Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Microport Cardioflow Medtech / Equity Capital Markets

<p>MicroPort Cardioflow is a transcatheter valve therapeutic medical device company incubated from the MicroPort Group. The company aims to raise up to USD 300m via a Hong Kong listing.</p><p>We look at the company's first-generation TAVR product, VitaFlow. We think it has decent clinical data in terms of efficacy and safety. It was launched two years behind the main competitor, VenusMedtech's VenusA-Valve. Having said that, its sales ramp is strong since its launch in 2H2019. </p><p>The company's management team has been working within the MicroPort Group for more than a decade. We believe that the company can leverage on the sales network of MicroPort Group. In terms of pre-IPO investors, we note that they are mainly domestic funds but the quality is decent. </p>

MicroPort Cardioflow is a transcatheter valve therapeutic medical device company incubated from the MicroPort Group. The company aims to raise up to USD 300m via a Hong Kong listing.We look at the company's first-generation TAVR product, VitaFlow. We think it has decent clinical data in terms of efficacy and safety. It was launched two years behind the main competitor, VenusMedtech's VenusA-Valve. Having said that, its sales ramp is strong since its launch in 2H2019. The company's management team has been working within the MicroPort Group for more than a decade. We believe that the company can leverage on the sales network of MicroPort Group. In terms of pre-IPO investors, we note that they are mainly domestic funds but the quality is decent. 

MicroPort Cardioflow (微创心通) Pre-IPO: Strong Sales Ramp-Up Despite Being Late in Market

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

<p>MicroPort Cardioflow Medtech Corporation, a 67%-owned subsidiary of MicroPort Scientific, is a leading medical device company in China. The company’s primary product is VitaFlow, a transcatheter aortic valve implantation (“TAVI” or “TAVR”) device, used to treat Aortic stenosis. TAVR is an emerging medical procedure in China with a handful of competitors at the moment.  The company has filed an Application Proof to list on the HKEX.</p><p>This Insight will discuss the company’s products, market opportunity, IP, etc. We will provide more details closer to the offering in a future Insight.</p>

MicroPort Cardioflow Medtech Corporation, a 67%-owned subsidiary of MicroPort Scientific, is a leading medical device company in China. The company’s primary product is VitaFlow, a transcatheter aortic valve implantation (“TAVI” or “TAVR”) device, used to treat Aortic stenosis. TAVR is an emerging medical procedure in China with a handful of competitors at the moment.  The company has filed an Application Proof to list on the HKEX.This Insight will discuss the company’s products, market opportunity, IP, etc. We will provide more details closer to the offering in a future Insight.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Hygeia Healthcare Group / Equity Capital Markets

<div>
<p>For primary listings in Hong Kong, there are standard rules as to the lock-up duration. There are exceptions - lock-ups can be entered into and negotiated with underwriters, as is often the case for secondary listings.</p>
<p>There are other quirks such as specific lock-ups with respect to share incentive schemes, such as in <a href="https://www.smartkarma.com/entities/shenzhen-hepalink-pharmaceutical-h" target="_blank" data-smartkarma-citation="entities:29142:1" rel="noopener">Shenzhen HepaLink Pharmaceutical (H) (9989 HK)</a>, which have their own unique lock-up period - although in this case, the % of shares out (0.31%) affected  is largely immaterial. </p>
</div>
<div>
<p>According to <a href="https://en-rules.hkex.com.hk/rulebook/1007-0" target="_blank" rel="noopener">Main Board Rule 10.07(1)</a> (or <a href="https://en-rules.hkex.com.hk/rulebook/1316a" target="_blank" rel="noopener">GEM rule 13.16A(1)</a>), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, they must adhere to a 6-month lock-up from the date of listing.</p>
</div>
<div>
<p>For cornerstone investors, the following is often stated in the share offer document:</p>
</div>
<div>
<blockquote>
<p>Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months from and including the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the relevant Cornerstone Investment Agreements, save for certain limited circumstances ... <br>Hepalink's <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2020/0624/2020062400097.pdf" target="_blank" rel="noopener">Global Offering Doc</a> (page 403)</p>
</blockquote>
</div>
<div>
<p>Every week in my <a href="https://www.smartkarma.com/compose/insight/46538/Last%20Week%20in%20Event%20SPACE:%20Japan%20Post,%20JD.com,%20Toyota,%20NTT,%20Jardines,%20Indices/Exec.%20Orders,%20Tianneng.%20Read%20more:%20https:/skr.ma/vhr6W" target="_blank" rel="noopener">Event SPACE</a> wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. </p>
</div>
<div>
<p>Large movement(s) concerning recently listed companies are likely lock-up related. </p>
</div>
<div>
<p>This monthly insight looks at companies that have been listed for around six months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially creating an overhang which could depress prices.</p>
<p>I've also constructed a chart highlighting the performance of IPOs leading up to their lock-up, and compared this to the HSI index. The results are interesting. Spoiler - recent IPOs underperform. </p>
</div>
<div>
<p>A summary of Main Board listings in 2020 is also attached at the bottom of this insight.</p>
<p>More below the fold.</p>
</div>


