More Hong Kong investment bankers are expected to join Chinese biotechnology firms this year, as a trend that began in 2018 gathers pace.
Hong Kong’s stock exchange, keen to tap the mainland’s booming biotech sector, introduced new regulations last April allowing biotech companies to list even before they turn a profit. Since then several investment bankers and research analysts have moved to pre-IPO Chinese biotech firms, including former Bank of America dealmakers Ellis Chu and Lee Henely, who joined JHL Biotech in May.
Exits of this kind will continue in 2019, says Eunice Ng, director of headhunters Avanza Consulting in Hong Kong. “This is now a trend. More bankers will be needed to assist biotech firms in building proper funding channels, structuring their internal finance, executing deals, and developing good relationships with external bankers,” she adds.
To join a company like JHL or Ascletis Pharma (the first early-stage biotech firm to list in Hong Kong under the revised rules), bankers will typically have covered the biotech industry and will have an IPO background, says Hubert Tam, managing partner of Hong Kong search firm Sirius Partners. “A lot of times they will move to one of their clients,” he adds.
Senior bankers are most in demand, says Stanley Soh, a Hong Kong-based regional director of financial services solutions in Asia. “Since the IPO reform, there’s a growing list of Chinese biotech firms considering the HKEX due to its advantages of geography and language,” he adds. “Now these firms need experienced bankers to drive attractive valuations by communicating long-term potential to investors. The roles are mainly at the senior level, especially as chief financial officers helping to prepare the firm for an IPO or M&A.”
In July 2018, for example, CStone Pharmaceuticals appointed Richard Yeh, formerly a Goldman Sachs MD and head of APAC healthcare equity research, as its CFO. Similarly, Alphamab’s new CFO Terry Shuai joined the company from Deutsche Bank last year, where he was head of healthcare banking.
While most bankers who move in-house have a genuine interest in biotech, many are also motivated by potential stock-option windfalls. “A promise of equity and the opportunity to lead a firm to IPO are huge incentives for senior bankers,” says Soh. “Basic salaries are comparable with banks, but the upside in equity compared to banking bonuses could be a lot more.”
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