m&a 2018 review...pwc foreword —explanation of data presented in this report (1/2) • the...

M&A 2018 Review

China Pharmaceutical Sector

April 2019

PwC

Agenda

2

April 20192018 M&A Review — China Pharmaceutical Sector

Foreword 03

Overview 05

Strategic Buyers 09

Financial Buyers 14

Mainland China Outbound Deals 18

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 2018 Review and 2019 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

2018 M&A Review — China Pharmaceutical Sector April 2019

3

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


4

PwC

Overview

PwC

China pharmaceutical M&A was relatively active in 2018, with a 54% increase in deal volume and a 16% increase in deal value at US$19.77 billion; the increase was driven by domestic strategic buyers and financial buyers offsetting a 30% decline in outbound M&A


6

Source: ThomsonReuters, ChinaVenture and PwC analysis

* US$ 67.83bn of Yunnan Baiyao’s restructuring plan announced in November 2018 was excluded from domestic strategic buyer deals.

Total deal volume and value of China Pharmaceutical sector, 2018 vs. 2017

Volume Value Volume Value Volume Value Volume Value Vol Value

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

Domestic 194 23,454 172 11,411 158 6,481 167 9,033 6% 39%

Foreign 4 19 8 97 11 178 3 - (73%) n/a

Total Strategic buyers 198 23,473 180 11,508 169 6,659 170 9,033 1% 36%

Financial buyers

Private Equity 37 7,431 53 5,373 39 4,001 86 5,963 121% 49%

VC 47 85 38 194 39 87 129 293 231% 238%

Total Financial buyers 84 7,516 91 5,567 78 4,088 215 6,256 176% 53%

China mainland Outbound

SOE - - - - 2 576 3 193 50% (66%)

POE 7 117 25 2,668 24 3,877 15 1,047 (38%) (73%)

Financial buyers 1 - 5 564 7 1,909 31 3,222 343% 69%

Total China mainland Outbound 8 117 30 3,231 33 6,362 49 4,462 48% (30%)

HK Outbound 1 53 3 276 3 6 3 18 0% 175%

Total 291 31,159 304 20,582 283 17,115 437 19,769 54% 16%

20172015 2016 18 Vs 17 % Diff2018

PwC

194 172 158 167

4 8 11 3

85 96

85

246 8

28 29

21

0

50

100

150

200

250

300

350

400

450

500

2015 2016 2017 2018

Domestic Strategic Buyer Foreign Strategic Buyer Financial Buyer Outbound

Overall deal volume hit record high of 437, with significant increase in PE/VC transactions at record high of 246

Deal volume by main category (2015-2018)


7

Up 54%


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

PwC

23,454

11,411

6,481 9,033

19

97

178

-

7,516

6,131

5,997

9,478

170

2,943

4,459

1,258

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2015 2016 2017 2018Domestic Strategic Buyer Foreign Strategic Buyer Financial Buyer Outbound

Deal values increased by 16% year-on-year due to significant increase of domestic strategic M&A and PEVC investment, but China outbound M&A dropped off the 2017 peak to the lowest in the past three years.

Deal value by main category (2015-2018)


8


* US$3.22bn (US$ 1.91bn in 2017) of private equity fund backed China mainland outbound deals are also recorded in financial buyer deals

Up 16%

PwC

Buyers

Strategic

PwC

194 172 158 167

4

8 11 3

0

5,000

10,000

15,000

20,000

25,000

0

50

100

150

200

250

2015 2016 2017 2018Deal volume — Domestic Deal volume — InboundDeal value — Domestic Deal value — Inbound

Volume

Domestic strategic M&A increased by 1% and 36% in deal volume and deal value, respectively, with 22 mega-deals valued at more than US$100 million (compared to 12 in 2017); On the other hand, foreign inbound strategic M&A remained inactive

Strategic buyer deals volume and value (2015-2018)


10


US$mil

PwC

The growth of the deal values of strategic buyers mainly came from the pharmaceutical sector; volume and value of deals in the biotechnology sector both fell in 2018

Strategic buyer deal by subsector (2015-2018)