For primary listings in Hong Kong, there are standard rules as to the lock-up duration. There are exceptions - lock-ups can be entered into and negotiated with underwriters, as is often the case for secondary listings.
There are other quirks such as specific lock-ups with respect to share incentive schemes, such as in Shenzhen HepaLink Pharmaceutical (H) (9989 HK), which have their own unique lock-up period - although in this case, the % of shares out (0.31%) affected  is largely immaterial. 


According to Main Board Rule 10.07(1) (or GEM rule 13.16A(1)), if a person/group of persons is/are listed as the controlling shareholder(s) of the issuer's listing application, they must adhere to a 6-month lock-up from the date of listing.


For cornerstone investors, the following is often stated in the share offer document:



Each of the Cornerstone Investors has agreed that it will not, whether directly or indirectly, at any time during the period of six months from and including the Listing Date (the “Lock-up Period”), dispose of any of the Offer Shares they have purchased pursuant to the relevant Cornerstone Investment Agreements, save for certain limited circumstances ...  Hepalink's Global Offering Doc (page 403)



Every week in my Event SPACE wrap, I flag large moves (~10%) in CCASS holdings over the past week or so, moves that are often outside normal market transactions.  These may be indicative of share pledges.  Or potential takeovers. Or simply help understand volume swings. 


Large movement(s) concerning recently listed companies are likely lock-up related. 


This monthly insight looks at companies that have been listed for around six months, as a guide to when insiders/controlling shareholders are permitted to sell, potentially creating an overhang which could depress prices.
I've also constructed a chart highlighting the performance of IPOs leading up to their lock-up, and compared this to the HSI index. The results are interesting. Spoiler - recent IPOs underperform. 


A summary of Main Board listings in 2020 is also attached at the bottom of this insight.
More below the fold.


Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<p style="text-align: justify;">On November 6<sup>th</sup>, <a href="https://www.smartkarma.com/entities/microport-cardioflow-medtech-corporation" target="_blank" data-smartkarma-citation="entities:31084:1" rel="noopener">MicroPort CardioFlow (1844972D HK)</a> applied to the Hong Kong Stock Exchange for listing on the main board. Different from the previous innovative pharmaceutical companies, MicroPort CardioFlow belongs to the innovative medical device industry, mainly involved in the field of valvular heart diseases. Compared with <a href="https://www.smartkarma.com/entities/venus-medtech-hangzhou-inc" target="_blank" data-smartkarma-citation="entities:28257:1" rel="noopener">Venus MedTech (2500 HK)</a>, Suzhou Jiecheng Medical Technology and <a href="https://www.smartkarma.com/entities/peijia-medical" target="_blank" data-smartkarma-citation="entities:28862:1" rel="noopener">Peijia Medical (9996 HK)</a>, is MicroPort CardioFlow a better candidate of the TAVR market in China?</p>

On November 6th, MicroPort CardioFlow (1844972D HK) applied to the Hong Kong Stock Exchange for listing on the main board. Different from the previous innovative pharmaceutical companies, MicroPort CardioFlow belongs to the innovative medical device industry, mainly involved in the field of valvular heart diseases. Compared with Venus MedTech (2500 HK), Suzhou Jiecheng Medical Technology and Peijia Medical (9996 HK), is MicroPort CardioFlow a better candidate of the TAVR market in China?

