As Hong Kong’s capital markets continue to have a strong year, one trend has been clear: The growing number of listings by Chinese biotech and biopharma companies. The past few weeks have seen a number of IPOs raising more than $300 million each, including Antengene Corporation, Simcere Pharmaceutical Group, JHBP (CY) Holdings and Everest Medicines.


In September, Charles Li, the CEO of bourse operator HKEX, said the exchange will surpass the Nasdaq as the world’s largest biotechnology stock trading and fundraising centre within the next 5 to 10 years. Given the track record of Hong Kong so far, that will not be surprising: In just two years, it has grown its reputation as a global hub for biotech listings, encouraged by the modernisation of stock market rules to help start-ups raise capital. In particular, industry watchers credit the introduction of Chapter 18A in 2018, which allowed the listing of pre-revenue biotech companies in Hong Kong.

But there are other market factors which contribute to supporting this development, say Matt Emsley, Herbert Smith Freehills managing partner for China, and Stanley Xie, Herbert Smith Freehills Kewei joint operation partner. “Government support/favourable policies for Chinese innovative pharma companies to raise their funds,” is one benefit, another is the “remarkable growth potential (size and number of pharma/healthcare companies in China comparing to the overall spending (and fast-growing spending potential) on healthcare by Chinese people,” particularly when compared against the U.S., for example, the “market cap of U.S. and China pharma/healthcare companies is around $5.5 trillion and $1.5 trillion, respectively,” say Emsley and Xie.

Both factors lead to more “VC/PE investing into this industry and then more potential listings/fundraising for these companies,” they say.

According to the duo, more international pharma and healthcare companies are viewing China as their next strategic move, with the size and the needs of the China market proving a hot selling point.

“During the evolvement/transformation process, the industry would be able to attract more analysts, which in turn facilitate investor education,” Emsley and Xie say.

HKEX will be the natural “first choice” for pre-IPO Chinese pharma and healthcare companies when it comes to public fundraising “due to a relatively stable regulatory framework, i.e. certainty (compared to the U.S.) and more and more sophisticated Chinese investors in this sector over time (who are more familiar with the local market),” say the lawyers.

HKEX recently announced that some eligible 18A companies will be included in the Stock Connect, and this is likely to only encourage investor interest going forward, both in terms of facilitating mainland investors to “invest in 18A companies going forward,” while also serving to attract more companies to raise funds in HKEX, and strengthening its “market position in the biotech/healthcare section,” they add.

According to both Emsley and Xie, over time the market can expect to see more China-based institutional investors growing “more sophisticated,” with other investor groups focusing on pharmaceutical and healthcare companies in different stages “depending on their risk appetite.”

From a regulatory perspective too, there could be more specific guidances targeting companies focusing on some types of cutting-edge therapeutic areas — “cell and gene therapy,” for example. But this isn’t likely to be the only regulatory development likely to be carried out in order to ensure optimal market conditions for investors and businesses.

In order to be truly effective, regulations are expected to keep pace with the transformation and evolution of the sector, say the lawyers noting that timely responses should be provided to the market and business stakeholders in this industry.

While there’s certainly more developments likely, it’s hard not to see the current burst of interest as due, at least in part, to the global COVID-19 pandemic — particularly given heightened awareness around healthcare and medical services.

Lawyers feel the pandemic has provided a boost to the healthcare industry. “Non-COVID clinical trials can proceed in a relatively normal way in China comparing to the rest of the world, which gives certain Chinese companies an edge against their overseas peers,” they say.


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