Christian Shepherd and Hudson Lockett
CanSino Biologics’ stock surged as much as 127 per cent on its first day of trading on Shanghai’s Nasdaq-like Star Market on Thursday after the company raised Rmb5.2bn ($748.9m) in a secondary share offering. The shares later pared some of that initial enthusiasm to trade 85 per cent higher.
Appetite for Tianjin-based CanSino’s stock has been driven by its development of an experimental Covid-19 vaccine that seeks to stimulate an immune response to coronavirus using a chemically weakened common cold.
The treatment has been developed jointly with a team of leading immunologists from China’s People’s Liberation Army and has already been approved for use on troops.
Optimism that the company may successfully deliver a vaccine has helped propel its Hong Kong-listed shares more than 320 per cent since the start of the year. CanSino’s Hong Kong-traded stock fell 11 per cent on Thursday.
But the drug, which is about to enter into final stage trials in Saudi Arabia, is months away from being commercially available. That, and the fact that CanSino has been chronically unprofitable, has prompted analysts to question its business model.
The company said in its Star Market prospectus that its net losses had risen from Rmb64.4m in 2017 to Rmb157m last year.
“The political pressure surrounding a vaccine is enormous and CanSino has been unprofitable for years,” said Brock Silvers, chief investment officer of Adamas Asset Management in Hong Kong. “CanSino looks deeply speculative at this point — no profit, deep tech hype, abundant risk, but at premium valuations.”
Mr Silvers, who spoke prior to the listing, added that CanSino was not even at the front of the pack in China’s vaccine race. Rivals Sinovac Biotech and state-owned Sinopharm Group have already been approved for phase three trials. CanSino experienced mixed results in its proposed vaccine’s phase two trial.
China’s Star Market, which launched a little more than a year ago, is known for its spectacular listing debuts with retail investors often bidding up shares. Chipmaker SMIC’s stock soared 246 per cent on its first day of trading last month.
“Before the Star Market, there’s no chance for unprofitable companies like CanSino to be listed,” said Zhao Bing, an analyst at Huajing Securities.
Chinese groups were among the first globally to announce experimental vaccines and begin clinical trials. But they have increasingly had to conduct final stage trials in other countries where the virus is still spreading, given that China appears to have largely contained the pandemic.
That has put China’s vaccine makers at a disadvantage compared with the likes of the UK’s AstraZeneca — which is working with Oxford university — US-based Moderna and Germany’s BioNTech, which are based in countries with a relatively high number of new daily Covid-19 infections.
Additional reporting by Xueqiao Wang in Shanghai