HKEX’s biotech chapter shows all the signs of a sustainable market

Two years in, HKEX has matured into a sustainable market for biotech equities

Two years in, the Hong Kong stock exchange’s biotech chapter is no longer an experiment, but a maturing equity market with all the hallmarks to suggest it can sustainably support innovative companies -- as long as follow-on capital becomes routinely available.

The Hong Kong Exchanges and Clearing Ltd. (HKEX) launched Chapter 18A, commonly referred to as the biotech chapter, in the spring of 2018. The hope was that the new listing mechanism would fill a much-needed void in the region for pre-revenue companies that had previously been prevented from listing on equity markets due to revenue and profit thresholds (see “Hong Kong’s New Chapter”).

The first biotechs to list on the exchange suffered from overwrought IPO valuations and poor liquidity, and came out of the gate in the midst of an increasingly volatile market that was on edge due to an ongoing vaccines scandal in China and the threat of a coming trade war between the U.S. and China. Their poor initial performance threatened to sour investor appetite in the market’s infancy (see “Hong Kong’s First Wave”).

But several stakeholders noted that those initial shocks tempered expectations, leading subsequent companies to seek valuations that are more in-line with those of NASDAQ listings.

“We are at a stage now where

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