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M&A 2016 Review China Pharmaceutical Sector

April 2017

www.pwccn.com

PwC

Agenda

2016 M&A Review — China Pharmaceutical Sector

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April 2017

Foreword

Overview

Strategic Buyers

Financial Buyers

Mainland China Outbound Deals

PwC

Foreword — Explanation of data presented in this report (1/2)

• The data and analysis here presented are for the China Pharmaceutical sector only

• The data source of this deck is consistent with that of PwC M&A 2016 Review and 2017 Outlook, which is based on the information compiled by ThomsonReuters, ChinaVenture and PwC analysis, unless stated otherwise

• Thomson Reuters and ChinaVenture record announced deals. Some announced deals will not go on to complete

• The deal volume figures presented in this report refer to the number of deals announced, regardless of whether or not a value is disclosed for the deal

• The deal value figures presented in this report refer only to the deals whereby a value has been disclosed (referred to in this presentation as “disclosed value”)

• “Domestic” means China including Hong Kong and Macau

• “Outbound” relates to mainland China company acquisitions abroad

• “Inbound” relates to overseas company acquisitions of Domestic companies


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April 2017

PwC

Foreword — Explanation of data presented in this report (2/2)

• “Private Equity deals” or “PE deals” refer to financial buyer deals with deal value of over US$10mn and/or with undisclosed deal value, invested mainly by private equity GPs, and also including direct investments by financial institutions and conglomerates which are of the nature of private equity type investing

• “VC deals” refer to financial buyer deals with deal value of less than US$10mn and/or with undisclosed deal, but invested by venture capital funds

• “Strategic buyer” refers to corporate buyers (as opposed to financial buyers) that acquire companies with the objective of integrating the acquisition in their existing business

• “Financial buyer” refers to investors that acquire companies with the objective of realising a return on their investment by selling the business at a profit at a future date and mainly, but not entirely, comprise PE and VC funds


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April 2017

PwC

Overview


5

April 2017

PwC

M&A in China’s Pharmaceutical sector increased slightly in 2016 in terms of deal volume, with deal value down by 34% at US$20.58 billion


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April 2017

Source:ThomsonReuters, ChinaVenture and PwC analysis

Total deal volume and value of China Pharmaceutical sector, 2015 vs. 2014

Volume Value Volume Value Volume Value Volume Value Volume Value

Strategic buyers (US$mil) (US$mil) (US$mil)

Domestic 146 9,792 194 23,454 172 11,411 33% 140% (11%) (51%)

Foreign 9 612 4 19 8 97 (56%) (97%) 100% 418%

Total Strategic buyers 155 10,404 198 23,473 180 11,508 28% 126% (9%) (51%)

Financial buyers

Private Equity 15 979 37 7,431 53 5,373 147% 659% 43% (28%)

VC 10 31 47 85 38 194 370% 179% (19%) 127%

Total Financial buyers 25 1,009 84 7,516 91 5,567 236% 645% 8% (26%)

China mainland Outbound

SOE 2 305 - - - - (100%) (100%)

POE 5 73 7 117 25 2,668 40% 59% 257% 2185%

Financial buyers 1 6 1 - 5 564 0% (100%) 400% #DIV/0!

Total China mainland Outbound8 384 8 117 30 3,231 0% (70%) 275% 2667%

HK Outbound 3 758 1 53 3 276 (67%) (93%) 200% 420%

Total 191 12,555 291 31,159 304 20,582 52% 148% 4% (34%)

16 Vs 15 % Differnce2014 2015 15 Vs 14 % Differnce2016

PwC

146

194 172

9

4

8 26

85 96

10

8 28

0

50

100

150

200

250

300

350

2014 2015 2016

Domestic Strategic Buyer Foreign Strategic Buyer Financial Buyer Outbound

Except for domestic strategic investments, all the other types of M&A activities, in particular outbound deals, have increased in 2016 (1/2)

Deal volume by main category (2014 - 2016)


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April 2017


PwC

9,792

23,454

11,411

612

19

97 1,015

7,516

6,131 1,136

170

2,943

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016

Domestic Strategic Buyer Foreign Strategic Buyer Financial Buyer Outbound

Except for domestic strategic investments, all the other types of M&A activities, in particular outbound deals, have increased in 2016; deal value decreased.

