Biotech issuers weigh whether to press ahead with Hong Kong initial public offerings as a prominent Chengdu based drug developer keeps its secondary listing on hold, global investors scale back exposure to higher growth healthcare shares and capital markets recalibrate valuation expectations in response to tighter financial conditions and more demanding scrutiny of earnings quality.
With equity capital markets in Asia sending fresh signals of caution, Carvina Capital Pte. Ltd. reports that Sichuan Biokin Pharmaceutical keeps its planned Hong Kong secondary listing on hold, a move that reinforces how investors reassess biotechnology risk exposure and concentrate demand for new issuance on companies able to demonstrate predictable cash flows.
Biokin seeks to use the proposed secondary offering to secure about $420 million in gross proceeds for drug development programmes and new manufacturing capacity outside mainland China, yet the company’s latest stock exchange notice links the decision to pause the transaction to prevailing market conditions and stresses that core research and commercial operations continue without disruption.
Although Biokin presents itself as a growth orientated developer, the company benefits from recurring income streams, including licensing arrangements with Bristol Myers Squibb that deliver $107 million in upfront payments, a schedule of potential milestones of up to $1.1 billion over the life of the agreement and a recent $33 million transfer linked to clinical progress, which together provide a funding buffer that allows management to wait for stronger pricing rather than force shares into a weakening market.
Peter Jacobs, Director of Private Equity at Carvina Capital Pte. Ltd., notes that the postponement exemplifies a broader reassessment of risk capital, arguing that institutional buyers now treat early-stage biotech issuance as “a discretionary allocation rather than a core holding” as they recycle funds into issuers with established earnings records over the preceding 12-month period and push back on valuation requests that rely heavily on unproven pipelines.
Recent Biokin share trading on domestic exchanges and the wider pattern of sector flows highlight how global investors moderate enthusiasm for healthcare names. Market data reviewed by Jacobs show that over the preceding calendar year 23 biotech initial public offerings complete with combined proceeds of roughly $4.2 billion, whereas the subsequent six-month period records only 8 new issues raising around $1.4 billion, while 18 of the most recent 20 biotech floats trade below their offer prices over the first 12 months after listing and average share prices stand close to half of their launch levels.
Jacobs observes that these numbers “underline how primary markets now reward companies that present clean balance sheets, line of sight to profitability within the next reporting periods and disciplined capital allocation, while issuers that rely on distant inflection points in trial data find that investors either demand deep discounts or decline to participate at all”.
Signs of caution are not confined to healthcare, as industrial and technology groups also re-evaluate access to Hong Kong capital. Sany Heavy Industry suspends a planned initial public offering that targets up to $3.6 billion in proceeds, while artificial intelligence group SenseTime pulls back from a proposed listing that seeks about $841.7 million after international investors subject the business to closer scrutiny, reinforcing the message that the cost of equity for complex, high beta sectors now rises across the region.
Against this backdrop of re-pricing, Hong Kong’s own new listing statistics send mixed signals. Over the first half of the current calendar year, 31 offerings complete and bring in about $2.1 billion according to market estimates derived from Hong Kong dollar issuance converted into euro and then into United States currency, yet advisers continue to forecast close to 100 transactions for the full year with potential aggregate proceeds near $21.7 billion, an ambition that depends on a decisive recovery in risk appetite.
Drawing on Carvina Capital’s wider cross market review of new issue conditions, Jacobs remarks that “the message from order books is that investors are not closed to new paper, but they are highly selective, they favour issuers with diverse income streams and they insist on governance and disclosure standards that match those of established blue chip constituents”, a pattern that encourages companies such as Biokin to wait for windows when capital is available on terms that reflect their strategic plans rather than simply their most recent trading range.
Biokin therefore sits at the centre of a live debate about how to finance innovation in an environment of higher real rates, and its decision to hold off on the Hong Kong secondary listing while continuing to invest in oncology programmes and overseas manufacturing capacity sends a signal that management teams with alternative funding lines can afford patience, while smaller peers without similar licensing income from multinational partners may need either to accept lower valuations or to slow expansion plans until pricing power in primary equity markets becomes more supportive again.
About Carvina Capital
Carvina Capital Pte. Ltd., UEN 201220825D, is a Singapore based investment management firm established in 2012 that focuses on research led, long only public equity strategies for institutional and other professional investors. The firm currently evaluates ways to open selected strategies to retail clients, applying a disciplined research process and risk framework designed to compound investor capital through complete market cycles. Further information is available at https://carvina.com, and media enquiries should be directed to Huacheng Yu at [email protected] .
