Funding option: royalties giant opens Hong Kong base as mainland China biotech deals surge

The world’s largest buyer of biopharmaceutical royalties has set up its first Asia-Pacific base in Hong Kong, joining a string of multinational corporations in the pharmaceutical sector establishing offices in the city as out-licensing deals by mainland Chinese biotechnology firms hit record highs.

Royalty financing gives drug developers an alternative way to raise capital even as US investment restrictions loom, according to an expert.

“Chinese biotech firms would need royalty financing as an alternative,” said Kenneth Sun, who spent more than a decade at Wall Street bank Morgan Stanley before joining US-headquartered Royalty Pharma as senior vice-president and head of Asia.

Founded in 1996 and headquartered in New York City, Royalty Pharma provides financing to drug developers and research institutions in exchange for royalties – a share of a drug’s future sales. It opened its Hong Kong office at IFC in Central in May.

The total number of Chinese biotech business development deals, including out-licensing, rose 30 per cent year on year through May 31, while total deal value surged 87 per cent over the same period, according to an HSBC report on June 23.

Sun’s remarks come amid geopolitical uncertainties and a liquidity shift towards artificial intelligence stocks that have taken a toll on traditional fundraising channels, leaving the cash-hungry sector exposed to volatility in Hong Kong’s initial public offering market.