What It Takes to Go Public in Hong Kong
The IPO Preparation Journey for Biotech Companies

Since the introduction of Chapter 18A in 2018, Hong Kong has become the second-largest biotech fundraising platform globally, with cumulative IPO proceeds exceeding US$18 billion[reference:0]. But what does it actually take for a pre-revenue biotech company to go public on the Hong Kong Stock Exchange? This article breaks down the core listing requirements, pre-IPO maturity metrics, and structural considerations that define the 18A journey — drawing on the latest data from the 2024–2025 listing cohorts.

1. The Core Requirements: What Chapter 18A Demands

Chapter 18A was designed to allow pre-revenue, pre-profit biotech companies to access public capital markets, provided they meet a set of investor protection measures that ensure only companies at a relatively advanced stage of development can list[reference:1].

1.1 The “Core Product” and “Beyond Concept Stage”

The most fundamental requirement is that the applicant must have at least one “Core Product” that has passed the “concept stage”[reference:2][reference:3]. But what does this mean in practice?

A Core Product is defined as a biotech product (including small-molecule drugs, biologics, or medical devices including diagnostic devices) that is subject to regulatory approval based on clinical trial data[reference:4][reference:5]. The product must be the basis of the company’s listing application.

For a Core Product to be considered “beyond concept stage”, the company must have completed at least one regulated clinical trial in human subjects[reference:6]. In practical terms, for pharmaceuticals and biologics, this means Phase I clinical trials must have been completed, and the relevant regulatory authority must not object to the commencement of Phase II trials[reference:7].

Importantly, if the Core Product has been licensed-in or acquired, the applicant must have independently completed at least one clinical trial on that product after acquiring the rights[reference:8]. This prevents companies from simply buying a late-stage asset and listing on that basis without demonstrating their own R&D capability.

1.2 Additional Eligibility Criteria

Beyond the Core Product requirement, Chapter 18A applicants must satisfy several other conditions[reference:9]:

• Market capitalisation: At least HK$1.5 billion at the time of listing[reference:10].
• Management continuity: Substantially the same management must have operated the business for at least two full financial years[reference:12].
• R&D continuity: The company must have been conducting R&D on the Core Product for at least 12 months prior to listing[reference:13].
• Working capital: Sufficient funds to cover at least 125% of operating expenses for 12 months post-listing (including IPO proceeds)[reference:14].
• Sophisticated investor: At least one sophisticated investor must have made a substantial investment at least six months before the listing date, and that investment must be maintained through the IPO[reference:16].
• IP ownership: The company must own or have rights to patents or other IP relating to the Core Product[reference:17].
• Use of proceeds: IPO proceeds must be primarily used for R&D to bring the Core Product to market[reference:18].

Unlike the main board’s financial eligibility tests (which require three years of profit or revenue track records), Chapter 18A requires only two financial years of operating history[reference:19] — reflecting the reality that pre-revenue biotech companies may not have long operating histories.

2. Pre-IPO Maturity: What the Data Shows

The 18A regime is designed for companies that are relatively mature in their development — not early-stage startups. The 2024–2025 listing data confirms this clearly.

Companies that listed in 2024–2025 had an average establishment age of 12 years (compared to 11 years in 2023, 10 years in 2022, and 9.1 years in 2021). This upward trend suggests that the market is attracting increasingly seasoned and well-established biotech companies.

In terms of financing, these companies completed an average of 4.9 rounds of pre-IPO financing, raising a total of US$147 million before going public. This level of private market validation — from multiple rounds of sophisticated investors — provides a strong signal of quality to public market investors.

R&D spending during the track record period averaged US$78.5 million. However, this figure varies significantly by business model. For example, companies focused on antibody-drug conjugates (ADCs) with global, multi-pipeline development strategies — such as 映恩生物 (Dingxin Biotech) — reported substantially higher R&D expenditures due to the capital-intensive nature of their approach.

3. Founder and Management Shareholding

One of the key indicators of alignment between management and shareholders is the level of equity held by founders and senior executives prior to the IPO. The data from the 2024–2025 listings shows a wide range.

Founders and other individuals named in the prospectus (excluding employee shareholding platforms) held, on average, a significant portion of the company’s issued share capital. However, the reported figures often understate actual economic interests, particularly for companies incorporated in mainland China, where regulatory considerations often require the use of employee shareholding platforms rather than direct equity grants.

In some cases, the percentage of shares held by these individuals may be higher than reported, as they may hold unvested restricted shares, options, or equity awards that are not yet reflected in the reported percentages.

4. Incorporation Jurisdiction: Cayman Islands vs. Mainland China

One of the most significant structural shifts in the 18A ecosystem is the growing proportion of companies incorporated directly in mainland China (so-called “H-share” structures), rather than in the Cayman Islands.

Among the 20 biotech companies that listed in 2024–2025, 14 were incorporated in mainland China — meaning that companies with mainland China incorporation now account for more than one-third of all HKEX-listed biotech companies. This represents a dramatic shift from earlier years, when the vast majority of 18A companies were incorporated in the Cayman Islands.

