How do you view Chinese pharmaceutical companies?2022Overall situation of overseas listings in the year,2023Will there be new changes in the coming year? Currently, there are multiple financing channels available overseas, such as Hong Kong and US stocks, Singapore, etc. What are their respective advantages, and how should pharmaceutical companies make appropriate choices?APrivate Placement on the Stock Market, Hong Kong Stock MarketIPO listingCompared with financing channels,GDRWhat are the advantages and disadvantages?2022In recent years, many enterprises have chosen to list on European markets such as Switzerland. What are the main considerations, and will it become a2023Trend of corporate listings in the year?
Frost & SullivanFrost & SullivanChen Zhenrong, Frost & Sullivan's Healthcare Industry Consulting Director for Greater China, was interviewed by Finance & Health for a joint exploration of2023The journey of healthcare companies going public.
Finance & Big Health
Q
How do you view Chinese pharmaceutical companies?2022Overall situation of overseas listings in the year,2023Will there be new changes in the year?
Chen Zhenrong
Frost & Sullivan Greater China Healthcare Industry Consulting Director
2022In [year], the number of Chinese biopharmaceutical companies going public overseas increased year-on-year21The decline was significant, with Hong Kong stocks still being the main focus. In terms of the US stock market, affected by macro factors such as the COVID-19 pandemic, US interest rate hikes, and geopolitics, the US Congress2020The Foreign Companies Accountability Act passed in 2019 It poses a very severe challenge to Chinese concept stocks. However, it is worth noting that new additions2A homegrown biopharmaceutical company successfully listed on the Hong Kong Stock ExchangeGDR.
It is expected that with the weakening impact of the COVID-19 pandemic and geopolitics, the number of Chinese biopharmaceutical companies going public overseas will recover, and the options for overseas listing will become more diversified.
Special Purpose Acquisition CompanySPACThe listing mechanism allows shell companies without actual business operations, which serve as a listing intermediary, to raise funds through an initial public offering. After listing, they can use the raised funds and refinancing within a preset period to merge with a target company through forms such as mergers, share purchases, share exchanges, asset acquisitions, and reorganizations. This enables the non-listed company to ultimately obtain a listing status. Compared to traditionalIPO listingIt makes the listing process simpler, faster, and less costly. Currently, the Hong Kong Stock Exchange has also launchedSPACMechanisms have been established, and relevant articles of association have been issued for listing guidance.
Global Depository ReceiptsGDRA depositary receipt is a type of financial instrument issued by a depository institution, available to markets in multiple countries. It is used to raise funds in US dollars or euros.GDRAllowing the trading of company stocks in countries where there is no stock market, thereby enabling investors to invest in the shares of companies that are not listed on the local stock market.GDREnables outstanding enterprises that are already listed domestically to issue overseas to obtain financing, compared to the traditionalA+HThe method is more convenient.
Q
Currently, there are multiple financing channels available overseas, such as Hong Kong and US stocks, Singapore, etc. What are their respective advantages, and how should pharmaceutical companies make appropriate choices?
Chen Zhenrong
Executive Director, Greater China, Frost & Sullivan
For enterprises, choosing the initial listing location is usually a comprehensive consideration that includes whether it meets the listing conditions of the corresponding exchange, regulatory policies, valuation performance, liquidity, ease of refinancing, listing costs and time, as well as the clustering effect of enterprises. In fact, for most biopharmaceutical companies, they face the situation where they need a large amount of capital to drive research and development progress but cannot achieve profitability in the short term. In such cases, the exchange listing conditions and corresponding regulatory policies become a rigid threshold.
Hong Kong Stock ExchangeHKEXThere are special incentive policies for biopharmaceutical companies going public, which are as follows:2018In the year, Rule 18 of the Listing Rules was establishedAZhang, allowing unprofitable biotech companies to go public in Hong Kong, with a relatively low threshold, and a market value of up15It costs HK$100 million, but the downside is that Hong Kong stocks currently have poor liquidity, and at the same time, the price-earnings ratio for biotech companies is relatively low.
