m&a 2017 review china pharmaceutical sector...pwc foreword —explanation of data presented in...

M&A 2017 Review China Pharmaceutical Sector

April 2018

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PwC

Agenda

Foreword

Overview

Strategic Buyers

Financial Buyers

Mainland China Outbound Deals

2017 M&A Review — China Pharmaceutical Sector April 2018

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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 2017 Review and 2018 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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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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PwC

Overview


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PwC

China pharmaceutical sector M&A fell by 17% in 2017 to US$17.12 billion, but China mainland outbound activity increased by 10% and 97% in number of deals and in deal value

Total deal volume and value of China Pharmaceutical sector, 2017 vs. 2016

Volume Value Volume Value Volume Value Volume Value Volume Value

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

Domestic 1 46 9,7 92 1 94 23 ,454 1 7 2 1 1 ,41 1 1 58 6,481 (8%) (43%)

Foreign 9 61 2 4 1 9 8 97 1 1 1 7 8 38% 83%

Total Strategic buyers 155 10,404 198 23,473 180 11,508 169 6,659 (6%) (42%)

Financial buyers

Priv ate Equity 1 5 97 9 37 7 ,431 53 5,37 3 39 4,001 (26%) (26%)

VC 1 0 31 47 85 38 1 94 39 87 3% (55%)

Total Financial buyers 25 1,009 84 7 ,516 91 5,567 78 4,088 (14%) (27%)

China mainland Outbound

SOE 2 305 - - - - 2 57 6 n/a n/a

POE 5 7 3 7 1 1 7 25 2 ,668 24 3 ,87 7 (4%) 45%

Financial buy ers 1 6 1 - 5 564 7 1 ,909 40% 239%

Total China mainland Outbound 8 384 8 117 30 3,231 33 6,362 10% 97%

HK Outbound 3 7 58 1 53 3 27 6 3 6 0% (98%)

Total 191 12,555 291 31,159 304 20,582 283 17,115 (7%) (17%)

2014 2015 2016 1 7 Vs 1 6 % Differnce2017


6

Source: ThomsonReuters, ChinaVenture and PwC analysis

PwC

23,454

11,411

6,481

19

97

178

7,516

6,131

5,997

170

2,943

4,459

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2014 2015 2016 2017

Domestic Strategic Buyer Foreign Strategic Buyer Financial Buyer Outbound

1,136

1,015612

9,792

Deal values fell continuously in domestic strategic buyer as a result of fewer mega-deals. However, outbound deal values have seen big increase in 2017


Down 17%

* US$1.3bn of private equity fund backed China mainland outbound deals are also recorded in financial buyer deals

Deal value by main category (2o14-2017)


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146

194 172 158

9

4 8

11 26

85 96

85 10

8 28

29

0

50

100

150

200

250

300

350

2014 2015 2016 2017

Domestic Strategic Buyer Foreign Strategic Buyer Financial Buyer Outbound

Deal volumes also fell in domestic strategic and financial sectors, but — despite reported curbs — outbound deal volumes continued to increase to a new record of 29 transactions


Down 7%

* 7 PE-led China mainland outbound deals are also recorded in financial buyer deals

Deal volume by main category (2014-2017)


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Strategic Buyers


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Domestic strategic M&A declined by nearly 43% to touch four-year lows with only 12 mega-deals valued at more than $100 million (compared to 23 in 2016); On the other hand, foreign inbound strategic M&A remained inactive.

百万美元

146

194 172 158

9

4

8 11

0

5,000

10,000

15,000

20,000

25,000

0

50

100

150

200

250

2014 2015 2016 2017

Deal volume — Domestic Deal volume — Inbound Deal value — Domestic Deal value — Inbound

Volume US$mil

Strategic buyer deals volume and value (2014-2017)


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Although overall deal volume and value decreased in 2017, biotechnology showed growing trend in deal volume.

114

133 138

99

41

65 42

70

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 2017

Deal volume — Pharmaceutical Deal volume — Biotechnology

Deal value — Pharmaceutical Deal value — Biotechnology

VolumeUS$mil

Strategic buyer deal by subsector (2014 -2017)


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2017 top deals of strategic buyers— above US$200 million

Date

announced

Deal val

(US$ mil)

Acquirer Target Target industry Brief introduction

1 07/06/2017 830 Jiangsu Yuyue

Tech Dvlp Co

Yunnan Baiyao

Holding Co Ltd

Pharmaceuticals Jiangsu Yuyue Technology Development Co Ltd acquired a 10% stake in Yunnan Baiyao Holding

Co Ltd, a Kunming-based manufacturer and wholesaler of pharmaceuticals, a 50:50 joint venture

between New Huadu Industrial Group Co Ltd (New Huadu) and the People's Government Of Yunnan

Province, from New Huadu (5%) and the People's Government Of Yunnan Province (5%), for CNY

5.638 bil (USD 829.741 mil), in a privately negotiated transaction.

