HONG KONG – China's leading contract research organization (CRO), Wuxi Apptec Co. Ltd., is set to debut on the Shanghai Stock Exchange via a $910 million IPO for its core small-molecule CRO business.
The China Securities Regulatory Commission (CSRC) approved Wuxi's IPO proposal only seven weeks after an updated application was filed on Feb. 2. The CSRC disclosed in early March that it would accelerate the A-share listings of domestic unicorn companies– a term that refers to a startup company that has achieved a valuation exceeding $1 billion. And Wuxi Apptec is definitely considered as one.
The CRO is the second firm after tech giant Foxconn to enter the "fast approval channel" for IPOs in China.
"Wuxi Apptec is engaged in innovating drugs, which is encouraged and supported by the Chinese government," Zhang Keran, equity analyst from Huarong Securities, told BioWorld Asia. "It is no surprise that it did not take long for the company to obtain the listing approval."
The biotech giant intends to raise approximately ¥5.741 billion (US$914 million) by issuing no more than 104 million shares. The offer price per share is estimated at ¥55.09 (US$8.80).
Wuxi Apptec spokesperson Sunnie Sun declined BioWorld Asia's request for further comments on the listing. But according to the company's prospectus, a significant portion of the proceeds will be used to expand its drug safety evaluation center in Suzhou and its chemical R&D laboratory in Tianjin. The rest will be used to enhance its R&D capacities.
The prospectus also revealed that Wuxi Apptec recorded revenue of ¥5.68 billion (US$903 million) for the first nine months of 2017, with net profits of ¥1.06 billion (US$169 million). To compare, the company reported net profits of ¥975 million (US$155 million) in the previous year.
In 2007, Wuxi Pharmatech, the predecessor of Wuxi Apptec, was listed on the New York Stock Exchange with stock code WX. It then became the first Chinese tech firm to privatize in New York at the end of 2015 with a valuation of $3.3 billion at the time. (See BioWorld Today, Nov. 15, 2015.)
A draft listing application of Wuxi's biologics unit, Wuxi Biologics Inc., filed to Hong Kong Stock Exchange in January 2017 said the company delisted from the U.S. market so the "management team can focus more on improving the company's long-term financial performance."
That track record may also help explain why Wuxi Apptec got through the reviewing process for the IPO in such a short amount of time.
"Since the company was listed in New York before, it had already gone through due diligence and verification overseas," said Zhang. "The proven track record made it easier for it to obtain the listing approval in China."
Wuxi Biologics was listed on the Hong Kong Stock Exchange (HKEX) in June 2017. Its market cap has surged from $4.1 billion on its debut to $11.6 billion on April 3, 2018.
Wuxi's small-molecule manufacturing subsidiary, Syn-The-All Pharmaceuticals Co. Ltd., completed its $80 million listing on the New Third Board, the over-the-counter stock exchange in China, in April 2015. (See BioWorld, July 14, 2015.)
Now the Wuxi empire can be found on the China A-share market, the New Third Board, and the HKEX, which implies that the company is seizing markets with potential to secure better capital access.
"The investment prospects of Wuxi Apptec are bullish. There are not too many prominent players on the market, so the company definitely has the appeal to the investors," said Zhang.
The CRO's shareholders comprise prominent domestic names such as Ping An Insurance (Group) Co. of China Ltd. and Jack Ma, founder of e-commerce giant Alibaba Group.
Shanghai Golden Pharmaceutical Investment Management Co. Ltd., which holds 5.26 percent of Wuxi's shares, is a subsidiary of Ping An. Shanghai Yunfeng Hengyuan Investment Center, another shareholder, has shares indirectly owned by Jack Ma.
Before giving Wuxi Apptec the greenlight for a Shanghai IPO, the CSRC raised a few concerns regarding issues such as the company's transactions, suppliers, and source of technology since members of the management also own parts of other companies in similar business areas, which may lead to industry competition.