China's STAR Market Reforms Boost Biotech Financing as Healthgen Becomes First Company to Benefit from Resumed Rules
核心洞察
China's STAR Market has resumed its fifth set of listing rules, allowing unprofitable biotech companies to go public, with Wuhan Healthgen Biotechnology becoming the first to receive IPO approval under the restarted program in July.
Shanghai Allist Pharmaceuticals exemplifies the market's success, transforming from 300 million yuan losses to 1.43 billion yuan profit after its 2020 IPO and subsequent approval of its third-generation non-small cell lung cancer treatment.
The reforms expand beyond biotech to include AI, commercial aviation, and low-altitude economy companies, while introducing confidential pre-review mechanisms to protect sensitive technology information during the IPO process.
China's tech-focused STAR Market has resumed its inclusive listing rules for unprofitable biotech companies, marking a significant milestone for pharmaceutical innovation financing. Wuhan Healthgen Biotechnology Corp became the first biomedical company to receive IPO approval under the restarted fifth set of listing rules in July, following the China Securities Regulatory Commission's announcement at the Lujiazui Forum in June.
The resumption comes after a suspension since 2023 and highlights the market's commitment to supporting high-tech companies during their capital-intensive development phases. Wu Qing, chairman of the China Securities Regulatory Commission, confirmed the restart of these rules, which specifically accommodate companies that may be unprofitable but demonstrate strong technological innovation potential.
Healthgen's Pioneering IPO Application
Founded in 2006, Healthgen specializes in plant-derived recombinant human serum albumin, a critical component widely used in vaccine production and cell culture media supplements. The company's IPO application represents a significant test case for the resumed listing rules, as it seeks to raise 2.4 billion yuan despite reporting combined losses of 851 million yuan as of 2024.
The company's financial trajectory reflects the typical biotech development pattern, with losses of 144 million yuan, 187 million yuan, and 151 million yuan from 2022 to 2024, respectively. During the same period, Healthgen invested heavily in research and development, directing 110 million yuan, 159 million yuan, and 117 million yuan toward R&D activities.
"Complicated R&D procedures, strict approval standards, huge investment in new drugs, and high risks" characterize companies in this sector, according to Healthgen's public circular. The company plans to allocate approximately 1.66 billion yuan of its IPO proceeds to build a recombinant human serum albumin production base, with another 642 million yuan designated for new drug R&D.
Success Story: Allist Pharmaceuticals' Transformation
The potential impact of the STAR Market's inclusive approach is exemplified by Shanghai Allist Pharmaceuticals Co Ltd's remarkable transformation. After going public in December 2020 following four consecutive years of losses, including over 300 million yuan in its listing year, Allist achieved a dramatic turnaround.
Three months post-IPO, the company received marketing approval in China for its third-generation treatment innovation for non-small cell lung cancer. By 2021, Allist reported a profit turnaround of about 18.3 million yuan, with profits continuing to surge. The company's net profit reached 1.43 billion yuan by 2024, demonstrating the transformative potential of accessible capital markets for biotech innovation.
"The leapfrogging progress made by Allist is inseparable from the fifth listing rules of the STAR Market, which allow the IPO of unprofitable companies," said Du Jinhao, Allist's chairman. In 2023, the company announced plans to use part of its 1.5 billion yuan IPO proceeds to build a new production line for one of its key products annually.
Market Impact and Industry Growth
The STAR Market's influence on China's biotech sector has been substantial since its 2019 launch. A total of 20 innovative biomedical companies have been listed via the fifth set of listing rules, with 19 of them successfully introducing their core products to market. As of end-June, 588 companies had been listed on the STAR Market, with 80 percent representing emerging industries including biomedicine, new-generation information technology, and high-end equipment.
"Over time, the STAR Market has become the first listing choice for China's hard technology companies. Providing more than 1 trillion yuan of IPO proceeds and refinancing, the board has supported the development of new quality productive forces," said Li Zhan, chief economist at China Merchants Securities.
The market's success aligns with China's broader healthcare ambitions. According to the Health China 2030 Initiative released by the State Council, China's biomedical industry market value is expected to reach 8 trillion yuan by 2030. Biomedicine has been elevated as one of China's strategic emerging industries in the 14th Five-Year Plan (2021-25).
Expanded Scope and New Mechanisms
Recent reforms have broadened the fifth set of listing rules beyond semiconductors and biomedical companies to include artificial intelligence, commercial aviation, and low-altitude economy companies. This expansion reflects China's commitment to supporting frontier technologies across multiple sectors.
"It has been underlined that the new reform policies can only apply to companies with major technology breakthroughs, huge business prospects and continued huge amount of R&D," said Tian Lihui, head of the Institute of Finance and Development at Nankai University.
The reforms also introduce a pilot program allowing quality tech firms to undergo pre-review for their IPOs, addressing concerns about premature disclosure of sensitive technologies and business strategies. This confidential filing mechanism aligns with international practices, similar to the U.S. Jumpstart Our Business Startups Act of 2012 and recent Hong Kong Stock Exchange provisions for technology and biotechnology companies.
Addressing the "Death Valley" Challenge
The inclusive listing rules specifically target the financing challenges faced by technology companies during their development phases. "Financing has been a huge challenge for technology companies. Profitability usually takes place long after their inception. Opening the financing gate to unprofitable but rapidly developing companies can help them jump over the so-called 'death valley'," said Yang Chao, chief strategist at China Galaxy Securities.
This approach recognizes the unique characteristics of biomedical companies, which typically require extensive R&D timelines and substantial capital investment before achieving profitability. The fifth set of listing rules provides crucial financing access during these critical development phases, enabling companies to advance breakthrough technologies and bring innovative treatments to market.
The resumption of these rules represents a strategic commitment to fostering innovation in China's biotech sector, with Healthgen's approval serving as a bellwether for future biomedical IPOs under the reformed framework.