Chinese Biotech Is Making Billionaires

Traditionally, investors and employees alike look to get involved in or employed with companies that turn a profit year after year or have a real potential to hit the market running. As a result, one would think that to be a billionaire, you would have to work for a company that continues to produce positive income year after year.  In China, it appears that is not the case.

The majority owner of Ascletis Pharma Inc., Jinzi Wu, is estimated to have a net worth of around $1.1 billion as a result of pricing for an initial public offering (IPO), which will provide $400 million in funding to the company.  The maker of HIV and liver-cancer pharmaceuticals is expected to begin trading on the Hong Kong Exchange on August 1st.  The company has received extensive backing from two large rounds of investing which have helped the company raise $155 million from big firms such as Goldman Sachs.  However, at the end of 2017, the company reported tremendous loses around $13 million as the company has yet to generate any actual sales.

With the loses in mind, does the company truly have the ability to go public and how is the CEO amassing such a fortune?  The company is doing so by taking advantage of the listing rules on the Hong Kong Exchange. It is the first biotech company to do so and is likely paving the way for future companies follow suit.  The new rules, which took effect on April 30th, 2018, allow biotech firms without revenue or profit to list in Hong Kong. The Hong Kong Exchange itself established the new listing rules in order to help establish itself as a place to finance the increasing number of drug developers in China.  Currently, New York is the established center for biotech IPOs, but Hong Kong is already seeing significant volume coming its way with nine biotech companies filing for listing so far and more planning to follow.  In fact, some of these companies dropped their plans for a US IPO in favor of the Hong Kong Exchange to remain close to home and take advantage of this new opportunity.

Jinzi Wu, although under scrutiny for his net worth and profit losses, is certainly qualified to fulfill his role.  In 1996, Wu attended the University of Arizona where he received a doctorate in cancer biology. In addition to founding Ascletis, he also worked for a number of biotech companies including Novartis AG and Ambrilia Biopharma Inc.  When publicly asked about the IPO, Wu expressed that it was quite difficult to assess the value directly.  He said, “it’s always risky to invest in pre-revenue biotech firms because what they are working on is innovative. But you will only be rewarded if you take the risk.”

Currently, Ascletis, which was founded in 2013, is working primarily on four drugs.  They have two hepatitis C virus drug candidates which are approaching the commercial state and an HIV drug which has passed a few clinical trials. The last drug they are developing is to fight liver cancer and has completed the first phase of clinical trials.

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