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Monday, October 28, 2019, 18:00
HK's biotech IPO craze continues as Ascentage soars 57%
By Bloomberg
Monday, October 28, 2019, 18:00 By Bloomberg

Ascentage Pharma Group International went from Hong Kong’s hottest initial public offering this year to a huge debut as investors continue to embrace unproven Chinese health-care companies.

The developer of cancer and hepatitis B therapies soared as much as 57 percent on Monday before paring the gain to 9.9 percent at the close. The firm’s retail portion of its offering was more than 750 times oversubscribed last week, the highest ratio among Hong Kong listings this year, according to data compiled by Bloomberg.

Investors have a particular interest in the health-care sector, especially biotech firms given they usually have a good growth outlook

Albert Yu, Analyst at Zhongtai Financial International Ltd

ALSO READ: Giving China the biotech advantage

The surge comes after Hong Kong relaxed its rules last year to encourage biotech firms with no record of profit or revenue to list. The other eight such companies that debuted since that change gained an average 18 percent from their offer prices, Bloomberg-compiled data show.

“Investors have a particular interest in the health-care sector, especially biotech firms given they usually have a good growth outlook,” said Albert Yu, an analyst at Zhongtai Financial International Ltd. “The company should be able to generate strong profits once it is able to commercialize its products.”

China is investing billions in its hospitals and has revamped its drug approval system to get novel medications quickly to its population. The country has the world’s biggest patient pool for diabetes, and almost 4 million people are diagnosed with cancer each year.

READ MORE: Henlius Biotech raises US$410m in HK IPO

With the government driving down the prices of generic medicines, investors see biotech companies that develop innovative treatments as having the most profit potential in China’s US$132 billion pharmaceutical market. Last year, venture capital firms poured US$17.6 billion into Chinese biotech start-ups.

Ascentage’s debut also provided a boost to other drug stocks on Monday. Wuxi Biologics Cayman Inc advanced 5.5 percent, while Sino Biopharmaceutical Ltd gained 1.2 percent and Sinopharm Group Co added 3.2 percent.

IPOs in Hong Kong have been well-received in general this month, with the 18 new listings before Ascentage gaining an average of 29 percent on day one.

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