Capital Market Innovation Services Forum - Q&A on Biotechnology Companies Listing
Capital Market Innovation Services Forum (hereinafter referred to as "Forum") was successfully held on the 2020 China BioMed Innovation and Investment Conference (2020 CBIIC). The Forum was organized by China Pharmaceutical Innovation and Research Development Association (PhIRDA), Ernst & Young Hua Ming LLP, Frost & Sullivan, Han Kun Law Offices, and Huatai United Securities. The forum gathered experts from domestic and foreign securities companies, accounting firms, law firms, consulting firms and other IPO listing consulting service to share the latest trends in the capital market, analyze hot issues in the listing of biotechnology enterprises, provide service support for related enterprises to broaden financing channels with the help of capital market, and help enterprises to list with less trouble, less time and better quality.
The Forum was moderated by Ms. Grace Xiao, Assurance Senior Manager of Ernst & Young Hua Ming LLP.
Moderator: Ms. Grace Xiao, Assurance Senior Manager of Ernst & Young Hua Ming LLP
The first keynote speech “IPO Accounting and Tax Issues for Biotech Companies” was delivered by Ms. Jane Yang, Managing Partner of Beijing Office & Assurance Partner of Ernst & Young Hua Ming LLP. Ms. Yang first reviewed the global IPO market, especially the performance of pharmaceutical, medical and biotech companies in the capital market in recent years, and compared the capital market in Chinese Hongkong and mainland, as well as the listing conditions of different listed sectors (including China A-share market, SSE STAR, and ChiNext). Ms. Yang, a seasoned expert,illustrating case studies, answered questions for enterprises on the financial preparation for the listing, financial key points and common problems in the audit process. She also reminded that the finance should be screened carefully by company prior to listing.
Keynote Speaker: Ms. Jane Yang, Managing Partner of Beijing Office & Assurance Partner of Ernst & Young Hua Ming LLP
Next, Mr. Fred Mao, Partner of Frost & Sullivan, delivered a keynote speech themed “Biotech Portfolio Analysis and Investment Outlook”, sharing the valuation method and investment logic for biotechnology enterprises. Mr. Mao pointed out that the selection of valuation methods should be based on the enterprises’ life cycle and industry features. DCF (Discounted Cashflow Model) is the most commonly used valuation method for Biotech. The following factors should be noted: disease burden, unmet clinical needs, favorable policies and pipeline competition. The risks of drug resistance and commercialization are the two major challenges faced by biomedical companies. Given that most domestic pipelines in the late stage are “fast-follow” type, the risk of druggability is relatively low compared with foreign countries, but we should take more consideration on the risk of domestic commercialization. A new drug project with high commercial value indicates high risks, and the investment also needs to balance the risks of drugs from R&D to post marketing stages. On the other hand, business value and risk are the key factors for biotech companies to balance their investment decisions.
Keynote Speaker: Mr. Fred Mao, Partner of Frost & Sullivan
The third speech “Key Legal Issues Concerning Pharmaceutical License-in and Asset Transactions” was given by Lawyer Aaron Zhou, Partner of Han Kun Law Offices. Mr. Zhou explored two basic modes of pharmaceutical equity transaction:license-in and asset / equity buyout. In terms of license-in, Mr. Zhou explained authorization, license fees, inspection and audit, transaction model and choice of listing license holders, non-compete and intellectual property rights. While for equity buyout, ownership is more complete compared with license-in, which facilitates more independent and flexible drug R&D and commercial activities. A detailed analysis on the following aspects is also provided: the scope and boundary of the transferred assets, purchase consideration, transition period, and bid/eligibility before the asset and equity buyout transaction. Given that both transaction modes may involve supply arrangement, Mr. Zhou also shared his experience on supply mode, pricing mechanism, prediction for purchase volume, inspection and acceptance, quality assurance, transfer of production etc.
Keynote Speaker: Lawyer Aaron Zhou, Partner of Han Kun Law Offices
The last keynote speech “IPO Pathway and Trend Analysis of Biotech Companies” was shared by Mr. Gao Yuan, Head of Investment Banking/Healthcare Division, Huatai United Securities. He believed that China's biotechnology sector was in its prime time, and very likely to surpass other countries in terms of the logic of China's industrial development and capital market. Innovative companies were highly possible to have complex capital structure (multiple listing, multiple splitting and multiple businesses). According to Mr. Gao, the listing rules are similar in different areas, therefore the company should take their condition into consideration when listing in China or foreign market. Mr. Gao also analyzed the characteristics of A-share and Hong Kong share in the aspect of listing verification and pricing.
