Eye-drug maker Ocumension bags biggest gain of 2020 Hong Kong healthcare IPOs

Shares of eye therapy maker Ocumension Therapeutics bagged the highest gain on the first day of trading among the 23 healthcare companies listed in Hong Kong in 2020.

The Shanghai-based company's stock surged 152.4% from its issue price of HK$14.66 apiece when listed on July 10, according to data compiled by S&P Global Market Intelligence.

"Companies with innovation and unique products usually do better in IPOs. Ocumension is one of the leading eye therapy developers, which is also rare in the Hong Kong capital market, so it was welcomed by investors," said Ke Yan, Singapore-based head of research at DZT Research, which focuses on small- and mid-cap companies.

Apart from Ocumension, public floats by medical device developers and online healthcare service providers were also popular among investors. Shares of surgical instrument maker Kangji Medical Holdings Ltd., for example, jumped 98.8% when listed in Hong Kong on June 29, while those of Suzhou, China-based Peijia Medical Ltd. increased 68% in its May 15 debut.

Shares of Kangji were oversubscribed nearly 1,000 times by Hong Kong investors, while Peijia's offering was also oversubscribed 1,184 times.

"Unlike drugs, which require in-depth medical knowledge to understand, devices and online healthcare platforms are easier to understand for investors, especially retail investors. Therefore, these companies managed to attract them," said Zhao Bing, healthcare analyst with Chinese investment bank China Renaissance Securities.

JD Health International Inc., the healthcare arm of Chinese e-commerce company JD.com Inc., which sells medical products online, also attracted investors with its HK$31 billion mega-IPO. Shares of the company rallied 55.9% on the first day of trading on Dec. 8.

"We view JD Health as a multitudinal play involving some of the fastest growing sectors: healthcare, internet, consumer, while offering sub-sector exposure in both digital health and drugstores in China. More importantly, it is already profitable and has a clear path of success gaining market share in a growing pie," Jefferies said in a Jan. 13 report.

In contrast, investors are less interested in companies that do not have many innovative products or whose medicines are still in early-stage development, according to experts.

Hong Kong-based medical product distributor Tycoon Group Holdings Ltd., for example, plunged 35.6% on debut, the biggest first-day loss of the healthcare companies listed in 2020.

Simcere Pharmaceutical Group Ltd., whose primary focus is generic drugs, saw shares decrease 19.9% on the first day of trading, while those of HBM Holdings Ltd., whose drugs are mostly in early-stage development, fell 11%.

Shares of JW (Cayman) Therapeutics Co. Ltd., a gene and cell therapy venture established by Seattle-based Juno Therapeutics Inc. and Shanghai-based WuXi AppTec Co. Ltd., also dropped 7.6% on debut. The company's focus on CAR-T, or chimeric antigen receptor T cell, therapies, could be a reason for investor hesitancy, said Ke.

"CAR-T has narrow indications and investors may also have concerns about the affordability of the expensive treatment," Ke said.