2 12/10/2017 536 China Biologic

Prod Hldg Inc

Health Forward

Holdings Ltd

Biotechnology China Biologic Products Holdings Inc (China Biologic) agreed to acquire the entire share capital of

Health Forward Holdings Ltd, manufacturer of biological products, from PW Medtech Group Ltd, in

exchange for 5.521 mil China Biologic's new ordinary shares valued at a total CNY 3.533 bil (USD

536.365 mil), in a stock swap transaction. The shares were based on China Biologic's closing

stock price of CNY639.928 (USD 97.15) on 11 Oct 2017, the last full trading day prior to

announcement.

3 11/12/2017 487 China

Regenerative

Medicine

Lung Hang

Investments Ltd

Pharmaceuticals China Regenerative Medicine International Ltd of Hong Kong signed a Letter of Intent to acquire the

entire share capital of Lung Hang Investments Ltd, manufacturer of pharmaceutical preparation,

from Sacred Heart Healthcare LP, for an estimated CNY 3.223 bil (USD 486.867 mil).

4 19/06/2017 445 Grand Full

Development Ltd

Bloomage

BioTechnology

Corp

Pharmaceuticals Grand Full Development Ltd of Hong Kong planned to acquire a 50.712% interest or 187.793 mil

ordinary shares in Bloomage BioTechnology Corp Ltd, a Beijing-based manufacturer and wholesaler

of pharmaceutical preparation, for CNY 14.23 (USD 2.09) in cash per share, or a total CNY 3.029

bil (USD 444.736 mil), via scheme of arrangement. Upon completion, Bloomage BioTechnology

Corp Ltd will be delisting from the stock exchange.

5 12/09/2017 436 Shenzhen

Hepalink Pharm

Grp

Shenzhen Duopule

Ind Dvlp Co

Pharmaceuticals Shenzhen Hepalink Pharmaceutical Group Co Ltd agreed to acquire the entire share capital of

Shenzhen Duopule Industry Development Co Ltd, a Shenzhen-based manufacturer and wholesaler

of pharmaceutical preparation, in exchange for an estimated 138.889 mil Shenzhen Hepalink

Pharmaceutical Group Co Ltd's new ordinary shares valued at CNY 2.844 bil (USD 435.903 mil), in

a stock swap transaction. The shares were valued based on Shenzhen Hepalink Pharmaceutical

Group Co Ltd's closing stock price of CNY 20.48 (USD 3.138) on 27 Apr 2017, the last full trading

day prior to the suspension.

6 11/12/2017 295 Boai NKY

Pharmaceuticals

Ltd

Boai Nky Biotech

Co Ltd

Biotechnology Boai NKY Pharmaceuticals Ltd agreed to acquire the remaining 83.74% interest, which it did not

already own, in Boai NKY Biotechnology Co Ltd, a Jiaozuo-based manufacturer and wholesaler of

biological products, in exchange for an estimated 41.975 mil Boai NKY Pharmaceuticals Ltd's new

ordinary shares valued at CNY 1.954 bil (USD 295.227 mil), in a stock swap transaction. The

shares were valued based on Boai NKY Pharmaceuticals Ltd's closing stock price of CNY 46.56

(USD 7.033) on 24 Mar 2017, the last full trading day prior to the suspension.

7 30/06/2017 210 Yantai

Dongcheng

Biochemicals

JYAMS PET

Research & Dvlp

Ltd

Pharmaceuticals Yantai Dongcheng biochemicals Co Ltd agreed to acquire the entire share capital of JYAMS PET

Research & Development Ltd, a Nanjing-based manufacturer of medicinals and botanicals, for an

estimated CNY 1.427 bil (USD 210.28 mil), in a stock swap transaction. The consideration was to

consist of CNY 557.763 mil (USD 82.218 mil) in cash and the issuance of an estimated 60.753 mil

Dongcheng Biochemicals's new ordinary shares valued at CNY 868.77 mil( USD 128.062 mil).


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Financial Buyers


13

PwC

PE and VC activity declined by 14% and 26% in number of deals and deal value compared to the significant peak seen in 2016

15

37

53 39 10

47

38

39

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 2017

Deal volume — PE Deal volume — VC Deal value — PE Deal value — VC

Volume US$mil

Financial buyer deals (2014-2017)


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2017 top deals of financial buyers— above US$200 million

Deal val

(US$ mil)

1 19/04/2017 662 Zhuhai Hengqin

Weichuang

Zhuhai Weixing

Industrial Co

Pharmaceuticals Zhuhai Hengqin Weifu acquired 100% stake of

Wuhan Zhuhai Weixing Industrial Co for USD

662 mil.

2 11/05/2017 438 Xizang Yuxi

Venture Capital

Guizhou Xinbang

Pharm Co Ltd

Pharmaceuticals Guanfu Zhang,the actual owner of Guizhou

Xinbang Pharm, transferred all his 21.04%

stake to Xizang Yuxi VC for USD 396 million.

3 28/06/2017 396 Hangzhou

Zhemintou

Tianhong

Zhenxing Biopharm

& Chem Co

Pharmaceuticals Hangzhou Zhemintou Tianhong attempted to

get control of Zhenxing Biopharm & Chem Co

for USD 396 mil under a tender offer.

