Hong Kong investors are preparing for an influx of healthcare equities that could absorb $2 billion of capital in the coming weeks as two Chinese pharmaceutical companies roll out plans for initial public offerings.
Shanghai Pharmaceuticals, which is already listed in its home city, said last month that shareholders had approved the company’s H-share offering plan and that the China Securities Regulatory Commission had accepted its listing application. Last week, the company raised its original $1.2 billion target to between $1.5 billion and $1.8 billion, and said that it aims to list in Hong Kong by the end of this month.
On the same day, Shanghai Pharmaceuticals’ smaller peer, China NT Pharma Group, a Shanghai-based supply chain and sales service provider for vaccines, said that it plans to raise $275 million in a Hong Kong IPO. The company kicked off bookbuilding for the deal on Monday.
Investors have grown familiar with China’s healthcare industry recently. Three medical companies — Sihuan Pharma, China Medical System (CMS) and MicroPort Scientific — raised more than $1 billion from IPOs in Hong Kong late last year. Sihuan raised $741 million by pricing shares at 26.7 times its 2011 forecast earnings, making it one of the most expensive new stocks to list in the city last year.
NT Pharma is offering 357 million shares. Around 75%, or 270.48 million, are primary and 25%, or 86.55 million, are secondary. The indicated price range is between HK$4.54 and HK$6 a share, which suggests the company could raise HK$1.62 billion to HK$2.14 billion ($208 million to $275 million).
Based on NT Pharma’s 2011 projected earnings, that translates into a price-to-earnings (P/E) ratio of 16.4 times to 21.6 times. That is a significant discount compared to NT Pharma’s close competitor CMS, which is currently quoted at 28 times.
CMS makes very few products itself but engages in the marketing and promotion of prescription drugs in China. The stock has had a volatile first quarter this year, with its price dropping more than 12% to a low of HK$6.68 on March 15, but bounced back by 22% to HK$8.16 by the end of last month.
NT Pharma has prepared 321 million shares, or 90% of the total offering, for international investors, while the remaining 10% is earmarked for the Hong Kong public offering. The share allocation is subject to the standard over-allotment option.
The deal comes with a 15% greenshoe option that, if fully exercised, would allow the company to raise up to HK$2.46 billion by issuing an additional 53.55 million shares, comprising 40.57 million primary and 12.98 million secondary shares.
The share price will be fixed on April 13 (US time) and the trading debut is scheduled for April 20. Goldman Sachs and UBS are joint bookrunners of the deal.
NT Pharma distributes 19 types of vaccines made by global and domestic vaccine manufacturers. It made a gross profit of Rmb663.2 million ($100.4 million) in 2010.
China’s population is becoming more health conscious as living standards rise and disposable incomes increase, which is also making people more willing to use preventative healthcare products such as vaccines, NT Pharma said in a preliminary IPO prospectus.
According to the PRC National Bureau of Statistics, per-capita expenditure on healthcare in China’s urban and rural areas increased from about Rmb476 and Rmb115.8 respectively in 2003 to about Rmb786.2 and Rmb246.0 in 2008.
Photo provided by AFP.
