Investors pile into Viva Biotech’s Hong Kong IPO as they are confident of the R&D services provider’s business model
- Not only is the firm profit-making, but its investment in potential drug candidates has made it attractive to investors, says Louis Tse Ming Kwong of VC Asset Management
- Viva’s business model of taking equity in smaller companies is a convenient way of having many shots on a goal in the Asian biotech, says Brad Loncar of Loncar Investments
Viva Biotech’s hugely popular IPO last week, which was oversubscribed was 106.9 times, reflects growing risk appetite among retail investors in the nascent drug research services sector in Hong Kong, according to analysts.
The retail tranche of the Shanghai-based company’s HK$1.37 billion (US$176 million) IPO handily beat the 90.8 times subscription interest seen in vaccines developer Cansino Biologics’ offering in March. Subscriptions to Viva’s IPO topped its eight predecessors – mostly unprofitable drug developers – in the past two years, which ranged between 0.5 to 9.1 times.
Louis Tse Ming Kwong, managing director of VC Asset Management, said the massive response to Viva was helped by its relatively small offering size, as was Cansino’s IPO.
“It is a supply and demand game,” he said. “Investors were attracted to Viva because of its more defensive business model. Not only is it already profitable because of its drug research services, but it also has potential investment gains from its growing investment portfolio in the sector.”
Viva priced its shares at the high end of the indicative range, defying an earlier prediction. It also closed on Friday at HK$5.03, 14 per cent above its IPO price of HK$4.41.
