China’s two stock exchanges, Shanghai and Shenzhen, have liberalized the rules allowing Hong Kong listed companies to add a China listing. The Shanghai and Shenzhen--Hong Kong Stock Connect program, launched in 2014 and 2016, links mainland China’s stock exchanges with their Hong Kong counterpart. Under the new rules, there are 17 biopharmas listed in Hong Kong, none of them profitable, now eligible for a listing on the Shanghai STAR Board or the ChiNext Exchange in Shenzhen, according to a Pharma DJ article (see story). 

The minimum requirements for the expanded program are:

• Average daily market capitalization -- RMB5 billion ($724.6 million);
• Average daily trading value – RMB30 million ($4.4 million);
• Fewer than 50% trading suspension days.

According to the Pharma DJ article, the mainland listing would benefit the seventeen companies because the two exchanges would expose the companies to new investors who might be more interested in young, still unprofitable companies. The Hong Kong exchange has many listed companies, but only a relatively small number of individual investors. Institutional investors, whose funds tend to focus on the leading companies in each industry, tend to overlook the biopharmas with early stage assets.

On the other hand, mainland China has more individual investors and large funds that are open to making investments in upstart biopharmas. The are willing to looking past a young company’s lack of revenue to see the promise of a clinical trial portfolio.

For the past two years, the stock prices of all biopharmas have been in decline, with industry averages more than 50% off their 2021 highs. Companies in their post-IPO phase have lost even more.

And, in one more fact bolstering the mainland exchanges, PharmaDJ points out that the Shanghai STAR Exchange, which opened to pre-revenue biopharmas after the Hong Kong market offered them a home, has become the exchange of choice for China biopharmas, according to a survey the company did in late 2022. The results were lopsided: 80% of respondents preferred the STAR market; only 15% picked Hong Kong. One year earlier, when the STAR market was just getting started, only 37% of respondents favored the STAR exchange.

The 17 Hong Kong listed biopharmas eligible for the China Mainland program are:

• Ascentage Pharma
• Brii Biosciences
• CARsgen Therapeutics
• Akeso Biopharma
• InnoCare Pharma
• Remegen Biosciences
• JacoBio Pharma
• Ocumension Therapeutics
• Everest Medicines
• Sirnaomics
• CStone Pharma
• Boan Biotechnology
• Kintor Pharma
• Alphamab Biopharmaceuticals

Disclosure: none.