Chipscreen became the first biopharma to price its IPO on Shanghai’s STAR market Tuesday, raising RMB1 billion ($148.2 million) in an upsized offering that signals that the investor exuberance that drove big gains for the first companies to list will likely extend to biotechs in the queue.
Shenzhen Chipscreen Biosciences Ltd. (Shanghai:688321) sold 50 million shares at RMB20.43 in a deal that values the company at RMB8.4 billion ($1.2 billion). The company, which develops small molecules for cancer, diabetes and endocrine and autoimmune diseases, expected to raise RMB803.5 million. Its first day of trading could come as early as Aug. 12, Chairman and CEO Xianping Lu told BioCentury.
Lu said the company’s China-focused strategy was the primary reason to seek a listing on the Shanghai Stock Exchange’s new science and technology innovation board. An investor base that includes a state-owned enterprise also made it the most expedient choice. The presence of CapitalBio, which holds about 11% of Chipscreen’s equity, would have extended the company’s approval process on NASDAQ or Hong Kong stock exchange, according to Lu.
"You never saw such transparency in this capital system before."
The first group of 25 companies soared out of the gate when trading began on the exchange on July 22, posting average gains of 140% in their first day. Lu attributed the gains to investor confidence stemming from the transparency of the STAR board's application process. The results of multiple rounds of reviews by the exchange’s experts in finance, technology, accounting and legal issues, were made immediately available to the public.
"You never saw such transparency in this capital system before, so for that reason the companies seem to have better quality in terms of the fundamentals," he said.
Many Chinese biotech executives are watching from the sidelines to see how the first companies fare before deciding whether to pursue a listing on the new board or in Hong Kong, Chinese biotech executives and investors have told BioCentury.
While Lu conceded that there was uncertainty because the new board was untested, he said that the government was highly motivated to make the exchange a success after capital market reforms a decade ago fell short and also understood the need to support innovative companies focused on R&D which are not yet profitable. The board has evolved rapidly since it was proposed by Chinese President Xi Jinping in November (see "Shanghai’s New Chapter").
Lu said that regulators are still adapting to the new system. Although Chipscreen was among the first three companies approved by the Shanghai exchange, it was the twenty-eighth to receive final registration by the China Securities Regulatory Commission (CSRC). The registration took more than a month, he said, because as the first biopharma, CSRC was seeking to set a stringent standard (see "Chipscreen Set to Test Shanghai’s New Innovation Board").
Chipscreen's next step, Lu said, will be to explore ways to expand the company’s global footprint through licensing, collaboration or marketing of its drugs outside of China. In the longer term, the company is considering listings in Hong Kong and the U.S., where he believes the company's focus on innovation would attract investors.
Chipscreen markets HDAC inhibitor Epidaza chidamide for non-Hodgkin and peripheral T cell lymphomas in China and has seven other candidates in its pipeline for various cancers, Type II diabetes, non-alcoholic steatohepatitis (NASH) and autoimmune diseases, including rheumatoid arthritis, with the most advanced in registration or Phase III testing.
Other biopharma companies planning to list in Shanghai may have selected the STAR market for similar reasons. Qiming Venture Partners' Nisa Leung told BioCentury in February that it would make sense for domestic companies and JVs doing business primarily in China to list on the new board.
Of the at least nine biopharmas that have applied for listing on the STAR market, at least two have state-run investors: Shanghai Fudan-Zhangjiang Bio-Pharmaceutical Co. Ltd. (Shanghai, China) and Hunan Nucien Pharmaceutical Co. Ltd (Changsha, China).
The STAR market’s IPO queue also includes HitGen Inc. (Chengdu, China), Suzhou Zelgen Biopharmaceuticals Co. Ltd. (Kunshan, China), Chengdu Easton Biopharmaceuticals Co. Ltd. (Chengdu, China), Jiangsu Jibeier Pharmaceutical Co. Ltd. (Zhenjiang, China), BrightGene Bio-medical Technology Co. Ltd. (Suzhou, China), Xiamen Amoytop Biotech Co. Ltd. (Xiamen, China), and Shanghai Serum Bio-Technology Co. Ltd (Shanghai, China).