Investments in Chinese biotech firms listed on global markets are on the upswing. Zai Lab and WuXi Biologics have raised $172 million and $586 million last week and since June, respectively, leading to Zai Lab increasing 54% on the Nasdaq and WuXi Biologics jumping 84% in Hong Kong. The latest Chinese companies planning to go public include Xynomic Pharmaceuticals and Ascentage Pharma Group, both companies specializing in cancer therapeutics. The growth of investments in Chinese biotech firms can be largely attributed to the lack of US biotech IPOs over the past few years.

Although clinical-stage biotech companies do not have actual product revenues, the rise in investments points to the steep valuation of biotech firms and the confidence of investors in the potential of these companies. For example, Zai Lab has no sales, yet it has a $1.4 billion market capitalization. Similarly, WuXi Biologics had revenues of $181 million in 2016, yet trades at 114 times its 2017 predicted earnings. In the third quarter of 2017, only four biotech IPOs have been priced, with Zai Lab being the largest.

Source: Bloomberg