10 Key Things to Know about Listing Pre-revenue Biotech Companies on the Hong Kong Stock Exchange

Biotech companies which cannot meet the Main Board’s financial eligibility tests for listing can list under new Chapter 18A of the Main Board Listing Rules which caters for pre-revenue biotech companies.  To be eligible for listing under Chapter 18A, biotech companies must be primarily engaged in the research and development (R&D) of biotech products, processes or technologies and satisfy the requirements set out below.

  1. They must have HK$1.5 billion market capitalisation at listing and available working capital to cover 125% of the group’s costs for 12 months after listing.

  2. A track record of 2 financial years in the same line of business under substantially the same management. Change of ownership in the previous 12 months may impact suitability for listing.

  3. The primary reason for listing must be to finance R&D to bring Core Product(s) to commercialisation. A Core Product is one which must be approved for sale by the US FDA, China FDA or the European Medicines Agency after clinical trials.

  4. Company must have been primarily engagement in R&D for the development of its Core Product(s) for 12 months before listing.

  5. Patent(s), patent application(s) and/or intellectual property for its Core Product(s) must have been registered.

  6. At least one Core Product must have been developed beyond the concept stage – i.e.

    • Small Molecule Drugs and New Biologic Products - completed Phase I clinical trials and no objection to Phase II

    • Core Products that are biosimilar- at least 1 clinical trial on humans completed and no objection to Phase II to demonstrate bio-equivalency

    • Medical and Diagnostic Devices - Class II medical device, 1 clinical trial on humans completed and no objection to Phase II

  7. Other Biotech Products – considered by the Stock Exchange case by case.

  8. Prior meaningful third party investment from sophisticated investor(s) 6 months before listing and continuing at listing. Meaningful investment is:

    • Market cap of HK$1.5-3 bln – 5% of issued share capital

    • Market cap of HK$3-8 bln – 3% of issued share capital

    • Market cap of >HK8 bln – 1% of issued share capital

  9. The minimum 25% public float cannot include IPO shares subscribed by cornerstone investors or existing shareholders.

  10. Fundamental change in the company’s main business is prohibited, except with Stock Exchange consent.