Pre-IPO MicroPort CardioFlow - A Better Candidate of the TAVR Market in China?

Thematic (Sector/Industry)

<p><strong>1. Industry viewpoints:</strong></p><ul>
<li>The continuous promotion of medical insurance fee control policies such as DRG is conductive to the development of China ICL industry in the future.</li>
<li>For the TAVR industry, the domestic market is still in the early stage of growth, but with a lot of potential in the future.</li>
<li>With the aggravation of population aging and government incentive policies (such as the two-child policy), the assisted reproductive industry in China has been attracting much attention due to its low penetration rate and high gross profit.</li>
</ul><p><strong>2. Company news:</strong></p><p style="text-align: start;">News about the registration of COVID-19 vaccine, updated progress of new drugs and the new agreement of innovative technology platform from <a href="https://www.smartkarma.com/entities/sinopharm-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:32:1" rel="noopener">Sinopharm Group Co Ltd H (1099 HK)</a>, <a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech-inc" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius Biotech (2696 HK)</a>, <a href="https://www.smartkarma.com/entities/peijia-medical" target="_blank" data-smartkarma-citation="entities:28862:1" rel="noopener">Peijia Medical (9996 HK)</a> and Biocytogen.</p><p><strong>3. Market review:</strong></p><p style="text-align: start;">Last week, stock price for healthcare sector in A share decreased 2.14%, while CSI 300 decreased 3.48% over the same period of time.</p><p><strong>4. Risk Disclosure:</strong></p><p style="text-align: start;">Policy risk, R&amp;D risk, Company risk and COVID-19 risk.</p>

1. Industry viewpoints:
The continuous promotion of medical insurance fee control policies such as DRG is conductive to the development of China ICL industry in the future.
For the TAVR industry, the domestic market is still in the early stage of growth, but with a lot of potential in the future.
With the aggravation of population aging and government incentive policies (such as the two-child policy), the assisted reproductive industry in China has been attracting much attention due to its low penetration rate and high gross profit.
2. Company news:News about the registration of COVID-19 vaccine, updated progress of new drugs and the new agreement of innovative technology platform from Sinopharm Group Co Ltd H (1099 HK), Shanghai Henlius Biotech (2696 HK), Peijia Medical (9996 HK) and Biocytogen.3. Market review:Last week, stock price for healthcare sector in A share decreased 2.14%, while CSI 300 decreased 3.48% over the same period of time.4. Risk Disclosure:Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

China

Venus MedTech (HangZhou) Inc. develops and sells cardiovascular devices. The Company offers products including aorta, compression loading and conveying systems, and pulmonary artery. Venus MedTech (HangZhou) markets its products throughout China.

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Venus MedTech (2500 HK)

MicroPort Cardioflow (微创心通) Pre-IPO: Strong Sales Ramp-Up Despite Being Late in Market

The company's first-generation TAVR, VitaFlow, has decent clinical data in terms of efficacy and safety. It was launched two years behind VenusA...

Ke Yan, CFA, FRM

Microport Cardioflow: Winning in TAVR

We provide our initial thoughts on the proposed listing of medical device (TAVR) company MicroPort Cardioflow on the HKEX.

Kemp Dolliver, CFA

Hong Kong IPOs: Lock-Up Expiries (December 2020 Edition)

There exist the "moral hazard" around the expiry of lock-up periods. In 2020, IPO's have on average underperformed the HSI heading into the lock...

David Blennerhassett

Pre-IPO MicroPort CardioFlow - A Better Candidate of the TAVR Market in China?

This article analyzed the market potential of TAVR in China, competition pattern of key players, financial position of MicroPort CardioFlow and...

Xinyao (Criss) Wang

China Healthcare Weekly (Dec.11)

The article analyzed industry viewpoints about China ICL industry, TAVR industry and the assisted reproductive industry, and also included...

Xinyao (Criss) Wang

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