Ch. 18A sets out four listing conditions for biotech companies: they should have at least one core product past the concept phase, satisfy eligibility requirements on R&D focus, IP and product pipelines, and have an expected market value of no less than HKD1.5 billion with meaningful investment of third-party from at least one sophisticated investor, financial records of at least two fiscal years and adequate operating working capital.

Biotech companies generally choose a mainstay product with good commercial prospects from their pipeline, categorised into drugs (small molecule drugs), biological agents or medical devices. The HKEX consider other biotech products on a case-by-case basis. In addition, such products must be reviewed and approved by competent authorities such as the National Medical Products Administration (NMPA), the US Food and Drug Administration (FDA) and the European Medicines Agency (EMA) based on clinical trial data before launch. Any product that does not require approval by competent authorities or can be reviewed and approved without submission of clinical trial data should not be considered as a core product.

To put it simply, it refers to the core product having been approved for phase II clinical trial. In NMPA application, clinical study for new drugs is generally divided into five stages: preclinical study and phase I, II, III and IV trials. Since 2015, the NMPA has adopted a one-step approval procedure for clinical trial applications (including phases I to III) of all new drugs, therefore a new drug may not be progressively approved or further confirmed. Drugs in such listing projects must have entered phase II clinical trial to meet the requirements of Ch. 18A, and all significant communication with competent authorities and related results should be disclosed to prove that the NMPA has no significant doubts or objections to the completed or ongoing clinical trials. For generic drugs, proof of at least one human clinical trial (FIM) is required to demonstrate that the NMPA does not object to a Phase II (or subsequent phases) trial.

Biotech companies must own the intellectual property rights of the core products, including their own registered patents or patent applications developed internally as well as obtain exclusive licenses for the development, production and commercialisation of the core products through authorisation by the right holder.

In addition to companies, funds and investment institutions in the pharmaceutical, healthcare or biotechnology sectors, investors, investment funds or financial institutions with total assets under management of no less than HKD1 billion will also be recognised as "sophisticated investors".

Depending on the market value of the biotech company applying for listing, a shareholding of 1% to 5% is generally sufficient, taking into account the nature and amount of investment, the investment shares, the timing and other factors.

At present, nearly 80% of the listed biotech companies have adopted for a red chip structure, such as Beigene and InnoCare Pharma, while the rest are largely under H-share structure, such as Junshi Biosciences and CanSino Biologics. The two types of listing structures have their fair shares of pros and cons. After the CSRC’s issuance of the draft of "Overseas Listing Filing System" for public comment in December 2021, there is no significant difference in the regulatory approval of the two structures in the foreseeable future. However, if the applicant is more concerned about the overseas asset allocation and the convenience and flexibility of capital operation, it may give priority to the red chip structure; if the applicant's ownership structure is relatively complex, bears heavy tax burden for restructuring or is considering an A + H listing, the H-share structure is more suitable.

Compared with Ch. 18A, SSE STAR Market's "standard no. 5" set a higher threshold for market value, while requirements for R&D pipeline reserves, core team and core technology platform value rely more on “window guidance”. In 2021, a total of 17 biopharmaceutical companies failed to complete IPO on the STAR Market. The main reasons for their failure include the high requirements for sci-tech innovation and stricter standards for the pipeline model based on authorised technology introduction. By comparison, Ch. 18A has a clearer and more transparent regulatory approval process, allowing for pre-listing consultation and communication (pre-A1 submission) with the HKEX regarding special circumstances or unusual matters, with targeted adjustments based on communication results, hence a higher level of certainty.

The overall requirement is that a biotech company should clearly and accurately disclose its business model and products without compromising any scientific accuracy, including the source of the relevant products in the R&D pipeline, market coverage, market potential, important research information (preclinical/clinical data, R&D progress, future development plans, etc.) and business strategy.

Without HKEX approval, biotech companies listed under Ch. 18A should not carry out any individual or series of acquisitions, sales or other transactions or arrangements that will result in a fundamental change in their main business activities described in the listing documents. In other words, if a biotech company intends to expand or diversify its business, it should communicate with the HKEX in advance to obtain pre-approval.