Chinese CRO Frontage Holdings raises $205m in Hong Kong IPO

FILE PHOTO: The Hong Kong Exchanges flag, Chinese national flag and Hong Kong flag are hoisted outside the Hong Kong Stocks Exchange in Hong Kong June 7, 2016. REUTERS/Bobby Yip/File Photo

Frontage Holdings, a Chinese contract research organisation (CRO), has raised HK$1.6 billion in its initial public offering in Hong Kong, according to its filing.

The company sold 501.9 million shares at HK$3.20 apiece  with three cornerstone investors – Gaoiling Fund and YHG Investment, Worldwide Healthcare Trust, and Greenwoods Asset Management – taking up about 41.5 per cent of the offering.

Frontage said it will use the proceeds from its IPO to finance its continuing expansion and acquisition activities.

The company provides integrated research, analytical, and development services through the drug discovery and development process, with operations in both the United States and China – the two largest markets for CRO services in the world.

In the US, the company provides drug metabolism and pharmacokinetics, safety and toxicology, and chemistry, manufacturing, and controls. In China, Frontage provides bioequivalence and related services.

Frontage said its revenue grew significantly from its operations in China increasing from $7.18 million in 2016 to $28.45 million in 2018.

“We successfully capitalised on the growth of outsourcing opportunities in China during this period and our enhanced visibility, growing reputation and recognition in the China market as a CRO with a reputation for high-quality services,” it said.

Revenue from its US operations increased from $41.47 million in 2016 to US$54.66 million in 2018 due to “consistent growth” in its revenue from bioanalytical services as well as due to the contribution of its newly created safety and toxiology business segment.

Frontage now joins a number of companies that have raised funds by listing in Hong Kong. Most recently, Xinyi Energy, a Chinese solar farm operator, raised $465 million after pricing its Hong Kong IPO near the bottom of a marketed range.

Duiba, a Chinese enterprises solution provider backed by private equity firms TPG and Orchid Asia Group, raised HK$766.2 million ($97.6 million) by selling 127.7 million shares at HK6 apiece in Hong Kong.