Deal value by main category (2014 - 2016)


8

April 2017


US$mil

PwC

Strategic Buyers


9

April 2017

PwC

146

194 172

9

4

8

0

5,000

10,000

15,000

20,000

25,000

0

50

100

150

200

250

2014 2015 2016

Deal volume - Domestic Deal volume - Inbound Deal value - Domestic Deal value - Inbound

Domestic strategic M&A witnessed strong growth in 2015 driven by economic transformation, this trend was slowing down in 2016 with volume and value decreased by 11% and 51% respectively. On the other hand, foreign inbound strategic M&A appear to be more active

Strategic buyer deals volume and value (2014 - 2016)


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April 2017


Volume US$mil

PwC

114

133

138

41

65 42

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

0

50

100

150

200

250

2014 2015 2016

Deal volume - Pharmaceutical Deal volume - Biotechnology Deal value - Pharmaceutical Deal value - Biotechnology

Pharmaceuticals was the hottest subsector, which continued to grow in deal volume, but noticed decrease in deal value from 2015. Biotechnology was slowing down in both deal volume and value.


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April 2017

Strategic buyer deal by subsector (2014 - 2016)


Volume US$mil

PwC

2016 top deals of strategic buyers — above US$400 million


12

April 2017


Date

announced

Deal val

(US$ mil)

Acquirer Target Target industry Brief introduction

1 30/12/2016 3,648 New Huadu Industrial

Group Co., Ltd.

Yunnan Baiyao

Holding Co., Ltd.

Pharmaceuticals New Huadu Industrial Group Co., Ltd paid

RMB 25.4 billion to acquire 50% shares of

Yunnan Baiyao.

2 05/12/2016 654 Chengdu Tianxing

Instrument Co., Ltd

Beijing Berry Genomics

Biotechnology Co., Ltd.

Biotechnology Chengdu Tianxing Instrument Co., Ltd

acquired the entire share capital of Beijing

Berry Genomics, a manufacturer and

wholesaler of biological products, in a

reverse takeover transaction.

3 01/01/2016 504 Shanghai Shyndec

Pharmaceutical

Co.,Ltd.

Sinopharm Weiqida

Pharm Co., Ltd.

Pharmaceuticals

4 01/01/2016 493 Shanghai Shyndec

Pharmaceutical

Co.,Ltd.

China National Accord

Medicines Corporation

Ltd.

Pharmaceuticals

5 31/05/2016 470 Shanxi CY Pharm

Group Co., Ltd.

Shanxi Powerdone

Pharmaceutics Co., Ltd.

Pharmaceuticals Shanxi CY Pharm Group agree to acquire

the entire share capital of Shanxi

Powerdone, a manufacturer and wholesaler

of pharmaceutical preparation, for RMB 3

billions.

6 01/09/2016 419 Wuhan Dangdai

Technology Ind Group

Co., Ltd.

Humanwell Healthcare

(Grp)

Biotechnology Humanwell Healthcare plan to issue no more

than 158 comone shares to at RMB 17.76

per share to the orginal shareholder, Wuhan

Dangdai. After the issuance, Wuhan Dangdai

raise its interest from 24.49% to 32.74%.

Shanghai Shyndec Pharmaceutical

purchased the shares of a number of

Sinopharm Group subsidiaries by issuing

shares and paying cash for the purchase of

assets.

PwC

Financial Buyers


13

April 2017

PwC

15

37

53

10

47

38

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

10

20

30

40

50

60

70

80

90

100

2014 2015 2016

Deal volume - PE Deal volume - VC Deal value - PE Deal value - VC

PE deal value hit a record high in 2015 and decreased in 2016, though deal volume kept stable and PE remained active. VC appeared to become inactive in 2016.

