Chinese Healthcare and Biotech Firms Raised Capital amid Coronavirus Pandemic

China-based healthcare and biotech firms have reported a sharp increase in their capital accumulation this year since the country’s aging population and growing middle class are likely to spend more in healthcare concerning the widespread coronavirus impact.

With the surging investment in the healthcare sector, the country reported the healthcare-based companies have raised a record of $6.8 billion in fresh equity-linked transactions this year.

Booming Chinese Healthcare Industry

Citing the growing awareness on healthcare issues, Xia Yu, co-founder and CEO of a Chinese biotech firm, Akeso Inc. (Akeso), reflected, “Because of the epidemic outbreak, the biotech, healthcare industry has been valued more by everyone. People realize that no matter what the economy looks like, patients always need to see the doctor.”

Andy Lin, founding partner of a Chinese private equity firm, Loyal Valley Capital, explained, “After the virus outbreak, government and society will greatly increase spending on healthcare systems, which will benefit the industry.”

According to Refinitiv data, Chinese biotech and healthcare firms have raised $2.1 billion in combine from initial public offerings (IPOs) in mainland China, Hong Kong, and the US this year, which was nearly double the rate from the last year. The data also showed that the healthcare-related companies have been a driving force in Hong Kong this year, accounting for 30% of the total $2.78 billion raised via IPOs in the city.

Attributing the rise of investors’ confidence in biotech firms, Cathy Zhang, a managing director at Morgan Stanley and head of healthcare for Global Capital Markets in Asia, “It is really the scarcity value. Healthcare right now is probably the most active sector (in the capital markets).”

Chinese Companies Raising Funds

To mention some of the transactions and among the companies that successfully raised funding through IPO, Akeso, which focuses on oncology and immunology, raised $330 million last month in the city’s largest IPO this year. Other major transactions included InnoCare Pharma’s $288 million IPO in March and medical devices maker, Peijia Medical’s (Peijia) $302 million deal this month.

According to public filings of the deals, both Akeso and Peijia’s offerings were heavily oversubscribed by retail and institutional investors, with the retail tranche being over 600 times and 1,000 times covered respectively.

As showing interest to biotech companies from investment banks, the executive director at Morgan Stanley, Zhang stated, “For (pre-revenue) biotech companies, it is very important that you are able to continuously raise money after the IPO… The sector’s stocks have done quite well, so obviously biotech companies want to take advantage of the share price to continue to raise capital.”

Refinitiv data showed, already-listed firms have also raised $3.3 billion in follow-on share sales and $1.3 billion from convertible bonds this year, against $1 billion and $712 million respectively year before. Nisa Leung, the managing partner and leader of the healthcare sector at China-based Qiming Venture Partners, observed, “It is actually a testing ground for their abilities.”

Leave a Reply

Your email address will not be published. Required fields are marked *