HONG KONG – A number of relatively young biopharma companies plan to issue shares on China's stock markets over the next few months, prompted by the lifting late last year of a ban on new issues.

Among the companies that the China Securities Regulatory Commission (CSRC) has approved to launch initial public offerings since May, 23 are in the biotech space and five of them are biopharmaceutical companies and contract research organizations (CROs).

Throughout 2013, financial regulators in China maintained a freeze on new issues, but lifted it at the end of the year. It didn't lead to a flood of new listings, but there was a clear move by a few dozen companies to forge ahead.

Investors in early stage biotech companies often rely on some kind of public listing to exit their investments, so the reopening of the market for IPOs has been a relief for some. While the new issues have remained subdued in the months since the ban was lifted, that's likely to change going forward, driven both by the need for funding and the current global bull market for biotech stocks.

"The scale of biotech IPOs will likely to grow bigger," Du Zuoyuan, a health care stock analyst at Guosen Securities, told BioWorld Asia. "This is because of the industry uptrend."

Biotechnology stocks have had a good run over the past three years, said Billy Cho, head of Asia Healthcare at Citi, speaking during BioKorea 2014 in Seoul in late May. And most companies that have issued shares in the U.S. have done well after their IPOs.

EVIDENCE OF PROFITS IS REQUIRED

Cho is based in Hong Kong, which has a world-class stock market but one that is not particularly welcoming to early stage biopharma companies due to requirements that companies show three years of profits before going public. Most companies in this space often go public before selling a single product, and so cannot overcome this hurdle. So early stage companies are looking elsewhere to list.

"I remain very optimistic about the future of health care, particularly in this part of the world," said Cho. "I am not sure how long the market will stay open. If you ask 10 bankers or 10 economists you'll get 10 different answers. But the market is open now and you should strike when the iron is hot."

The companies in China that are now going public have a track record, something that the CSRC also requires, and they are hoping to benefit from the ongoing upswing in the market.

Among the biopharmas going public over the next few months in China is Chengdu Kanghong Pharmaceutical Group Co. Ltd., which has been planning an IPO since 2010, but was kept back by the recurrent ban on new offerings.

Based in Chengdu, Kanghong develops, manufactures and markets traditional Chinese medicines, as well as a wide pipeline of small molecules and biological drugs. It has nine subsidiaries including Sichuan Jishengtang Pharmaceutical Co. Ltd., Chengdu Hongda Pharmaceuticals and Chengdu Kanghong Biological Science & Technology Co.

The CFDA approval of Kanghong's monoclonal antibody (MAb) Conbercept ophthalmic injection in December 2013 gave the company a huge confidence boost to launch its IPO. Conbercept, a VEGF receptor antagonist for wet age-related macular degeneration (AMD), is the first novel MAb in China with global intellectual property rights. It has blockbuster potential with 10 million to 30 million potential patients in China alone.

Conbercept is expected to be the biggest contributor to Kanghong's revenue. Attracted by a large market for the product abroad, the company is considering out-licensing the drug. In March, Kanghong made its first sale of Conbercept to more than 20 provinces in China.

Kanghong plans to issue as many as 60 million new shares. The company said profits in 2013 added up to ¥372 million (US$60 million). Kanghong said in its IPO prospectus that it would invest the proceeds on improving its sales network and the reconstruction and expansion of its R&D center as well as the Jishengtang's Chinese medicine production line.

Another company in the IPO queue is Beijing Science Sun Pharmaceutical Co. Ltd., with profits for 2013 close to ¥190 million (US$30 million). It plans to sell 30 million new shares.

Founded in 1999, Science Sun focuses on the R&D, manufacture and commercialization of biological drugs such as active protease, active peptide and active polysaccharides. The company's pipeline centers on cardiovascular diseases, immune system diseases and nervous system diseases. Its best seller is Saisheng, a sodium deoxyribonucleotide injection used to treat acute and chronic hepatitis. Saisheng accounted for about 34 percent of the company's revenue in 2013, selling more than ¥160 million (US$26 million).

Saibai (alprostadil), is another major product for Science Sun. It is used to treat myocardial infarction. Saibai sold ¥60 million (US$10 million) in 2013, taking up more than 12 percent of the total revenue.

Asymchem Laboratories Co. Ltd. in the city of Tianjin is also poised to list. The company will issue 30 million new shares. The money will mainly go to the construction of Asymchem's R&D center and manufacturing facilities in Tianjin. The company's total profits for 2013 were more than ¥100 million (US$16 million).

Asymchem is a contract research organization that offers services from preclinical stage to the commercialization of the drugs. It provides global pharmaceutical companies integrated services from drug discovery, commercial manufacturing to regulatory filings.

Two companies that have submitted IPO prospectuses to the CSRC since May are Sunflower Pharmaceutical Group Co. Ltd. and Guangzhou Boji Medical & Biotechnological Co. Ltd., which will issue 36.5 million shares and 16.67 million shares respectively.

Sunflower focuses on traditional Chinese medicine but also works on biologics while Boji serves as a CRO.