China-focused biotech LianBio raises US$325m in US IPO

[HONG KONG] Biotechnology firm LianBio raised US$325 million in an initial public offering (IPO), according to a statement, potentially opening a narrow path for US listings by companies operating primarily in China.

The company sold 20.3 million American depositary shares (ADS) for US$16 apiece after marketing them for US$15 to US$17, according to a statement Sunday. Each ADS represents one ordinary share.

At the IPO price, LianBio would have a market value of US$1.7 billion based on the outstanding shares listed in its filings with the US Securities and Exchange Commission (SEC). Accounting for employee stock options and warrants, the company would have a fully diluted value of about US$1.9 billion.

The biotech company was founded by New York private equity fund Perceptive Advisors, and the firm and its affiliates will control 50.5 per cent of LianBio following the offering, according to its prospectus. LianBio, which lists headquarters in both Princeton, New Jersey, and Shanghai, does business primarily through subsidiaries in China.

US IPOs by Chinese companies have nearly vanished since July, when Beijing announced a cybersecurity probe of Didi Global just days after its New York listing. The escalation of an apparent crackdown on China's corporates wiped about US$1 trillion off the aggregate market value of its listed firms.

The SEC has recently issued detailed queries to companies with links to China, and even Hong Kong-based companies with little to no presence in the mainland have been warning about risks.

Including Didi's US$4.4 billion June 30 IPO, 46 companies based in China and Hong Kong raised more than US$15 billion in the first half of the year in the US, according to data compiled by Bloomberg. Since then, only 5 such companies have raised US$329 million combined, the data show.

The similarities between LianBio's offering and Chinese companies like Didi are limited. The biotech firm doesn't hold personally identifiable data on patients in China, nor does it have a variable interest entity (VIE) in its corporate structure, according to the prospectus.

VIEs create a foreign shell company outside of China and were widely used by issuers from the country until falling under close scrutiny by Beijing authorities amid stringent new rules on overseas listings.

Still, LianBio said in the first page of its prospectus that there are "significant legal and operational risks associated with having the majority of our operations in China", including potential changes in the legal, political and economic policies of the Chinese government.

The company revised its SEC filings to specify that the auditors who inspected its reports were US auditors.

LianBio focuses on in-licensing assets for greater China and other Asian markets, according to its filings. It has a pipeline of 9 assets in the areas of cardiovascular, oncology, ophthalmology, inflammatory disease and respiratory indications.

The company posted almost US$140 million in losses in 2020 and US$162 million for the 6 months ended in June.

Goldman Sachs Group, Jefferies Financial Group and Bank of America are leading the offering. The shares are expected to begin trading Monday (Nov 1) on the Nasdaq Global Market under the symbol LIAN.

BLOOMBERG