11


US$mil

133 138

99 131

65 42

70 39

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

2015 2016 2017 2018Deal volume — Pharmaceutical Deal volume — BiotechnologyDeal value — Pharmaceutical Deal value — Biotechnology

Volume

PwC

2018 top deals of strategic buyers (1/2)— above US$200 million

12



Date

announced

Deal val

(US$ mil)

Acquirer Target Target industry Brief introduction

1 05/01/2018 1,308 Sino Biopharmaceutical Ltd Sino Biopharm

(Beijing) Ltd

Pharmaceuticals Sino Biopharmaceutical Ltd (Sino Biopharm) of China acquired the remaining

51% interest, which it did not already own, in Sino Biopharmaceutical (Beijing)

Ltd, manufacturer of pharmaceutical preparation, from France Investment

(China) Group Ltd, in exchange for 723.284 mil Sino Biopharm's new ordinary

shares valued at CNY 8.494 bil (USD 1.308 bil), in a stock swap transaction.

The shares were valued based on Sino Biopharm's closing stock price of CNY

11.743 (USD 1.809) on 4 Jan 2018, the last full trading day prior to the

announcement.

2 10/07/2018 1,203 Beijing New Oriental Star Jiangsu Aosaikang

Pharmaceutical Co

Ltd

Pharmaceuticals Beijing New Oriental Star Petrochemical Engineering Co Ltd (BNEC) acquired

the entire share capital of Jiangsu Aosaikang Pharmaceutical Co Ltd, a Nanjing-

based manufacturer and wholesaler of pharmaceutical preparation for a total

CNY 7.952 bil (USD 1.203 bil), in a stock swap reverse takeover transaction.

3 02/06/2018 667 China Resources

Pharmaceutical Holdings Co

Ltd

Jiangzhong Pharm

Co Ltd

Pharmaceuticals China Resources Pharmaceutical Holdings Co Ltd, a unit of China Resources

Pharmaceutical Group Ltd, ultimately owned by the Chinese state-owned China

Resources National Co Ltd, intended to launch a tender offer for a 56.973%

interest or 170.918 mil ordinary shares in Jiangzhong Pharmaceutical Co Ltd, a

Nanchang-based manufacturer and wholesaler of pharmaceutical preparation,

for CNY 25.03 (USD 3.9) per share, or a total CNY 4.278 bil (USD 666.577 mil).

4 28/12/2018 437 Nanning Baling Tech Co Ltd Cellonis

Biotechnologies Co

Ltd

Pharmaceuticals Nanning Baling Technology Co Ltd planned to acquire the entire share capital of

Cellonis Biotechnologies Co Ltd, a Beijing-based manufacturer of biological

products, for a total CNY 3 bil (USD 437.007 mil) in cash.

5 19/03/2018 341 Ping An Life Insurance China Traditional

Chinese

Pharmaceuticals Ping An Life Insurance Co of China Ltd of China, a unit of Ping An Insurance

(Group) Co of China Ltd, acquired a 12% stake or 604.296 mil new ordinary

shares in China Traditional Chinese Medicine Holdings Co Ltd, a Hong Kong-

based manufacturer of pharmaceutical preparation, for HKD 4.43 (USD 0.565) in

cash per share, or a total HKD 2.677 bil (USD 341.327 mil), in a privately

negotiated transaction.

PwC

2018 top deals of strategic buyers (2/2)— above US$200 million

13



Date

announced

Deal val

(US$ mil)

Acquirer Target Target industry Brief introduction

6 21/05/2018 280 Shanghai Pharmaceuticals

(HK) Investment Ltd/Sunrise

Bright Investment Limited

Guangdong

Techpool Bio-

Pharma

Pharmaceuticals Shanghai Pharmaceuticals (HK) Investment Ltd, a wholly-owned overseas subsidiary of

Shanghai Pharma Group, intends to acquire a 100% stake in Takeda Chromo BeteiligungsAG, a wholly-owned subsidiary of Takeda Pharma AG for USD144 mil (about CNY915 mil),

thus indirectly holding a 26.34% interest in Guangdong Techpool Bio-pharma Co Ltd. Upon completion of the transaction, Shanghai Pharma's shareholding in Guangdong Techpool will

increase from 40.80% to about 67.14%, realizing absolute control. Meanwhile, Sunrise Bright Investment Limited is buying the 100% stake of another wholly owned Swiss

subsidiary of Takeda Pharma AG for USD136 mil, thereby indirectly owning 25% interest of

Guangdong Techpool.

