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Chinese contract research organization Joinn Laboratories (China) has won the green light for a secondary listing in Hong Kong last week.
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The Beijing-based company is seeking to raise between US$500 million (HK$3.9 billion) and US$600 million through a Hong Kong public sale, IFR reported. Joinn Laboratories has been listed on the Shanghai Stock Exchange in August 2017. Its share price has risen by more than 11.5 times to 156.7 yuan (HK$187.6) since its debut.
The company plans to start book-building in mid-February and begin trading at the end of this month.
Joinn Laboratories is the largest CRO for non-clinical safety assessment studies in China, with a market share of 15.5 percent by revenue in 2019, the company says in its prospectus citing consulting firm Frost & Sullivan.
CRO is an organization providing pharmaceutical research services outsourced by medical firms.
It plans to use the net proceeds to build new laboratories and facilities in Suzhou, Jiangsu province, Guangzhou, Guangdong province and Chongqing, recruit professionals, develop technologies, as well as strengthen the US operations. A part of the net proceeds will be for potential acquisitions and broadening CRO services offerings with a focus on clinical trial services.
Specialized in pharmacology and toxicology studies for innovative drugs, Joinn Laboratories generated more than 99 percent of revenues from non-clinical studies services. The company mainly offers drug safety assessment, drug metabolism and pharmacokinetics studies, as well as pharmacology and efficacy studies to pharmaceutical and biotech firms around the world.
Joinn Laboratories says its revenue grew from 301.28 million yuan in 2017 to 639.38 million yuan in 2019, with a compound annual growth rate of 45.7 percent. For the first nine months last year, revenue surged by 83.5 percent to 631.5 million yuan, largely due to the acquisition of Biomere, an American pre-clinical CRO, in a US$27.3 million deal.
Massachusetts-based Biomere generated 157.8 million yuan in revenue during the first three quarters last year, accounting for 25 percent of the total revenues. Joinn Laboratories also says it plans to lease and upgrade its facilities in northern California.
Net profit, meanwhile, jumped by 65.4 percent to 142.94 million yuan for the January to September period last year.
BOC International (China) expects Biomere to become the new revenue driver of Joinn Laboratories, helping it attract more US orders. The investment house expects the company's revenue will rise by 49 percent annually from 2019 to 2022, with a 47 percent increase in adjusted net profit.
However, Joinn Laboratories' gross profit margin fell to 50.5 percent for the nine months ended September last year, from 55 percent in 2017, dragged down by increasing costs of non-human primate research models and Biomere's business with a lower profit margin.
The company says the Covid-19 pandemic temporarily disrupted its operations, but it did not cause any cancelation of ongoing projects and material issues with the collection of customer receivables. Its US subsidiary Biomere has taken a proactive approach to protect employees and business, it adds.
But Joinn Laboratories warns that the Sino-US trade tension may have a material adverse effect on its operations in the long term, adding there is no sanction in place related to the CRO industry. "Our potential acquisitions and investments in the United States, if any, may be affected by heightened regulatory requirements or scrutiny if the current US-China disputes continue to escalate," the company cautions.
Joinn Laboratories says it plans to keep a dividend payout ratio of no less than 15 percent of net profit after listing.
CLSA Capital Markets is the sole sponsor of the IPO.
