Viva Biotech’s grossly oversubscribed IPO highlights growing demand for drug research services among investors in Hong Kong
May 14, 2019 (China Knowledge) - Viva Biotech hugely successful IPO in Hong Kong last week where it was oversubscribed by 106.9 times highlights the growing appetite for exposure in the city’s drug research services sector.
The company managed to raise HKD 1.37 billion in its IPO, pricing at the top end of its indicative price range for an IPO price of HKD 4.41 per share.
According to analysts, investors were drawn to Viva due to its defensive business model and its profitability unlike its predecessors which had gone public while still unprofitable.
The 11-year old company which is the fourth-largest in China’s drug discovery services industry made RMB 210 million in revenue last year for a pre-tax profit of RMB 105.9 million.
Viva currently sports an innovative business model where it accepts stakes in its customers in place of payments, allowing them to participate in their projects and enjoy potential upsides from the intellectual properties they generate.
The company first embarked on this model in 2015 amid increasing competition in the sector which had resulted in falling gross profit margins for the company. Viva now boasts 31 new drug development projects in its portfolio with an average investment of USD 1.5 million each, providing the company with the potential to reap investment gains from its portfolio.
Viva is planning to exit half of its stake in each investment within 30 months and the remainder in the following 36 months which is the average time taken for each drug candidate to reach phase 2 clinical trials.
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