Pharmaron keeps focus on North America, Europemoney-glitz | Tereza Cai 18 Nov 2019
Pharmaron Beijing seeks to raise up to HK$4.6 billion in its Hong Kong listing, 10 months after listing in the Shenzhen Stock Exchange this January.
It raised 432.9 million yuan (HK$483.5 million) in net proceeds in the A-share market, while its share price has since almost quintupled from 7.66 yuan to 54.29 yuan on Friday, giving it a market capitalization of 33.92 billion yuan.
The company secured an aggregated subscription of US$160 million (HK$1.26 billion) from five major investors including state-backed China Structural Reform Fund.
Established in 2004, Pharmaron Beijing has been riding on China's booming pharmaceutical discovery industry. It became the second-largest pharmaceutical research and development service platform in China and one of the top three drug discovery service providers globally in terms of total revenue in 2018, according to a commissioned report by Frost & Sullivan.
The report says China is the second-largest pharmaceutical market with a market size of US$231.6 billion in 2018. Along with the trend for large China-based pharmaceutical companies to shift their focus from generic drugs to innovative drugs, and the rapidly increasing number of biotech companies in China, it is believed that demand for pharmaceutical research and development services is strong.
The pharmaceutical R&D mainly consists of four stages: drug discovery, preclinical development, clinical development, and commercialization.
Pharmaron Beijing's business is under three major categories.
Laboratory services, which made up 64.8 percent of the total revenue in the first half this year, mainly cover for drug discovery and preclinical development stages.
Clinical development services, which contributed 1.6 percent of total revenue in the first half, mainly cover the clinical development stage.
CMC, an important and detailed section in a dossier to support clinical studies and marketing applications, covers the preclinical, clinical and commercial manufacturing stages.
Pharmaron Beijing is leading in drug discovery and early-stage clinical development, while it expects to expand capabilities in late-stage clinical development and commercial manufacturing.
As a contract research organization, Pharmaron Beijing focuses on providing pharmaceutical R&D services to companies in pharmaceutical markets. The penetration rate of China's CRO market reached 35.8 percent in 2018, which is expected to rise to 49.3 percent in 2023, according to Frost & Sullivan.
Pharmaron Beijing has an aggregate of over 1,000 customers, while the top 20 global pharmaceutical companies contributed to 31.3 percent of its revenue in 2018.
During the first six months this year, about 59.1 percent of the total revenue came from North America, and 24 percent was from Europe, while 11.7 percent was from the mainland. However, a significant portion of its costs is denominated in yuan.
The company cautions that margins will be under pressure when the yuan appreciates against the US dollar.
It plans to use 30 percent of the net proceeds for expanding capabilities of laboratory and manufacturing facilities in the mainland, and 10 percent for funding further overseas expansion, while 20 percent will be for establishing R&D services platform.
About 15 percent is for expansion in clinical development services, while 15 percent is for potential acquisitions, and the rest for general corporate and working capital purposes, the company says.