Biopharmaceutical firm Zai Lab raises $825m in HK IPO

A scientist works in Zai Lab's drug development laboratory in Shanghai in October 2018.

Biopharmaceutical company Zai Lab Ltd. raised HK$6.61 billion ($825 million) on its secondary listing in Hong Kong Monday, as it became the latest U.S.-listed Chinese company to start trading closer to home amid growing Wall Street wariness.

The Shanghai-based company’s Hong Kong shares rose 5.57% Tuesday after recording an 8.54% jump on their debut.

Zai Lab is the first Nasdaq-listed biopharmaceutical company to complete a secondary listing in Hong Kong since the Asian financial hub changed its rules to allow the practice in 2018.

The company, which listed in New York in 2017, hopes to focus on patients in China and tap Asian investors’ interest in the health care sector, founder and CEO Du Ying said, describing the move as a natural transition. The company is considering a further listing on Shanghai’s tech-focused STAR Market, depending on the board’s requirements.

Founded in 2015, Zai Lab focuses on developing medical solutions for cancer, tumors, infectious and autoimmune diseases.

Despite a 464.7% surge in revenue in the first half, the company is on track for another profitless year, recording $129 million in losses in the period on $19.2 million of revenue. Last year, the company lost $195 million, widening from a $139 million loss in 2018.

Almost half the money it raised in its Hong Kong IPO will be earmarked for research and development (R&D), commercialization of its core products, funding clinical trials and registration filings of drugs in its pipeline, and a quarter will be invested in global licensing and collaborating, according to a company filing.

The company’s business model focuses mainly on in-licensed drugs, where it signs exclusive agreements with drug developers to further develop, test and commercialize their drugs in new jurisdictions. In return, Zai Lab gains royalty fees and other payments for meeting commercial milestones.

Under the in-licensing model, Zai Lab can get drugs to market more quickly and share the cost of development with another party. But investors may be concerned that acting as a kind of pharmaceutical middle-man could make the company vulnerable to competition.

Zai Lab has so far brought to market Zejula and Optune, both of which are cancer products it licensed from U.S.-based third-party drugmakers.

It is on course to in-license more innovative drugs, according to Senior Vice President Wang Chong, who stressed the drugs would be either first-in-class or best-in-class.

The secondary listing follows plummeting bilateral relations between Beijing and Washington, and increased scrutiny of U.S.-listed Chinese companies in the wake of the fraud scandal at former Nasdaq high-flyer Luckin Coffee.

A group of U.S. regulators said last month that stock exchanges should set new rules that could trigger the delisting of Chinese companies, citing concerns that investors are being exposed to frauds.

The threat to expel Chinese companies from Wall Street is driving a wave of U.S.-listed businesses to seek a trading foothold in Hong Kong. Alibaba Group Holding Ltd. led the so-called “homecoming” trend last year with a blockbuster $13 billion share sale.

The article was first published on Caixinglobal.com

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.