Grail Plans $500 Million IPO in Hong Kong Amid Expansion of Cancer Early Detection Portfolio

On March 1, 2018, foreign media reported that Grail, a biotechnology company backed by Bill Gates and Amazon CEO Jeff Bezos, planned to launch an initial public offering (IPO) in Hong Kong.

According to an anonymous source, Grail also plans to raise $500 million through an IPO.

In the field of biotechnology, Grail is a name familiar to many. This cancer early screening company, favored by industry titans such as Bill Gates and Jeff Bezos, has attracted substantial investment from top-tier venture capital firms including Arch Venture Partners and Google Ventures.

Grail launched two large-scale trials in 2016 and 2017, respectively, to advance research on early cancer screening using ctDNA detection technology. Although this technology had not yet been applied in early cancer screening, its parent company, Illumina, remained highly optimistic about its potential.

Although no commercialized products have been launched yet, Grail’s growth has been relatively smooth under the spotlight of Illumina. In 2017, the company’s merger with another liquid biopsy firm, Cirina, brought Grail one step closer to realizing its vision.

Cirina is headquartered in Hong Kong and was co-founded in 2014 by Dennis Lo, Nancy Lui, and Chan Kwan-chi. The three founders have made significant contributions to the detection of cancer and other diseases through the use of plasma nucleic acids.

Among them, Dennis Lo is a leading authority in the field of non-invasive molecular diagnostics and screening, and the first scientist worldwide to discover cell-free fetal DNA in maternal blood. Following the merger, Dennis Lo will be appointed as Scientific Co-Founder and will join Grail’s Scientific Advisory Board. Min Cui, Founding Partner and Managing Director of Chengde Capital, will join Grail’s Board of Directors as an observer. Maneesh Jain, CEO of Cirina, will also join the Grail team.

This merger not only significantly strengthens Grail’s R&D capabilities but also builds a bridge for Grail to engage with the Chinese market. Post-merger, Grail will continue to develop its global commercial product markets, including regions across Europe, the United States, and Asia. As an operating subsidiary of Grail, Cirina will continue its research collaboration with The Chinese University of Hong Kong and further deepen this partnership.

It remains unclear whether Grail’s decision to list in Hong Kong is related to its merger with Cirina. What is certain, however, is that a successful Hong Kong IPO for Grail could signal a plot twist in the choice of listing venues for biotechnology companies.

On February 23, 2018, the Hong Kong Stock Exchange (HKEX) released the Consultation Paper on Listing Regime for Emerging and Innovative Companies (hereinafter referred to as the “Consultation Paper”). The Consultation Paper indicated that the HKEX would permit the following companies to list in Hong Kong:

a) Biotechnology companies that fail to pass the financial eligibility tests, including those without any revenue or profit track record;

b) High-growth and innovative companies with dual-class share structures;

c) Eligible issuers seeking a secondary listing on the Stock Exchange.

For details, see:“New Listing Rules of the Hong Kong Stock Exchange: Pre-Revenue or Unprofitable Biotech Companies May Apply for Listing”

As early as December 2017, the Hong Kong Stock Exchange (HKEX) announced its decision to broaden the existing listing regime, allowing the aforementioned three types of companies to list in Hong Kong, provided that appropriate disclosures were made and safeguard measures were implemented. This development also prompted some Chinese companies originally planning to list on the NASDAQ to pause and reconsider their choice of listing venue.

The Hong Kong Stock Exchange is the world’s leading capital market, according to data released by VCBeat.“Low Barriers, High Valuations, Easy Exits: Mainland Healthcare Companies May See a Wave of Hong Kong Listings”Based on the data,The Hong Kong Stock Exchange and the Shenzhen Stock Exchange are roughly equivalent in terms of the number of listed companies. Although trading activity is less vigorous than that of the Shenzhen market, the total market capitalization of Hong Kong stocks exceeds that of the Shenzhen market.Compared to the Nasdaq market, Hong Kong stocks offer significantly more attractive valuations.

Grail has not yet responded to this news, but if the move proves successful,Grail is poised to become one of the first beneficiaries since the Hong Kong Stock Exchange adjusted its listing rules at the end of last year. As WuXi AppTec,Biotech firms such as Grail are increasingly turning their attention to Hong Kong, and the Hong Kong stock market may attract more overseas biotechnology companies.