Guangzhou Innogen Pharmaceutical’s shares surged nearly 4x to HK$72 (US$9.20) on their Hong Kong trading debut, compared with its IPO price of HK$18.7 (US$2.39).

Innogen, which develops drugs for diabetes and metabolic diseases, raised HK$683 million (US$87.3 million) in its IPO.

The listing comes as Hong Kong-listed biotech firms have seen strong investor interest, with the sector’s average price-to-sales ratio rising to 18.8x from 8.7x in December 2024, CCB International data showed.

Innogen is the first firm to list under Hong Kong’s new IPO rules that lowered public float requirements.

The company’s IPO was oversubscribed over 5,340x by retail investors, but the new rules meant it did not need to increase the retail allocation.

Innogen plans to use most of the IPO funds for clinical trials and the commercial launch of its main product, which recently received approval in China for type 2 diabetes.

🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ Hong Kong biotech IPOs are experiencing unprecedented investor enthusiasm

The success of Innogen’s debut reflects a broader surge in Hong Kong’s biotech market, where major companies have delivered an average of 137% cumulative returns this year according to CCB International 1.

This momentum extends beyond Innogen, with recent debuts showing strong performance: Ab&B Bio-Tech gained 158% on its first trading day, while Nanjing Leads Biolabs and TransThera Sciences jumped 88.3% and 263.5% respectively since their debuts 1.

The enthusiasm is driving up valuations significantly, with investors now willing to pay 18.8 times sales for biotech companies compared to 8.7 times in December 2024 1.

This increase in the price-to-sales ratio indicates that investors are focusing on future growth potential rather than current revenues, particularly relevant for pre-revenue biotech firms using Hong Kong’s Chapter 18A listing rules.

2️⃣ Recent regulatory changes are making Hong Kong more attractive for biotech IPOs

Innogen became the first company to benefit from new Hong Kong exchange rules implemented on August 4 that reduced public float requirements for IPOs 1.

Under these updated regulations, Innogen didn’t need to increase retail investor allocations despite being oversubscribed more than 5,340 times. This demonstrates how the changes give companies more flexibility in managing their offerings 1.