(Bloomberg) -- Grail Inc., a cancer-testing startup backed by two of the world’s richest men, is weighing a U.S. initial public offering, people familiar with the matter said, potentially backing away from earlier plans to list in Hong Kong’s volatile market for new health stocks.
The Menlo Park, California-based biotechnology company could seek an IPO as early as 2019, based on conditions in the stock market, one of the people said. They asked not to be identified because the discussions are still at an early stage and plans could change. In February, Bloomberg reported that Grail had been considering raising as much as $500 million in a Hong Kong listing this year.
First-time share sales in the U.S. have raised $61.5 billion this year, up from $50.8 billion during the same period in 2017, data compiled by Bloomberg show. A representative for Grail declined to comment.
No final decisions have been made about a listing, said one of the people.
Grail is one of the most highly d biotechnology startups in the world, with a private valuation of about $3.2 billion, according to data from Pitchbook. It’s developing a test to detect a wide variety of cancers extremely early on. Investors in the startup include some of the highest-profile names in the business world, including Microsoft co-founder Bill Gates and Amazon.com Inc. founder Jeff Bezos’s personal venture fund.
Volatile Market
Hong Kong has been an attractive but tumultuous market for a handful of health companies that have chosen to list there. Earlier this year, the Hong Kong Stock Exchange changed its rules to let companies go public when they are still developing their products and don’t have revenue. Many biotech companies spend years without revenue or profits while they develop their products.
An increase in market volatility and weak performance by some Hong Kong IPOs in the sector have made Grail reconsider its listing venue and delay the timing until at least next year, one of the people said.
Chinese biotech firm Innovent Biologics Inc.’s October IPO raised HK$3.8 billion ($485 million), including a so-called greenshoe option. That deal followed listings by Ascletis Pharma Inc. and BeiGene Ltd. Ascletis’s shares are down about 48 percent from their offer price, BeiGene has lost 17 percent, and Innovent is up more than 70 percent.
U.S. biotech stocks have struggled as well. The Nasdaq Biotechnology Index of 190 stocks is up this year so far, though lost as much as 17 percent in a steep drop between August and October.
Grail last year completed the largest biotech funding round ever, raising over $900 million, data compiled by Bloomberg show. Grail’s main priority now is shaping its business strategy and boosting growth, one of the people said, and the size of a potential IPO hasn’t been finalized.
Formed by U.S.-listed genetic sequencing firm Illumina Inc. and the biotech venture capital firm Arch Venture Partners, Grail’s goal is to create a “pan-cancer” screening test that can diagnose people at a very early stage even when they have no symptoms, according to a 2016 interview with Jay Flatley, Illumina’s chief executive officer at the time.
©2018 Bloomberg L.P.
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