7 15/06/2018 273 Henan Yinge Industrial

Investment Co Ltd/ Beijing

Qiancheng Jufu Asset

Management Co Ltd/iCapital

Ltd

Genova Inc Biotechnology An investor group, comprised of Henan Yinge Industrial Investment Co Ltd, Beijing

Qiancheng Jufu Asset Management Co Ltd and iCapital Ltd agreed to acquire a 10% stake in Genova Inc, manufacturer of biological products, a unit of Novagen Holding Corp, for CNY

1.747 bil (USD 273 mil), in a privately negotiated transaction.

8 27/11/2018 269 Chengdu Xingcheng Invest

Grp

Tianjin Chase Sun

Pharmaceutical Co

Ltd

Pharmaceuticals The Chinese state-owned Chengdu Xingcheng Investment Group Co Ltd agreed to acquire

16.195% stake or 487.64 mil ordinary shares in Tianjin Chase Sun Pharmaceutical Co Ltd, a Tianjin-based manufacturer of pharmaceutical preparation, for CNY 3.83 (USD 0.552) per

share, or a total CNY 1.868 bil (USD 269.126 mil), in a privately negotiated transaction.

9 31/08/2018 252 Shenzhen Nuoyu Tech Co Ltd Guanfu Holdings

Co Ltd

Pharmaceuticals Shenzhen Nuoyu Technology Co Ltd, a unit of Shanghai Qianxi Investment Consulting Co

Ltd, signed a Letter of Intent to acquire 14.569% stake or 383.717 mil ordinary shares in Guanfu Holdings Co Ltd, a Quanzhou-based manufacturer of pharmaceutical preparation,

for an estimated CNY 4.5 (USD 0.658) in cash per share, or an estimated a total CNY 1.727 bil (USD 252.39 mil), in a privately negotiated transaction.

10 01/06/2018 242 Grand Pharm (China) Co Ltd Shanghai Winguide

Huangpu

Pharmaceuticals Grand Pharmaceutical (China) Co Ltd, a unit of China Grand Pharmaceutical &Healthcare

Holdings Ltd, planned to acquire the entire share capital of Shanghai Winguide Huangpu

Pharmaceutical Co Ltd, manufacturer and wholesaler of pharmaceutical preparation, from

Winguide Far East Ltd, for a total CNY 1.551 bil (USD 242.028 mil) in cash.

11 24/05/2018 241 China Grand Pharm

Healthcare

Taiwan Tung Yang

Intl Co Ltd

Pharmaceuticals China Grand Pharmaceutical &Healthcare Holdings Ltd of Hong Kong (Grand

Pharmaceutical &Healthcare), a unit of Outwit Investments Ltd, agreed to acquire the entire share capital of Taiwan Tung Yang International Co Ltd, a Shanghai-based manufacturer of

pharmaceutical preparation, from GL Saino Investment Ltd, for an estimated CNY 1.54 bil(USD 241.097 mil), in a stock swap transaction.The consideration was to consist of CNY

924 mil (USD 144.658 mil) in cash and the issuance of 181.07 mil new ordinary shares value at CNY 616 mil.

PwC

Buyers

Financial

PwC

PE/VC activity hit new records in deal volume at 215, and rebounded strongly in deal value to the highest in the past three years, reflecting high supply of available capital meeting high demand for funding in the private sector

Financial buyer deals (2015-2018)

2018 M&A Review — China Pharmaceutical Sector

15

37 53 39

86 47

38 39

129

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

50

100

150

200

250

2015 2016 2017 2018

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

Volume US$mil


April 2019

PwC

2018 top deals of financial buyers (1/2)— above US$200 million


16


April 2019

Date

announced

Deal val Acquirer Target Target industry Brief introduction

(US$ mil)

1 24/04/2018 285 Investor Group Innovative Cellular Biotechnology An investor group, comprised of Witruth Capital Co Ltd, Dunhou Venture

Capital Co Ltd, Shenzhen GTJA Investment Group Co Ltd, SB China

Venture Capital Ltd and Volcanics Venture Co Ltd acquired an

undisclosed minority stake in Innovative Cellular Therapeutics Co Ltd, a

Shanghai-based manufacturer of biological products, for CNY 1.8 bil

(USD 284.999 mil) in a privately negotiated transaction.

