When Hong Kong unveiled plans last year to encourage biotech companies to list in the city by loosening listing rules, the financial industry and investors cheered.
Hong Kong was an obvious financing center for a growing number of Chinese companies developing new drugs. But as the new rules come into effect Monday, at least one problem has become evident: Hong Kong's limited expertise in the biotech field.
Biotech companies without revenues, let alone profits, will now be allowed to apply for listings in the city under the new rules. Some 10 companies — mostly Chinese, including the Temasek backed Innovent Biologics and Shanghai Henlius Biotech — are already planning floats and some have dropped U.S. IPO plans in favor of listing closer to home.
The result however is a scramble for experts in a city whose financiers have limited experience with science.
Just 3 percent of all Hong Kong-listed stocks, by capitalization, come from so-called "new economy" sectors — tech as well as biotech — according to a report last year by Hong Kong Exchanges and Clearing, the bourse operator.
That compared with 60 percent for Nasdaq and 47 percent for the New York Stock Exchange.
Several bankers, investors and industry executives estimated that the city currently had fewer than 20 experienced biotech and biopharma bankers.
"It's not easy to hire the right professionals," said Kevin Xie, head of healthcare and co-founder of China Renaissance, a boutique investment bank. "There's a limited pool globally who truly understand the industry."
Leading investment banks are touting their ability to transfer bankers from the United States to plug gaps in Hong Kong. But lacking local licences, those seconded to Hong Kong can only advise their colleagues, not work on deals themselves. Li Hang, head of Greater China equity capital markets at CLSA, said: "We really need sector specialist bankers to run biotech deals, otherwise everybody will say we don't know how to do the due diligence."
Difficulties around talent go beyond the banks. Charles Li, chief executive of HKEX, said last month that it was tough to hire biotech professionals. "All financial institutions in town have been seeking such talent," he said.
Nonetheless, Li said Tuesday, when announcing the finalized rules, that HKEX had found a dozen experts, primarily scientists or employees of pharmaceutical companies, to serve on a board advising a listing committee that approves each IPO application.