Keynote Speaker: Mr. Gao Yuan, Head of Investment Banking/Healthcare Division, Huatai United Securities
The Forum set two panel discussions, one is “Experience Sharing of Investment & Financing of Biotech Companies” , moderated by Mr. Felix Fei, Life Science Sector Co-leader of Greater China & Deputy Assurance Leader of China Central & Partner of Assurance, Ernst & Young Hua Ming LLP. The panelists included Mr. Fred Mao, Partner of Frost & Sullivan, Mr. Liao Yixing, Vice President of Investment Banking/Healthcare Division, Huatai United Securities, Mr. Benjamin Qiu, Partner of Advantech Capital, and Mr. Anson Xu, Strategy & Transactions Partner of EY. Despite the down time of global macro economy after COVID-19, China's biopharmaceutical industry developed rapidly, which has promoted the entire capital market in a short time, and even changed the global pharmaceutical industry pattern in a long run. In recent years, with the rapid development of biotechnology, over-valuation had been seen by the sector, especially the leading enterprises facing obvious differentiation. However, the panelists believed that those unlikely to be replaced in the marketing needed to have high values, core technology, and products in the clinical needs, which would be hard to be replaced on the market and take differentiated advantages. Those companies, whether in the capital market or pharmaceutical market, will achieve good performance.
Panel Discussion: Experience Sharing of Investment & Financing of Biotech Companies
From left to right:
Mr. Felix Fei, Life Science Sector Co-leader of Greater China & Deputy Assurance Leader of China Central & Partner of Assurance, Ernst & Young Hua Ming LLP
Mr. Fred Mao, Partner of Frost & Sullivan
Mr. Liao Yixing, Vice President of Investment Banking/Healthcare Division, Huatai United Securities
Mr. Benjamin Qiu, Partner of Advantech Capital
Mr. Anson Xu, Strategy & Transactions Partner of EY
The second panel “Opportunities and Challenges of Capital Market Development for Biotech Companies” was moderated by Mr. Xue Bing, Partner of Han Kun Law Offices. The panelist included Mr. Chen Miao, Investment Partner of Huatai Purple Gold Investment, Mr. Raymond ZHU, Tax & Business Advisory Partner of EY, Mr. Zhang Li, Partner of Han Kun Law Offices, Mr. Zhao Pang, Assistant Vice President of Global Issuer Services in Markets, HKEX. The panelists believed that, there was still a certain gap for the pharmaceutical product pipeline between China and the United States. However, in recent years, China's industry has developed rapidly. The pharmaceutical policy reform in 2015 has brought great changes to the investment in China's pharmaceutical industry, leading to upsurge in innovation. The panelists suggested that start-up companies should have clear and long-term planning for financing approaches. Since 2020, various forms of financing have been booming, and pipeline promotion becomes the best way to demonstrate the company’s value, which has facilitated financing and IPO. Thanks to the interconnected capital markets of China’s mainland, Hongkong and the United States, a number of enterprises have completed their secondary listings, and the capital market will become more inclusive and acceptive to biotech enterprises. Finally, the panelists noted that it was necessary to take advantage of the current capital market and financing environment for “rainy days”, so as to complete their own financing and promote corporate pipelines. Meanwhile, head of biotech companies should make early plans for the core financial issues, no matter for the start-ups or those close to the IPO.
From left to right:
Mr.Xue Bing, Partner of Han Kun Law Offices
Mr. Chen Miao, Investment Partner of Huatai Purple Gold Investment Company
Mr. Raymond ZHU, Tax & Business Advisory Partner of EY
Mr. Zhang Li, Partner of Han Kun Law Offices
Mr. Zhao Pang, Assistant Vice President of Global Issuer Services in Markets, HKEX
Capital Market Innovation Services Forum has attracted extensive attention from the participants of biopharmaceutical industry. The experts shared inspired views in speeches and panel discussion to CBIIC participants, bringing wide-scale attractions and praise.
Capital Market Innovation Services Forum 1
Capital Market Innovation Services Forum 2