2 03/08/2018 277 Hillhouse/GIC/Baker

Bros/Ally Bridge

BeiGene Bio-pharmaceuticals BeiGene listed in HKSE on 8 August 2018, raising about USD 903 mil by

issuing 65.6 mil shares at the issue price of HKD108 per share. It

brought in four cornerstone investors, including Hillhouse (subscribed for

HKD 559 mil), GIC (subscribed for USD 100 mil), Baker Bros (subscribed

for USD 80 mil) and Ally Bridge (subscribed for USD 25 mil).

3 24/05/2018 260 Sequoia Capital/Yunfeng

Capital/Boyu capital/Blue

Pool/Arch Venture

Partners/6 Dimensions

Capital

Brii Biosciences Bio-pharmaceuticals Brii Bio, a company committed to bringing innovative medicines to China

as a way to improve public health and together with clinically

differentiated assets to meet this challenge was initially funded by ARCH

Venture Partners, 6 Dimensions Capital, Boyu Capital, Yunfeng Capital,

Sequoia Capital, and Blue Pool Capital of USD 260 million.

4 09/05/2018 260 Investor Group CStone

Pharmaceuticals

Bio-pharmaceuticals CStone Pharmaceuticals, a clinical stage biopharmaceutical company

devoted to the development of innovative drugs, completed a $260

million financing.The investment was led by GIC Private Limited,

Singapore’s sovereign wealth fund, with participation from new investors

including Sequoia China, Yunfeng Capital, 6 Dimensions Capital, CITIC

PE, Taikang Insurance Group, ARCH Venture Partners, Hillhouse

Capital, King Star Capital, 3W Partners, AVICT, and Terra Mafnum

Capital Partners. Existing investors also participated in this round,

including Oriza Seed Venture Capital , Boyu Capital, and WuXi

Healthcare Ventures (currently a 6 Dimensions Capital fund).

PwC

2018 top deals of financial buyers (2/2)— above US$200 million


17


April 2019

Date

announced

Deal val Acquirer Target Target industry Brief introduction

(US$ mil)

5 16/10/2018 246 Investor Group Innovent Biologics Bio-pharmaceuticals Innovent Biologics announced in Hong Kong on 16 October 2018 that it would issue 236 mil shares, or 21% of the enlarged share capital, for HKD12.50 to HKD14 per share, raising up to HKD3.3 bil. Cornerstone investors include Seacliff and Dwyer, Cormorant Asset Management, LP, king lam Asset Management, LAV Biosciences Fund IV, L.P. Prime Capital Funds, Rock Springs Capital Master Fund LP, SCC Growth V Holdco L. Ltd., Elbrus Investments Pte. Ltd., value partners fund management Hong Kong Ltd., and Vivo Funds, subscribed for the total number of shares available for sale for HKD1.918 bil.

6 10/12/2018 242 Investor Group Shanghai Junshi

Biosciences Co., Ltd.

Bio-pharmaceuticals Junshi Biosciences is a bio-pharmaceutical company engaged in the discovery and development of innovative drugs, as well as clinical research and commercialization on a global scale. It listed in HKSE from 24 December 2018, raising a total of HKD 3.08 bil to HKS3.24 billion. Seven cornerstone investors have committed to buy a total of USD 242 mil of the company's shares.

7 29/06/2018 220 Hony/CDH/Hopu/

Hillhouse/Singapore-

based EDBI/Ally

Bridge/Tasly Capital

I-MAB BIOPHARMA Bio-pharmaceuticals I-Mab Biopharma, a company focusing on innovative Biologics in therapeutic areas of immuno-oncology and immuno-inflammation, announced the completion of Series C financing for $220 million USD, representing one of the largest amounts ever raised in Series C by an innovative biotech company in China. This round of funding was led by Hony Capital, with participations from Hillhouse Capital, HOPU Investments, CDH Investment, Ally Bridge Group, Singapore-based EDBI, and existing investors C-Bridge Capital and Tasly Capital.