U.S. stocks are split between the NASDAQNASDAQ) and the New York Stock ExchangeNYSETaking the NASDAQ exchange, where biotech companies are more commonly listed, as an example, among companies listed on NASDAQ, healthcare companies are the most numerous and constitute the highest proportion of the sector, with a clear clustering effect of enterprises. At the same time, NASDAQ has three tiers: 'NASDAQ Global Select Market', 'NASDAQ Global Market', and 'NASDAQ Capital Market', which are designed to cater to different growth stages of enterprises and have different listing standards.
NASDAQ is undoubtedly one of the most mature and liquid capital markets globally, with its high audit efficiency and convenient refinancing being advantages that businesses should consider. However, companies also face potential risks such as short-selling and class-action lawsuits. Moreover, U.S. stocks are significantly affected by international political situations to a certain extent. Whether listing in the U.S. is allowed, whether the company's market value will be affected by geopolitical factors after listing, and these are also factors that companies need to consider.
In recent years, the Singapore ExchangeSGX) has also become a popular destination for domestic companies seeking overseas listings. Although the healthcare sector has become a distinctive segment of the New Third Board, its price-earnings ratio is not low. Currently, there are still few cases of domestic biopharmaceutical companies listing on the New Third Board, mainly due to the less ideal regulatory and liquidity conditions compared to the Hong Kong Stock Exchange.
Q
andAPrivate Placement, Hong Kong Stock MarketIPO listingCompared with financing channels,GDRWhat are the advantages and disadvantages?
Chen Zhenrong
Executive Director, Greater China, Frost & Sullivan
2022year2In the month, the China Securities Regulatory Commission (CSRC) issued the "Regulatory Provisions on the Interconnection and Depository Receipt Business of Securities Exchanges within and Outside China", expanding the "Shanghai-London Stock Connect" to the "China-Europe Stock Connect", thus broadening the interconnection financing channels. On one hand, it allows listed companies on the Shenzhen Stock Exchange to issueGDROn the other hand, it has also expanded its scope to major European securities markets such as the Hong Kong Stock Exchange.
GDRCompared with domestic private placements and overseas dual listings, in addition to domestic listed companies whose market value is not less than RMB200Beyond the 100 million yuan threshold, it has advantages in various aspects such as issuance pricing, review cycle, trading restrictions, and issuance intervals:
Compared with domestic private placements, through issuanceGDRBy introducing international and domestic strategic investors, financing channels at home and abroad can be expanded. This can achieve goals such as promoting business development, enhancing internationalization, advancing the international development strategy, optimizing shareholder structure, and reducing equity dilution risks.
Compared with overseas dual listings, withAShareholding companyHDual listing in Hong Kong through rights issue (commonly referred to asA+H) as an example,GDRThe approval and disclosure requirements for listing are relatively lower, the issuance and listing process is faster, and the costs incurred are also lower; in addition, the Swiss Exchange accepts the 'Accounting Standards for Business Enterprises of the People's Republic of China', which helps Chinese enterprises overcome a major obstacle to overseas listing while complying with Chinese laws.
Q
2022In recent years, many enterprises have chosen to list on European markets such as Switzerland. What are the main considerations and whether it will become a2023Trend of corporate listings in the year?
Chen Zhenrong
Executive Director, Greater China, Frost & Sullivan
SEHK relative to othersGDRIn terms of issuance location, it has three major advantages: a stable macro environment, high valuation, and sufficient capital. Switzerland is one of Europe's major financial centers, with a developed banking and insurance industry. It has a stable innovation, competitiveness, and economic environment. Moreover, as a permanent neutral country, it can provide a relatively stable political environment.
At the same time, the SIX Swiss Exchange is one of the largest and most liquid exchanges in Europe. Its stable macroeconomic and financial environment, as well as the exchange rate of the Swiss franc, are conducive to the issuer's valuation and the continuous stability of its market value. It also allows issuers to access a globally leading pool of capital-rich and experienced Swiss investors and international investors in the cross-border wealth management industry.
Considering that the Hong Kong Exchange also has an excellent industrial concentration in the pharmaceutical industry, including global large biopharmaceutical companies such as Novartis and Roche, the Hong Kong Exchange is somewhat attractive to domestically listed biopharmaceutical companies that meet the standards. It is expected that2023In the New Year, more enterprises will choose to issue on the Ruixin Stock ExchangeGDR.
*This interview was published in 'Finance & Big Health', with Xin Na as the reporter. The original title was "The listing train of healthcare companies is heading to Switzerland?" (Click the title to view the full report).
