre-listing valuation growth rate is atThe number of companies in the 10 - 50 times range is the highest, with 21 companies; most companies had 2 - 6 rounds of financing before going public, and there are a total of 53 such companies, accounting for 85.48% of all 18A companies.
02
Participation of intermediary institutionsIssuance history of Company 18A
Intermediary institutions, participationDuring the issuance process of listed companies on the 18A market, CICC and Goldman Sachs (Asia) are the sponsors with the largest number of participants, indicating that leading banks have rich experience in sponsorship projects and possess extremely strong project resources within their respective industries. Frost & Sullivan ranks first in the market for industry consultant services, with engagements in itThe issuance of shares by 53 companies accounted for 82.81% of the market share, far ahead of the second place, indicating that Frost & Sullivan has in-depth industry research and rich project experience during the issuance and listing process of 18A companies. The auditors and reporting accountants engaged in the issuance of 18A are mainly from the Big Four accounting firms, with EY accounting for 40.63%. In terms of law firms, the distribution of law firms serving as issuer lawyers is relatively even, with Maplehead, Davy & Partners, and Tongshang participating more frequently.
03
Cornerstone Investors ParticipateIssuance Situation of Company 18A
During the issuance process of Company 18A, in addition to the two Chinese concept stocks returning to the market, various forms of cornerstone investors participated. A total of 175 cornerstone investors participated in the issuance of 59 companies listed on the 18A board. Assuming that the over-allotment rights were not exercised, the investment amount was approximately HK$45.9 billion, accounting for 41.32% of the total fundraising amount of 64 companies listed on the 18A board. Among them, the top ten cornerstone investors are mostly internationally renowned investment institutions, while those from domestic or local private equity funds are more dispersed.
4
Development Outlook: Hong Kong Stocks for the Next Three YearsThe issuance volume of Company 18A is expected to remain at a stable level.
As ofOn March 31, 2024, a total of 18 companies among the 18A stocks listed on the Hong Kong stock market successfully completed placements, accounting for less than 30%. The 18 18A companies obtained a total refinancing amount of approximately HK$582.90 billion through placements, which is more than HK$115.79 billion more than the total IPO fundraising of approximately HK$427.11 billion.
In terms of time distribution,The year when Company 18A completed the most placements was 2021, with a total of 10 placements completed that year. The year when the company raised the most funds through placements was 2020, during which Hong Kong-listed Company 18A refinanced a total of HK$275 billion through additional share issuance and placements.
The issuance enthusiasm for 18A stocks followed the overall situation of Hong Kong stock market new share offerings, experiencing stages of initiation, fervor, cooling down, and subsequent decline. In terms of the number of issuers, from 2018 to 2024, the number of listed companies on 18A varied from 5, 9, 14, 20, 8, 7, and 1 respectively. The number of listed companies increased continuously from 2018 to 2021, with the highest number in 2021. From 2022 to March 2024, due to the cooling of the new share market, the number of listed companies declined.
In the second half of 2023, the mainland new share market was affected by the policy tightening of IPOs at certain stages. To date, there have been zero listings of unprofitable biotech companies on the Sci-Tech Innovation Board. However, for unprofitable biotech companies, their financing needs remain unchanged. Coupled with increasingly low investment intentions in the primary market, companies naturally turn their attention more towards the secondary market. But in the MainlandIn the context of IPO obstacles, turning to the Hong Kong capital market for listing opportunities may be a worthwhile alternative to consider.
"Living Report" is based on listed biotech companies, outlining the comprehensive development landscape of the biotech industry from different dimensions such as company overview, industry analysis, issuance materials, index analysis, and company research. For more detailed content, please refer to the full report.
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