Hong Kong – China’s Kangji Medical Holdings Ltd. has made a memorable debut on the Hong Kong Stock Exchange (HKEX), with shares jumping 98.84% from their opening price of HK$13.88 (US$1.79) to close at HK$27.60 (US$3.56) on the first day of trading on June 29.
The close marks the end of a successful journey to listing for the company, which produces minimally invasive surgical instruments and accessories for use in obstetrics and gynecology, general surgery, urology, and thoracic surgery.
Kangji priced the 225.4 million primary shares on offer at HK$13.88, the top of the range during the previous week, raking in HK$3.59 billion (US$463.17 million). It also said in a press release that strong support was received from cornerstone investors Fidelity Investments, Blackrock, Lake Bleu Capital, Hillhouse Capital, Cormorant, Orbimed Capital and Oaktree Capital.
A company spokesperson explained to BioWorld that Kangji chose to list in Hong Kong “in order to maximize the long-term development of the company and the interests of shareholders” after “detailed and careful planning and consideration.”
The spokesperson added that “the Hong Kong market is the main place for listing and fundraising in Asia … as an international financial center in China, Hong Kong has its unique advantages and is the main link between China and the global capital market. Relying on favorable factors such as a sound judicial system, international standards and practices, a strong capital pool, active participation of institutional investors and retail investors, and gathering of elites in finance, Hong Kong has always been able to rank among the global fund-raising markets.”
The company produces minimally invasive surgical instruments and accessories for obstetrics and gynecology (OBGYN), general surgery, urology and thoracic surgery. Founded in China in 2004 under the name of Hangzhou Kangji Medical Instrument Ltd., the company’s products can be found in 3,400 hospitals across the country, as well as hospitals in 42 other countries and regions.
Kangji said it will use the proceeds to fund research and development activities, invest in sales and marketing, fund potential investments as well as acquisitions within the next five years, and as working capital and general corporate purposes. With four products currently in the registration process and five in the design and development stage, the company aims to launch six products, including disposable ultrasonic scalpels, absorbable ligation clips and laparoscopic staplers, from its pipeline between 2020 and 2021.
The COVID-19 pandemic hit the company hard, with lockdown measures causing the temporary suspension of production as well as reduced demand from hospitals, as “many MIS were rescheduled to avoid cross-infections and hospital resources were redirected to support COVID-19 treatment during this period,” according to the spokesperson. But despite the challenges, the company managed to eke out a 0.5% increase in gross profit margin for the first quarter of the year compared to 2019.
The company is cautiously expecting to be minimally impacted by the pandemic for the rest of the year. As well as ramping up safety and hygiene in the company’s offices and manufacturing facilities, a newly established committee has been tasked with handling COVID-19-related contingencies and coming up with a “company-wide COVID-19 emergency response plan,” the spokesperson added. But with Beijing and other parts of the country re-imposing some lockdown measures to curb an outbreak originating from the Xinfadi market and the number of global cases passing the 10 million mark as of June 29 according to Johns Hopkins University data, the rest of 2020 looks uncertain.
With just four health care IPOs completed this year to date raising $1.25 billion for the sector, Hong Kong faces fierce regional competition from Shanghai’s Science and Technology Innovation Market (STAR) board, launched in 2019.
However, an analysis by law firm Pinsent Masons argues that the Hong Kong listing rules amended in April 2018 to allow pre-revenue biotech companies, which previously did not meet the requirements for a public listing, to list on the Hong Kong Stock Exchange, will continue to attract companies to the HKEX.
The analysis stated that as of April 30, 2002, 16 such companies, including Henlius and Venus Medtech, listed on the HKEX, with nine of the companies, who raised a combined $1.69 billion, listing in 2019.
Meanwhile, radiotherapy provider Hygeia Healthcare also made its debut in Hong Kong on Monday, raising HK$2.2 billion after it was oversubscribed more than 600 times. Meanwhile, immuno-biotherapy company Immunotech Biopharm is currently fundraising for its listing and aims to debut on the HKEX on July 10.