To raise capital for expansion, WuXi Biologics is pricing its shares at HK$20.60, the top end of its marketing range, thus valuing the IPO at HK$3.98 billion ($510 million), Bloomberg reports, quoting people familiar with the deal.
The WuXi AppTec subsidiary plans to sell 193 million shares and previously set the price range at HK$18.60 to HK$20.60 apiece.
About 45.1% of the money will be used to pay back previous bank loans, while 44.9% will be used to expand operations, including construction and equipment purchases for a new 30,000-liter-capacity facility in Wuxi, China, slated to run at the end of this year. When completed, that facility will become the world’s largest disposable bioreactor-based biologics commercial manufacturing facility, the company said. A fraction of the 44.9% will also go toward adding mammalian DS clinical manufacturing facilities at its Shanghai site.
The IPO comes on the back of the news that its parent company, WuXi AppTec, is seeking an IPO for its core drug R&D business on the Shanghai stock market.
WuXi Biologics provides services on the discovery, development and manufacturing of biologics. It has grown exponentially in the past few years to the extent that its own capital couldn’t sustain expenditure to meet the rising demand, since setting up cGMP-compliant facilities usually requires a large capital investment, and the industry’s high technical and regulatory requirements also make maintaining services costly.
As the prospectus (PDF) filed to the Hong Kong Exchange shows, the company’s revenues in 2014 were 332 million Chinese yuan ($48.9 million) with net profits at 42 million Chinese yuan ($6.2 million). For the first three quarters of 2016, revenue was about 697 million Chinese yuan ($102.5 million), and net profits have more than tripled to exceed 136 million Chinese yuan ($20 million).
AstraZeneca, Roche’s Genentech and Johnson & Johnson are among the company’s clients. The company’s market share in China of 48% in terms of revenue in 2016—growing from 36.4% in 2015—makes it the country's largest biologics outsourcing company, the company said, quoting a Frost & Sullivan report.
That company is very likely to continue to grow as the global biologics outsourcing services market grows. The Frost & Sullivan report predicts the size of that market to jump from $8.4 billion in 2016 to $20 billion in 2021.
“Our core competitive edge is our offering of integrated services that cover the full biologics development process and our ability to provide the customers with a single-source approach that saves customers critical time and money,” the company said in the prospectus. In the future, it plans to leverage its established position in China.
Trading is projected to start on June 13.