“Proposal on Supporting Unprofitable Biopharmaceutical Companies in Listing and Financing on the ChiNext Market of A-Shares” has been received. After careful study, the response is as follows:
I. Overview of Capital Market Support for Financing by Innovative High-Tech Enterprises in Biopharmaceuticals and Other Sectors
In recent years, the China Securities Regulatory Commission (CSRC) has taken multiple measures to vigorously promote the development of a multi-tiered capital market,Actively support the domestic listing of innovative high-tech enterprises in sectors such as biopharmaceuticals that comply with national industrial policies and issuance requirements.
In May 2014, the revised “Administrative Measures for Initial Public Offerings and Listing on the ChiNext Board” came into effect, appropriately lowering the financial thresholds for issuance and listing on the ChiNext Board, eliminating the mandatory requirement for sustained net profit growth, and allowing enterprises with revenues above a certain scale to list with only one year of profitability records. This expansion in the coverage of served enterprises has helped channel more capital into innovative high-tech companies in need of support.
In January 2016, the revised “Administrative Measures for the Initial Public Offering and Listing of Stocks” and “Administrative Measures for the Initial Public Offering and Listing of Stocks on the ChiNext Board” were implemented, adjusting independence and the use of raised funds from issuance conditions to information disclosure requirements, further optimizing issuance conditions, highlighting key review areas, and facilitating corporate financing.
By the end of 2017, there were 3,485 listed companies on the Shanghai and Shenzhen stock exchanges. In 2017, a total of 419 companies completed initial public offerings (IPOs), raising RMB 218.6 billion. High-tech enterprises accounted for nearly 80% of the newly listed companies throughout the year, including 32 biopharmaceutical companies that raised RMB 14.7 billion.
As of the first half of 2018, there were 3,547 listed companies on the Shanghai and Shenzhen stock exchanges. During this period, 63 companies completed initial public offerings (IPOs), raising RMB 92.3 billion in total, including three biopharmaceutical companies that raised RMB 3.17 billion.
II. Creating Conditions in Accordance with the LawGuide innovative companies in sectors such as biopharmaceuticals that are not yet profitable or have accumulated losses to issue equity financing instruments and list domestically.
In order to thoroughly implement the spirit of the 19th National Congress of the Communist Party of China and the relevant decisions and arrangements made by the CPC Central Committee and the State Council, deepen the reform of the financial system, and improve the financial market framework, on March 30, 2018, the General Office of the State Council forwarded the China Securities Regulatory Commission’s “Several Opinions on Launching Pilot Programs for Innovative Enterprises to Issue Stocks or Depository Receipts in Mainland China” (hereinafter referred to as the “Several Opinions”).
According to the "Several Opinions," the China Securities Regulatory Commission (CSRC) will select companies that align with national strategy, possess core competitiveness, and enjoy high market recognition.High-tech industries such as biopharmaceuticals, the internet, cloud computing, big data, and artificial intelligenceand strategic emerging industries, innovative enterprises that have reached a considerable scale shall be selected as pilots; the acceptance and review of such pilot enterprises for issuing stocks or depository receipts domestically shall be conducted in strict accordance with laws and regulations.
Meanwhile, the "Several Opinions" further optimize securities issuance conditions to address situations where certain innovative enterprises possess sustainable profitability but may not yet be profitable or have accumulated deficits.
In light of the characteristics of innovative enterprises—such as high growth, substantial investment, and a prolonged period to achieve profitability at specific development stages—and in accordance with the procedures stipulated by the Securities Law and upon approval by the State Council, the China Securities Regulatory Commission has amended Article 26 of the Measures for the Administration of Initial Public Offerings and Listing of Stocks and Article 11 of the Measures for the Administration of Initial Public Offerings and Listings on the ChiNext Board. These amendments explicitly stipulate that eligible innovative enterprises are no longer subject to the issuance conditions regarding profitability and the absence of accumulated deficits.
III. Next Steps
Moving forward, the China Securities Regulatory Commission (CSRC) will adhere to the general principle of pursuing progress while ensuring stability, firmly establish and implement the new development philosophy, deepen capital market reforms and expand opening-up, further improve supporting systems and regulatory rules, and support eligible innovative high-tech enterprises in listing on the domestic capital market.