SGX to amend life sciences listing rules to make revenue exemption explicit
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Yong Hui Ting
THE Singapore Exchange (SGX) is amending its rules to clarify that companies seeking a mainboard listing through the life sciences framework do not need to be revenue generating.
The root of the confusion has existed since 2012, but came to the fore only this year, when an issue manager for a possible life-sciences company’s listing sought clarification from the exchange, said SGX Regulation (RegCo), the market operator’s autonomous regulation arm.
The case was referred to RegCo’s industry-led Listings Advisory Committee (LAC).
It all began with some amendments to SGX’s mainboard-listing criteria that inadvertently introduced the ambiguity, the LAC said in its decision.
SGX’s life-sciences framework waives certain listing requirements for biotech companies, allowing them to raise capital before they have commercialised their products. When the framework was introduced in 2009, it specifically waived the profitability and revenue requirements for a mainboard listing.
In 2012, when the mainboard-listing criteria were amended, the rules under the life-sciences framework were not adjusted to reflect the amendments in the mainboard-listing rules. As a result, the life-sciences framework as it stands provides only explicit exemptions for the profitability-related requirements for a mainboard listing.
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It is silent about an exemption from the requirement that new listings have operating revenue in the latest fiscal year and market capitalisation of at least S$300 million.
In granting the exemption for the potential new listing, the LAC explained that the intention of the life-sciences framework is “to allow for the listing of life-sciences companies that do not have a financial track record”.
SGX said that it intends to amend its life-sciences rules – currently under Listing Rule 210(8) – to clarify its stance.
Market watchers interviewed by The Business Times were generally welcoming of the move, noting that Hong Kong also has a similar requirement under Chapter 18A of its listing rules, which allows biotech companies with no revenue or profits to be listed.
Basil Lui, founding partner of August Global Partners and adviser to EDBI, noted: “I had received feedback from some of our portfolio companies that Hong Kong is quite clear… they have a specific ruling for life-sciences (companies).” *(see amendment note)
But the regulation requirements for these companies to list in Singapore weren’t as clear, noted Dr Lui, who also used to be managing partner, healthcare and emerging technology, at EDBI, the venture capital unit of Singapore’s Economic Development Board.
He added that conversations with SGX to clarify such listing rules started as early as May last year. It was noted that it would be more beneficial for some lawyers in the space to have something as clear as Hong Kong’s Chapter 18A.
Most professionals in the field – lawyers included – are positive about the move, saying that it provides clarity that companies in the life-sciences sector do not need to have recorded a profit in the latest completed financial year.
Raymond Tong, partner at Rajah & Tann Asia, said: “There is now more certainty about the requirements, and I believe this will encourage more companies to list on SGX.”
Sarah Tsao, head of corporate finance for South-east Asia at UBS, described the move as “timely”, and pointed out the rising interest from Singapore and Asean-based biotech companies in listing on SGX.
There are now 41 healthcare companies listed there – half of which are providers of medical equipment and supplies or pharma and biotech companies.
Biotech startup Mirxes said that it is weighing a secondary listing in Singapore, following its initial public offering on Hong Kong’s stock exchange.
Dr Zhou Lihan, co-founder and chief executive of Mirxes, noted that SGX had already allowed pre-revenue life-sciences companies to list before the new amendments, though such a fact has not been made clear, and few knew about it. Such a move would thus make the listing rules clearer for everyone, he felt.
Dr Zhou also added that there have been life-sciences companies from the East and the West interested in listing in Singapore, including his own. Some Hong Kong-listed companies have been considering a potential secondary listing on SGX as well, he shared.
*Amendment note: An earlier version of this article incorrectly attributed Dr Lui as adviser to EDB International. The article has been amended to correct this.
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