Hong Kong Exchange’s plans to attract international biotech firms

Hong Kong Exchange’s plans to attract international biotech firms

Hong Kong's Exchange Biotech Summit took place on March 22, 2018, in the South Asian financial Capital, specifically in the HKEX Connect Hall. The ind

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Hong Kong’s Exchange Biotech Summit took place on March 22, 2018, in the South Asian financial Capital, specifically in the HKEX Connect Hall. The industrial-focused conference dedicated to industry professionals to network, exchange insights and experience, and work together to promote the biotech funding ecosystem in Hong Kong.

HKEX has published a public consultation paper seeking public feedback on the proposed new rules to accommodate the listings of companies from emerging and innovative sectors, with a new chapter focusing on the listing of pre-revenue biotech issuers. The proposed new chapter will widen market access for these companies to create a more vibrant marketplace in Hong Kong.

The paper includes draft Main Board Listing Rules (Listing Rule or Rules) to: (a) permit listings of biotech issuers that do not meet any of the financial eligibility tests of the Main Board; (b) permit listings of companies with weighted voting right (WVR) structures; and (c) establish a new concessionary secondary listing route for Greater China and international companies that wish to secondary list in Hong Kong.

“In the past few months, we have collectively decided to take a big step forward as a financial center and welcome emerging and innovative companies.  Now, we are proposing a listing regime that will boost Hong Kong’s attractiveness for a new generation of companies as well as investors, bringing more dynamism to our stock market,” said HKEX Chief Executive Charles Li.

In its proposals, the Exchange offers specific guidance on the listing eligibility for pre-profit/pre-revenue biotech issuers that produce pharmaceuticals (small molecule drugs), biologics, and medical devices (including diagnostics).  Manufacturers of other biotech products will be considered on a case by case basis.

On innovative issuers with WVR structures, the proposals closely follow the position set out in the Way Forward section of the New Board Concept Paper Conclusions.  An applicant will be required to demonstrate that it is eligible and suitable for listing with a WVR structure by reference to a number of characteristics, including the nature of the company and the contribution of the proposed WVR beneficiaries.  Recognising the potential risks associated with WVR structures, the Exchange has proposed detailed safeguards, including limits on WVR power and measures to protect non-WVR holders’ right to vote, enhanced corporate governance requirements as well as enhanced disclosure requirements.

For the proposed new secondary listings chapter, the Exchange aims to strike a balance between facilitating listings of innovative companies that are primarily subject to regulation overseas and providing appropriate investor protection.  As a result, it has proposed a new regime for three types of companies that are primarily listed on a Qualifying Exchange (QE) in the US or the UK, namely: (a) Greater China issuers that were primarily listed on a QE before the publication of the New Board Concept Paper Conclusions; (b) those that were primary listed on a QE afterwards; and (c) non-Greater China issuers.

Many international companies will grab this one in a lifetime opportunity including Bill Gates-backed cancer-detection startup Grail.

Bloomberg says: Grail Inc. is working with advisers on the proposed share sale, the people said, The firm may seek to raise as much as $500 million this year, though a final offering amount has not been decided, said one of the people, who asked not to be identified as details are private. The company’s investors include Bill Gates and the personal venture fund of Amazon.com Inc. founder Jeff Bezos, according to its website.

After beating Japan in the patent filling scene, China seems to be working intensively to upscale its market positioning in the next years.