Healthcare listings in Hong Kong started the year with a bang: Shares in Beijing-based Yidu Tech Inc., which offers big data and artificial intelligence technology to medical entities, soared 147.9% from the HK$26.30 issue price on their market debut Jan. 15.
That reflects continuing strong interest in healthcare offerings amid the COVID-19 pandemic. After an exuberant 2020 for IPOs, 2021 is expected to follow the same trend.
In particular, companies involved with health technology such as big data product providers, online consultation and medical e-commerce platforms are likely to step up the drive to go public, according to experts. There could also be heightened interest from device makers to list, they added.
A strong rebound in the benchmark Hang Seng Index will provide additional ballast to companies planning IPOs. After sliding 3.4% in 2020, the index has climbed 10.6%, closing at about 29,962 points year-to-date.
"The economic recovery of mainland China will continue to bring more fund flows into Hong Kong's capital markets as the quality of Chinese mainland companies seeking to raise capital at attractive valuations continues to rise," said Jens Ewert, life science and health care industry leader at Deloitte China.
In 2020, 23 healthcare companies went public in Hong Kong, raising a total of HK$98.06 billion, up from 20 companies that raised HK$40.48 billion a year earlier, according to data compiled by S&P Global Market Intelligence.
Pandemic boost
In the first and second quarters, companies offering digital health services could seek listings in Hong Kong, according to Ringo Choi, Asia-Pacific IPO leader at Ernst & Young.
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More digital health platforms are poised to list on the Hong Kong stock exchange. Tencent Holdings Ltd.-backed online medical platform We Doctor Holdings Ltd., for example, is reportedly expected to go public in 2021 after planning an IPO since at least 2019.
Investor interest in online medical platforms surged after patient demand for such services spiked early in 2020 as the pandemic spread in China.
"As the pandemic led to the suspension of outpatient services, online healthcare services played an important role in providing medical services for the public. Online medical consultation not only avoids the risk of cross-infections during offline hospital visits but also offers timely 24/7 services. The government has [also] stepped up efforts to back the digital health industry's development with streamlined policies," a Jan. 13 report by Jefferies on the healthcare industry outlook for 2021 noted.
WeDoctor saw a nearly 20% increase in medical consultations in the second half of 2020, even as the pandemic came under control in the country. Ping An Healthcare and Technology Company Ltd., better known as Ping An Good Doctor, also said daily consultations on average surged 26.7% year over year in the first half of 2020 to around 831,000.
Guidelines on reimbursing online health services such as follow-up consults for common and chronic diseases provided by qualified digital health institutions under public medical insurance schemes were also announced by China's Nation Healthcare Security Administration in November 2020. The move is likely to improve patient access to digital health services.
The successful Hong Kong listing of JD.com Inc.'s healthcare arm, JD Health International Inc., could also set the stage for similar companies to launch IPOs. JD Health, which mainly sells medical products online, attracted heavy investor interest with its HK$31 billion mega-IPO in December 2020.
Device demand
Medical device companies could also capture more attention from investors in 2021, said Cyrus Ng, Hong Kong-based senior investment analyst at investment management company Chartwell Capital Ltd.
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China's per-capita spending on medical devices was $69 in 2019.Shanghai-based heart disease surgical device developer MicroPort CardioFlow Medtech Corp. and Hangzhou, China-based New Horizon Health, which focuses on colon cancer screening, are among companies that have applied to list in Hong Kong, according to exchange data.
Investors see medical device as an area with huge growth potential in China, said Peng Yuyao, Hong Kong-based director of the healthcare and life sciences team at the investment banking division of China Renaissance.
"The gap in medical device expenditure between China and more developed countries is even larger than in medicines. Investors have been searching for companies in this subsector for investment," Peng said.
China's medical devices market was valued at 664.2 billion yuan in 2019, up from 312.6 billion yuan in 2019, according to data from Kangji Medical Holdings Ltd., a Shanghai- and Hong-Kong-listed surgical instruments maker.
However, per-capita expenditure on medical devices in 2019 was only $69 — less than one-third of what was spent on drugs. In comparison, average spending on medical devices per person in the U.S. totaled $494.8, nearly half of what was spent on medicines, Kangji said.
As of Jan. 22, US$1 was equivalent to 6.48 Chinese yuan.