On 24 April 2018, The Stock Exchange of Hong Kong Limited (the “Exchange”) published the consultation conclusions and announced the new rules to: (a) permit listings of biotech companies that do not meet any of the Main Board financial eligibility tests; (b) permit listings of companies with weighted voting right structures; and (c) establish a new concessionary secondary listing route for Greater China and international companies that wish to secondary list in Hong Kong.
The new rules broadly follow the proposals set out in the consultation paper published in February 2018 (see our client alert of 5 March 2018), with a few amendments to reflect comments from consultation respondents on certain details. The new rules have come into effect on 30 April 2018, from which date companies seeking to list under the new rules may submit formal listing applications to the Exchange.
This client alert gives you a quick summary of the key points of the new Chapter 18A of the Main Board Listing Rules (as supplemented by the Exchange’s Guidance Letter HKEX-GL92-18) which sets out additional listing conditions and other requirements for biotech companies that do not meet any of the Main Board financial eligibility tests.
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Biotech Advisory Panel
The Exchange is in the process of assembling a panel of industry experts to form a Biotech Advisory Panel to assist it, on an individual and “as needed” basis, in reviewing listing applications and assessing the suitability (including sustainability) of biotech companies applying for a listing under Chapter 18A. The Exchange will announce the list of members of the Biotech Advisory Panel on its website in due course.
Biotech companies intending to seek a listing under the new Chapter 18A should note that while the Exchange has provided guidance in Guidance Letter HKEX-GL92-18 on the factors that it will take into account when considering the suitability for listing of biotech companies, the Exchange retains the discretion to find a company not suitable for listing even if it satisfies all those factors.
It should also be noted that not all types of biotech products are automatically accommodated by the rules under the new Chapter 18A. Biotech products which do not fall into the categories set out in Guidance Letter HKEX-GL92-18 will be considered by the Exchange on a case by case basis. The Exchange has indicated that in these circumstances, it will determine whether the applicant can demonstrate that it is subject to a sufficiently robust regulatory process that would provide investors with sufficient frame of reference in order to make an informed investment assessment as to value. In particular, it may accept applicants that conduct clinical trials that do not strictly follow the traditional classification of Phase I and Phase II trials, e.g., (i) trials that are equivalent to entering Phase II trials whose results demonstrate an acceptable safety profile and provide preliminary evidence of efficacy; and (ii) combined Phase I/II trials.
In case of any doubt, potential applicants may wish to make enquiries with the Exchange prior to submitting their listing applications.