China's Simcere seeks return to public market with $1B HKEx IPO

China's Simcere Pharmaceutical Group plans to join a rush of drugmakers and healthcare-related companies to raise money but avoid a mainland China listing and head for the Hong Kong Stock Exchange (HKEx).

The Wall Street Journal reported that Simcere hopes to raise as much as $1 billion in an initial public offering, citing sources, which would mark a return to public capital markets since delisting from the New York Stock Exchange in 2013.

That would take a page out of a June listing by mainland China biotech 3SBio, which raised $710.7 million in an IPO on the HKEx after delisting from the Nasdaq in 2013 and going private.

The story comes as trading on the Shanghai Stock Exchange was halted for a second day this week as trading circuit breakers kicked in after a 7% fall in the Shanghai Composite index, which ended down 7.32% to 3115.89.

Whether the volatility cools mainland listings completely remains to be seen.

In November of last year, Chinese officials announced they would lift a ban on IPOs put in place after Shanghai exchange volatility in the summer. Among drug companies said to be eyeing a listing on the mainland was Jiangxi Fushine Pharmaceutical, which Reuters said in July wanted to sell as many as 18 million shares on the Shenzhen exchange.

The Shanghai volatility may be one reason why China's Jiangsu Hansoh Pharmaceutical also has eyed Hong Kong for an IPO later this year, the WSJ also reported this week, with plans to sell $3 billion in shares. That would be the largest healthcare IPO to hit the Hang Seng Index, according to data from Dealogic, cited in the WSJ report.

Jiangsu may be joined on the HKEx by Xiuzheng Pharmaceutical Group, the WSJ said this week of the northeastern China drugmaker that may seek to also raise $1 billion.

That would take the amount seeking to be raised on the HKEx by pharmaceutical companies to more than $5 billion this year, the WSJ said, citing sources.

In the case of Simcere, the potential $1 billion IPO would be around double the price paid in the 2013 management-led buyout that included Chairman Ren Jinsheng, private-equity firm Hony Capital and Shanghai Fosun Pharmaceutical, the WSJ said.

China Merchants Securities (HK), Morgan Stanley and UBS Group AG were tapped to lead the IPO, the WSJ said.

Meanwhile, two China-focused oncology companies, Beijing-based BeiGene and HK-based Hutchison China MediTech, or Chi-Med, plan Nasdaq listings this year.

- here's the report from the WSJ (sub. req.)

Read more on