Asia-Pacific IPO: WuXi XDC’s HK$4.06bn IPO

IFR Awards 2023
3 min read
Fiona Lau

Standout success

The HK$4.06bn (US$520m) IPO of WuXi XDC revived Hong Kong's lacklustre new issue market by demonstrating that international interest was still there for the right names.

The Chinese contract medical researcher and unit of Hong Kong-listed WuXi Biologics drew rare support from global institutional investors when most IPOs on the exchange were dragged over the finish line with the help of “friends-and-family” orders.

WuXi XDC showcased the city’s fundraising ability at a time when people had started losing faith in the once active primary market. Hong Kong IPOs raised just US$5.9bn in 2023, the lowest in 20 years and ranked eighth globally.

The deal hit the market in November when most IPOs which preceded it had seen deal sizes and valuations slashed and still traded down.

However, sponsors Morgan Stanley, Goldman Sachs and JP Morgan convinced seven top-tier global investors to invest a combined US$300m, equivalent to around 64% of the deal, as cornerstone investors were subject to a six-month lock-up.

Of the cornerstone group of Invesco, General Atlantic Singapore, Qatar Investment Authority, UBS Asset Management, HongShan Funds, Novo Holdings and Lake Bleu Capital, the QIA investment was particularly eye-catching as Middle Eastern money had not been drawn to Hong Kong IPOs for some time.

XDC is profitable and growing fast, unlike some other healthcare companies. The company focuses on ADCs – a class of biopharmaceutical drugs designed as a targeted cancer therapy, killing tumour cells while sparing healthy cells. It posted an adjusted profit of Rmb216m (US$30m) for the first half of 2023, almost double the Rmb109m from a year earlier.

The deal drew tremendous demand with the institutional tranche 19.6 times subscribed and the retail portion close to 50 times covered.

Demand came from all over the world. Excluding the cornerstone tranche, 38% of the deal went to Asian investors, 47% to the US and 15% to Europe. By investor type, long-only investors and healthcare specialists took 81% of the deal, hedge funds 11%, China funds 6% with the remaining 2% including corporates, family offices and private wealth.

The offering of 178m primary shares, representing 15.1% of the enlarged share capital, was priced at the top of the HK$19.90–$20.60 range. That valued XDC at a 2024 P/E of around 34 times, a premium of 18% over its parent.

A greenshoe of 19.2m shares was exercised in full.

XDC made a stellar debut on November 17, closing at HK$28, up 36%. It ended the year at HK$32, up 55%.

CICC, Citigroup and Huatai Financial were the other joint bookrunners.

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