Cancer treatment specialist BeiGene Ltd plunged 16.4% on its Shanghai debut on Wednesday after raising $3.5 billion, hit by concerns over its valuation amid potential U.S. sanctions on Chinese biotech companies.
BeiGene (6160.HK), which is already listed in Hong Kong and the United States, launched the biggest STAR Market float this year, taking advantage of rules by the Nasdaq-style board which welcomes loss-making firms.
Shares in BeiGene, which plans to use the majority of the proceeds to fund clinical trials and has posted at least three consecutive annual losses, closed 16.4% lower than its offer price of 192.6 yuan ($30.26) in Shanghai.
BeiGene’s Hong Kong-traded shares fell 7.6%.
“The money was raised at a very high valuation compared to Nasdaq and Hong Kong,” Brad Loncar, whose Loncar Investments runs an ETF for Chinese drug firms, said.
The offering, the 10th biggest public float globally this year according to data from accountancy group EY and the biggest of a healthcare firm in China in at least two decades according to Refinitiv data, comes amid growing concerns that some Chinese companies could face increased pressure and scrutiny in the U.S.
BeiGene’s Nasdaq-listed shares have tumbled nearly 20% so far this month as U.S. securities regulators finalised rules to kick non-compliant Chinese firms off U.S. exchanges in three years, a risk BeiGene flagged in its Shanghai prospectus.
The falls also came as the Financial Times reported that the U.S. Commerce Department is set to place more than two dozen Chinese companies, including some in biotech, on an “entity list” restricting exports to them by U.S. firms.
This accelerated a sell-off in Chinese health-care shares in afternoon trade, knocking 3.2% off a mainland index tracking the sector (.CSI300HC) against a 0.87% drop in the broader index.
BeiGene’s poor debut show in Shanghai means its underwriters will likely start buying shares in the secondary market to help stabilise prices under a so-called greenshoe option.
Investors that have subscribed to BeiGene’s Shanghai share sale include China’s national social security fund and the Abu Dhabi Investment Authority.
Backed by existing shareholders such as Amgen (AMGN.O) and Hillhouse-linked HHLR Fund, BeiGene is among China’s most active innovative biotech firms whose self-developed products obtained out-license deals from global pharmaceutical giants.