Biotech start-ups filing for HKEX IPOs: Insights on risk, countermeasures for survival and growth

Biotech start-ups filing for HKEX IPOs: Insights on...

A look at how biotech companies hoping to list on the HKEX can manage risk

DNA threads on fingers

The Conclusions to the New Board Concept Paper published by the Hong Kong Stock Exchange (“the Exchange”) on 15 December 2017 and the subsequent Consultation Paper on a Listing Regime for Companies from Emerging and Innovative Sectors published on 23 February 2018 propose amendments to the existing rules to allow the listing of:

  • Biotech companies that do not meet any of the financial eligibility tests of the Main Board
  • High-growth and innovative companies with weighted voting right (WVR) structures
  • Qualifying Issuers seeking a secondary listing on the Exchange. 

On 24 April 2018, the Exchange announced the new rules and added three new chapters in the Main Board Listing Rules to facilitate the listing of companies from emerging and innovative sectors as mentioned above. These new rules, which took effect on 30 April 2018, allow emerging and innovative companies seeking to list under the new regime to submit formal applications from that date. 

Although listing opportunities are now open to high-risk, high-reward biotech companies, concerns have also inevitably started to surface, including the lack of proven track record of profit or revenue, and the risk factors and typical features of biotech companies such as lengthy clinical development and the potential for data or information security breaches.  

The publication also discusses relevant areas of consideration, including R&D, clinical testing and commercialisation; data management and information security; reliance on third parties; government regulations and compliance; intellectual property; and key personnel reliance.

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