This trend reflects evolving regulatory and market conditions. Mainland China incorporation (the H-share route) offers certain advantages, including greater regulatory certainty and alignment with domestic capital market reforms[reference:20]. However, it also presents distinct challenges, particularly in the area of employee incentives.

4.1 Employee Incentives: From Share Plans to Employee Shareholding Platforms

Employee equity incentives are critical for biotech companies — they help attract and retain top scientific and commercial talent, conserve cash for R&D, and align employee interests with those of shareholders. However, the way these incentives are structured has evolved significantly.

In companies incorporated in the Cayman Islands, traditional share option plans and restricted share unit (RSU) plans are common. These plans allow the company to grant options or awards over its shares, which can be exercised or vested post-IPO.

In mainland China-incorporated companies, however, Chinese laws and regulations impose restrictions on granting equity incentives directly to employees. As a result, these companies have increasingly turned to “employee shareholding platforms” — special purpose vehicles established by the company or its founders to hold shares on behalf of employees. These platforms do not involve the grant of options or awards over listed shares; instead, employees hold interests in the platform entity.

Among the 2024–2025 listing cohort:

• Only 2 companies (both incorporated in the Cayman Islands) adopted post-IPO share plans (options and/or RSUs).
• 14 companies (all incorporated in mainland China) used employee shareholding platforms that do not involve the grant of options or award shares.

This trend is likely to continue as more mainland China-incorporated companies choose the H-share listing route. For overseas investors, understanding these structural differences is important: employee shareholding platforms may provide less transparency than traditional share plans, and the economic interests of employees may be subject to different terms and conditions.

5. The 2025 Game-Changer: Confidential Filing and the TECH Channel

In May 2025, HKEX and the Securities and Futures Commission launched two initiatives that have fundamentally changed the IPO preparation journey for biotech companies[reference:21].

The TECH Channel (Technology Enterprises Channel) is a dedicated communication channel that assists prospective biotech and specialist technology companies in understanding listing rules and preparing for their IPOs before they submit formal applications[reference:22]. Key features include:

• A specialised team with experience in reviewing Chapter 18A and 18C listing applications[reference:23].
• Early engagement to help companies understand eligibility and suitability requirements, including Core Product definition and sophisticated investor qualifications[reference:24].
• Preliminary guidance on case-specific issues under the Listing Rules[reference:25].

Confidential filing allows biotech companies to submit their Application Proofs on a confidential basis, addressing concerns about premature disclosure of proprietary technologies, operational strategies, and listing plans[reference:26]. This option is available for listing applications filed after 6 May 2025[reference:27].

By the end of 2025, 119 applications had been received through the TECH Channel, including 73 from pre-revenue biotech companies — demonstrating strong demand for these new pathways.

6. The Due Diligence Imperative

For overseas investors, law firms, and professional services firms advising on cross-border transactions, rigorous due diligence is essential when engaging with HKEX-listed or pre-IPO biotech companies. The 18A regime’s focus on clinical-stage assets, IP ownership, and sophisticated investor validation provides a solid foundation — but it does not eliminate the need for independent verification.

Key areas to scrutinise include:

• Corporate registration and legal status: Is the company properly incorporated and in good standing? What is its ownership structure?
• IP ownership and freedom to operate: Does the company genuinely own or have rights to the IP underlying its Core Product?
• Clinical data integrity: Are the clinical trial results reliable and verifiable?
• Regulatory pathway: Is the company on track with its regulatory submissions?
• Financial health: Does the company have sufficient working capital to reach its next milestones?
• Corporate governance: Is the board independent and diverse? Are there appropriate checks and balances?

Access to verified, official company information is the foundation of effective due diligence. Whether you are evaluating a potential investment, conducting a compliance review, or advising a client on a cross-border transaction, having reliable data about a company’s registration status, credit history, legal risk profile, and corporate governance is essential.

Services that provide official enterprise credit reports and professional due diligence reports can help bridge the information gap — enabling more confident, better-informed commercial decisions.

7. Conclusion

The journey to a Hong Kong IPO under Chapter 18A is demanding but well-defined. Companies must have a Core Product beyond the concept stage, a track record of R&D investment, multiple rounds of sophisticated investor backing, and sufficient working capital to fund their next phase of development. The data from the 2024–2025 listing cohorts shows that successful applicants are mature, well-funded, and clinically advanced — not early-stage ventures.

Recent regulatory innovations — particularly the TECH Channel and confidential filing — have made the process more efficient and less risky for companies. The growing trend toward mainland China incorporation and the associated shift from share plans to employee shareholding platforms reflect the evolving nature of the 18A ecosystem.

For overseas investors and professional services firms, the message is clear: opportunities abound, but diligence is essential. Understanding the regulatory framework, verifying corporate information, and conducting thorough due diligence are the keys to navigating this dynamic and fast-growing market.