potential change in biotech IPO rules

Shine Consultant reported that the IPO channel for A-share biopharmaceutical companies has been effectively frozen for nearly two years. Chongqing Genrix Biopharmaceutical became the last unprofitable biotech company to list using the ‘fifth set’ of standards in June 2023. Since then, the Science and Technology Innovation Board (STAR Market) has closed its doors to unprofitable biopharmaceutical companies, with not a single new approval.

Regulatory tightening continued. CSRC (China Securities Regulatory Commission) issued new Opinions in March 2024 and the new nine articles in April, directly raising entry thresholds for biopharmaceutical companies. As a result

• only five pharmaceutical companies completed IPOs in 2024, the lowest in a decade
• this represents a dramatic decline from 57 IPOs in 2021 and 36 in 2022
• many companies including Wuhan Healthgen Biotechnology and Shanghai Hrain Biotechnology applied in 2022 but remain stuck in the inquiry stage
• firms like new-generation cancer immunotherapy company Elpiscience Biopharma and small nucleic acid drug developer Suzhou Ribo Life Science are still assessing the situation

The IPO freeze has severely damaged primary market financing for biotech

• 2024
  • financing amounts decreasing by another 10 percent
    • current funding represents only about 30 percent of 2021 levels
• 2023
  • domestic biopharmaceutical investment decreased by 42.35 percent compared to 2022, with transaction numbers falling by 37.72 percent
• 2022
  • a 40.79 percent drop in 2022 compared to 2021

The cash situation has become dire

• 50 percent of biotech companies had less than C¥1 bn in cash reserves by the end of 2023
• 28 percent had less than C¥500 million, indicating severe cash shortages
• investment logic has shifted from post-IPO equity appreciation to focusing on companies' immediate operational and profitability capabilities
• limited funds now flow primarily toward projects with clear market expectations, making it especially difficult for early-stage biotech firms without marketable products

Cash-strapped companies have increasingly turned to licensing deals to survive. Companies desperately seeking funds are forced to sell their pipelines, and international companies are buying all good projects from the PRC, laments Song Ruilin 宋瑞霖 China Pharmaceutical Innovation and Research Development Association executive president. The numbers support this claim

• 73 licence-out authorisation partnerships were formed in the first three quarters of 2024
• total transaction value reached US$33.6 bn, doubling y-o-y
• these licensing deals now exceed primary market financing in scale

While the global market recognises Chinese technical strength, it has created a buyer's market where good assets are often ‘sold cheaply’ leading to ‘China discount’ situations. Dr Deng Lingquan 邓灵泉 Med-Fine Capital partner, warns this may cause the PRC's biotech industry to become merely an early-stage asset provider for the US market, similar to the UK and other European countries in the past. He cautions that with industry investment scale shrinking, many potentially successful enterprises will simply disappear.

The 2025 Guolian Minsheng Securities Project Cooperation Conference claim that exchanges may have reopened IPO applications for unprofitable enterprises and IPOs may become normalised with an estimated 150–200 companies annually—about two to three companies per week. While unconfirmed, such a change would benefit biotech companies at all stages.

It's not that PRC innovation capabilities are inadequate, but that policies haven't opened up, argues Song. The recent regulatory signals may indicate that policymakers are finally addressing this issue, potentially preventing further loss of innovative PRC biotech assets to foreign buyers.