Financial buyer deals (2014 - 2016)


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April 2017

Volume US$mil


PwC

2016 top deals of financial buyers — above US$300 million


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April 2017


Deal val

(US$ mil)

1 26/01/2016 590 Guangxi Invest Grp

Co Ltd

Guangxi Wuzhou

Zhongheng Grp

Pharmaceuticals The investor of Guangxi Wuzhong Zhongheng

agreed to transfer 20.52% interest, the total

deals value at RMB 3.9 million.

2 04/02/2016 401 Investor Group Sinovac Biotech Ltd Pharmaceuticals Privatization at USD 7 per share by investor

group.

3 02/09/2016 367 Investor Group Hainan Asia Pharm

Co Ltd

Pharmaceuticals Sichuan Goldstone Orient New Material

Equipment Co.,Ltd. and it's subsidiaries plan

to issue no more than 53 million shares at a

price of RMB 23.13 per share, and paid

RMB870 million in cash to acquire Hainan

Asia Pharm.

4 23/04/2016 308 Investor Group Nanjing

Pharmaceutical Co

Ltd

Pharmaceuticals Nanjing Pharma plan to issue no more

than 300 mil comone shares at RMB 6.57

per share to the investor group.

Date

announced Acquirer Target Target industry Brief introduction

PwC

Mainland China Outbound Deals


16

April 2017

PwC

POEs and financial buyers witnessed a plunge in 2016 in outbound deals in terms of both volume and value, with US$1 billion deals taking place. While SOE reported no participation in 2016.


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April 2017

2 - -

5 7

25

1 1

5

0

500

1,000

1,500

2,000

2,500

3,000

0

10

20

30

40

2014 2015 2016

Deal volume - SOE Deal volume - POE Deal volume - Financial buyer

Deal value - SOE Deal value - POE Deal value - Financial buyer

Mainland China outbound deals by investor type

Volume US$mil


PwC

2016 top Mainland China outbound deals — aboveUS$500 million


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April 2017

Deal val

(US$ mil)

1 28/07/2016 1,260 Shanghai Fosun

Pharmaceutical

(Group) Co Ltd

Gland Pharma Ltd Pharmaceuticals Shanghai Fosun acquired 86.08% interest

of Gland Pharma Ltd, a manufacturer of

plasma products.

2 19/05/2016 1,197 Creat Group Corp Bio Products

Laboratory Ltd

Pharmaceuticals Creat Group of Chian agreed to acquired

Bio Products Laboratory for GBP 820

million.

3 14/11/2016 518 Investor group SciClone

Pharmaceuticals Inc

Pharmaceuticals SciClone Pharmaceuticals, Inc. (NASDAQ:

SCLN) ("SciClone") today confirmed that it

has received an unsolicited, nonbinding

proposal from a consortium led by GL

Capital Management GP Limited and ABG

Management Limited to acquire all of the

outstanding shares of SciClone not already

owned by the consortium for $11.18 per

share in cash.

Date

announced Acquirer Target Target industry Brief introduction


PwC


Developed economies continue to be the favoured outbound destinations, among which, North America and Europe came in top two in terms of volume in 2016.

0

North America

4

South America

0 0

0

6

0

813

03

2016 2015

Outbound M&A deal volume by region of destination 2016 vs. 2015

Europe Asia Pacific

Africa Oceanic

April 20172016 M&A Review — China Pharmaceutical Sector

19

4

PwC


20

April 2017

Xun Tang

PwC China Deals Partner

Pharmaceuticals and Life Sciences Industry

[email protected]

Janelle Fei

PwC China Deals Associate Director

Pharmaceuticals and Life Sciences Industry

[email protected]

Thank you

This content is for general information purposes only, and should not be used as a substitute for consultation

with professional advisors.

© 2017 PricewaterhouseCoopers Management Consulting (Shanghai) Limited. All rights reserved. PwC

refers to the China member firm, and may sometimes refer to the PwC network. Each member firm is a

separate legal entity. Please see www.pwc.com/structure for further details.CN-20170425-1-C1.

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