4 13/03/2017 281 Liu Xicheng Hainan Haiyao Co

Ltd

Pharmaceuticals Xicheng Liu, the actual owner of Hainan

Haiyao, attemped to acquire 10% more stake

of the company under a tender offer.

5 24/08/2017 201 Essence

Fund/TFTC/Haier

Capital/One-belt-

one-road etc

Yifan Pharmaceutical

Co., Ltd

Pharmaceuticals Yifan Pharma issued 106.2 million new

shares via private placement and raised Rmb

1.8 billion in total.

Brief introductionDate

announced Acquirer Target Target industry


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Mainland China Outbound Deals


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2 - - 2

5 7

25 24

1 1

5 7

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

10

20

30

40

2014 2015 2016 2017

Deal volume — SOE Deal volume — POE Deal volume — Financial buyer

Deal value — SOE Deal value — POE Deal value — Financial buyer

Volume US$mil

Pharmaceutical outbound deals, as deals with clear strategic rationale, continued to witness a plunge starting from 2016 in terms of both volume and value. POE actively involved and contributed US$1bn deals. The involvement of PE and financial buyers in outbound M&A is now a well established sub-sector of the market. SOE also contributed 2 deals in 2017.

Mainland China outbound deals by investor type


17


PwC

2o17 top Mainland China outbound deals— above US$500 million

Deal val

(US$ mil)

1 10/04/2017 1,300 Creat

Group Corp

POE Biotest Medical research

& development

Creat Group Corporation, an investment firm, has agreed to acquire Biotest AG, a

provider of plasma proteins and biological drugs, in a tender offer. The transaction is

expected to be valued at approximately EUR1.2 billion (USD1.3 billion).

2 30/11/2017 1,051 Nanjing

Xinjiekou

Dept Store

POE Shiding Shengwu

Biotechnology

(Hong Kong)

Trading Ltd /

Dendreon

Pharmaceuticals

Inc

Biotechnology Nanjing Xinjiekou Department Store Co Ltd (Nanjing Xinjiekou) of China agreed to

acquire the entire share capital of Shiding Shengwu Biotechnology (Hong Kong)

Trading Ltd, provider of biotechnology research and development services, from

Sanpower Group Co Ltd, in exchange for an estimated 180.248 mil Nanjing Xinjiekou's

new ordinary shares valued at HKD 8.21 bil (USD 1.051 bil), in a stock swap

transaction. The shares were valued based on Nanjing Xinjiekou's closing stock price

of HKD 45.546 (USD 5.833) on 14 Sep 2017, the last full trading day prior to the

suspension.

3 01/03/2017 900 Investor

group

Financial Buyer Grail Medical research

& development

Grail, Inc., a Menlo Park, CA-based life sciences company that promises to detect

cancer early when it can be cured, raised over $900m through the first close of its

Series B funding. The round was led by Arch Venture Partners with participation from

Johnson & Johnson Innovation as well as Amazon, Bristol-Myers Squibb, Celgene,

McKesson Ventures, Merck (known as MSD outside the United States and Canada),

Tencent Holdings Limited and Varian Medical Systems, Inc.

4 09/01/2017 820 Sanpower

Group Co

Ltd

POE Dendreon

Pharmaceuticals

Inc

Biotechnology Valeant Pharmaceuticals International, Inc. announced that its affiliate has entered

into a definitive agreement to sell all of the outstanding equity interests in Dendreon

Pharmaceuticals, Inc. ("Dendreon") to the Sanpower Group Co., Ltd.,. Under the

terms of the transaction, Valeant will receive cash consideration of $819.9 million at

completion.

5 08/06/2017 605 Investor

group

Financial Buyer SciClone

Pharmaceuticals

Pharmaceuticals SciClone Pharmaceuticals, Inc. and a consortium consisting of entities affiliated with

GL Capital Management GP Limited ("GL Capital"), Bank of China Group Investment

Limited ("BOCGI"), CDH Investments, Ascendent Capital Partners and Boying

announced that they have entered into a definitive merger agreement under which the

Buyer Consortium will acquire all the outstanding shares of SciClone for $11.18 per

share in cash, representing a valuation of approximately $605 million.

6 15/11/2017 576 Shanghai

Pharma

Century

SOE Cardinal Health (L)

Co Ltd

Pharmaceuticals Shanghai Pharma Century Global, wholly-owned subsidiary of Shanghai Pharma

acquired a 100% stake in Cardinal Health (L) Co., Ltd. in an all-cash offer and

therefore owned Cardinal Health’s business entities in the PRC upon the completion

of this transaction.

Brief introductionAcquirer typeDate

announced Acquirer Target Target industry


18


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 2017

6

North America

13 8

South America

Europe

Africa

Asia Pacific

Oceanic

0 30

6

1

718

0 1

2017

2016

Outbound M&A deal volume by region of destination 2017 vs. 2016


19


PwC

2017 M&A Review — China Pharmaceutical Sector

20

April 2018

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.

© 2018 PWC. All rights reserved. PwC refers to the China member firm, and may sometimes refer to the PwC network. Each member

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