Shanghai Pharmaceuticals, one of China’s biggest drug manufacturers and distributors, is to raise up to $2.2bn through an offering of new shares in Hong Kong, according to people close to the transaction.

The Shanghai-quoted company, which is expected to announce the offering on Friday, began talking to potential institutional investors on Tuesday ahead of a planned listing in the Chinese territory on May 20. The move comes as foreign investment and consolidation of domestic drug producers intensifies in China, which is fast becoming one of the world’s largest markets for medicines.

The people close to the transaction said Shanghai Pharma had signed up some cornerstone investors, including a commitment for $300m of stock from Temasek, the Singapore state investment agency.