4 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 MARCH 2024 BRI EFS Beijing Health Guard Biotechnology, which developing vaccines against cancer-causing viruses, recently became the first company to be listed on exchanges in both Beijing and Hong Kong. Lawyers say that this “Beijing + Hong Kong” pathway an attractive option for mainland enterprises in certain industries. 中国内地疫苗公司康乐卫士近日成为第一家展开“北+H”上市 实践的企业。法律专家解读了这背后的机遇和挑战。 BY HU YANGXIAOXIAO 作者：胡阳潇潇 On March 15, 2023, Beijing Health Guard Biotechnology made its debut on the Beijing Stock Exchange. Within a year, this developer of clinical-stage HPV vaccines approached the Hong Kong Stock Exchange for listing, setting a precedent for the “Beijing + Hong Kong” listing route for biotech companies. In June of 2023, the BSE and HKEX ratified a memorandum of understanding, paving the way for eligible listed entities in both exchanges to seek listing on the counterpart’s platform. Health Guard emerged as the pioneering firm to navigate this arrangement. John Sun, a partner at DeHeng Law Offices in Shanghai, points out that the memorandum fosters a supportive stance from HKEX towards Beijing-listed companies that align with Hong Kong’s listing prerequisites. Yet, he emphasizes the broad nature of this framework, lacking in detailed guidelines or a dedicated review process. Consequently, BSE-listed firms must adhere to HKEX’s listing standards and the China Securities Regulatory Commission (CSRC)’s overseas listings rules by Chinese corporations. Viewed through this lens, the perceived notion that the “Beijing + Hong Kong” listing scheme reduces entry barriers for biotech entities is mostly misplaced. Furthermore, Sun regards the FROM BEIJING TO HONG KONG 探索“北+H”之路 “Beijing + Hong Kong” model not as a novel concept but rather as an expansion of existing frameworks, offering an alternative funding avenue for companies listed in both Beijing and Hong Kong. However, Sun highlights the advantages of the “Beijing + Hong Kong” listing strategy. He explains, “Companies can harness the financial markets of both regions for capital raising, bypassing the limitations of a single market’s regulatory framework and financing rules. This is particularly relevant in the current strict regulatory environment for A-share IPOs and refinancing. Possessing the status of a company listed in Hong Kong can facilitate more diverse financing options.” This strategy is especially beneficial for technology and R&D-focused companies, such as those in the biotech sector, which “need sustained cash flow. Opting for a secondary listing on the HKEX is an appealing choice to meet their financial requirements.” Furthermore, Sun notes, “For firms listed in Beijing, obtaining a dual listing on the HKEX can significantly boost their international profile and impact, aiding their global expansion strategies.” Regarding sectors beyond biotech considering the “Beijing + Hong Kong” route, Sun sees potential. “Listings on the BSE typically feature price-to-earnings ratios ranging from 10 to 20 times, whereas the HKEX accommodates a wider spectrum of valuations. Presently, companies in the consumer, healthcare, and IT sectors enjoy top valuations on the HKEX, making the ‘Beijing + Hong Kong’ pathway an attractive option for enterprises within these industries from the mainland.” THE OTHER WAY ROUND Since 2020, biotech companies like Shenzhen Hepalink and Hangzhou Tigermed have successfully pursued “A-share first, then H-share” listings. Sun emphasizes that the pathway for “Beijing first, then H-share” listings for biotech companies mirrors established listing norms, showing no significant . However, Sun also highlights a recent trend where companies such as Junshi Biosciences, BeiGene, and InnoCare Pharma have embarked on a “return to A-shares” movement by seeking listings on the mainland’s STAR Market after their initial listings in Hong Kong. Beyond meeting the STAR Market’s criteria, redchip companies are also faced with a minimum market capitalization requirement of 20 billion yuan, which could skyrocket to 200 billion yuan if they don’t meet specific standards like possessing independent R&D, leading international technology, and a strong competitive edge in their sector. Regarding the possibility of a similar trend with the BSE, Sun acknowledges that while the criteria for re-listing on the STAR Market are stringent, the pathway back to the BSE is muddled with regulatory uncertainties. “As it stands, Hong Konglisted companies aiming for a BSE listing must initially secure a position on the New Third Board, a scenario yet to see a precedent. The CSRC’s mention of a ‘direct IPO on the BSE’ policy in last September’s ‘Reform 19 articles’ remains pending actual implementation. Furthermore, the BSE is currently not open to red-chip company listings,” explains Sun. Even if regulatory conditions were to permit, the allure of the BSE needs bolstering, especially when juxtaposed with the STAR Market. “With the tightening of A-share IPOs, the BSE has upped its financial benchmarks for issuers, requiring a recent year’s net profit
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