8 26/12/2018 201 Wuxi Zhongbao Jiawo

Investment Partnership

(Limited Partnership)

Walvax

Biotechnology Co.,

Ltd.

Biotechnology Yunnan Industrial Investment Group signed a share transfer agreement with Wuxi Zhongbao Jiawo, to transfer the 5% of Walvax Biotechnology's shares (about 76.87 million shares) it hold to Zhongbao Jiawo at a price of CNY 137.8 mil. Walvax Biotechnology is a company specializing in the development, production and marketing of vaccine products in the field of biomedicine.

9 28/11/2018 200 Ireland Strategic

Investment

Fund/Temasek/Yunfeng

Capital/Sequoia Capital

WuXi NextCODE Biotechnology On 28 November 2018, Ireland Strategic Investment Fund, TemasekHoldings (Private) Co., LTD., Shanghai Yunfeng Investment Management Co., LTD., Sequoia Capital China Fund and undisclosed investors invested USD 200 mil in WuXi NextCODE.

PwC

Outbound Deals

Mainland China

PwC

Although the number of mainland China outbound deals increased by 48% in 2018, the deal values decreased by 30%, mainly caused by the decrease of POE activities; The involvement of PE and financial buyers in outbound M&A is now a well established sub-sector of the market and contributed 31 deals with 7 US$100 million+ mega-deals (compared to 4 in 2017)

Mainland China outbound deals by investor type


19

- - 2 3 7

25 24 15

1

5 7

31

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

0

10

20

30

40

50

60

2015 2016 2017 2018

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

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

Volume US$mil


April 2019

PwC

2o18 top Mainland China outbound deals— above US$200 million


20


April 2019

Date

announced

Deal valAcquirer Target Target industry Brief introduction

(US$ mil)

1 11/04/2018 593 China Jianyin

Investment Ltd

Financial buyer Australia Nature’s Care

Biotech

Pharmaceuticals China Jianyin Investment Ltd. and its wholly-owned branch company announced

that together with Tamar Alliance Partners Fund I, L.P., the deal of buying 75%

shares of the Australian health company Australia Nature’s Care Biotech (ANCB)

has officially completed.

2 31/08/2018 510 WeDoctor/Mason

Group/Aldworth

Management

POE Genea Biomedx Biotechnology WeDoctor, Mason Group and Aldworth Management will acquire 89.5% shares of

Genea Biomedx, an Australian biotechnology company by HKD 3.43 billion to

HKD 4 billion. Genea Biomedx has offered infertility therapeutic services in

Australia for about 30 years. Genea focuses on the development of IVF, artificial

insemination and human culture solutions.

3 08/02/2018 500 Investor group Financial buyer Moderna Therapeutics Bio-pharma Moderna Therapeutics, a clinical stage biotechnology company that is pioneering

messenger RNA (mRNA) therapeutics and vaccines to create a new generation of

transformative medicines for high unmet medical needs in patients, has raised

$500 million in a new funding round. New investors include a wholly-owned

subsidiary of the Abu Dhabi Investment Authority (ADIA), BB Biotech AG, Julius

Baer, Singapore-based EDBI and Sequoia Capital China. Existing investors that

also participated in this round include Fidelity Management & Research Company,

Pictet, Viking Global Investors, ArrowMark Partners and Alexandria Venture

Investments.

4 12/09/2018 450 Bison Capital

Acquisition Corp

Financial buyer Xynomic

Pharmaceuticals Inc

Pharmaceuticals Bison Capital Acquisition Corp of China (BCAC) definitively agreed to merge with

Xynomic Pharmaceuticals Inc, a Dover-based manufacturer of pharmaceutical

preparation, for an estimated USD 450 mil, in a leverage buyout transaction. The

consideration was to consist of USD 350 mil common shares and up to USD 100

mil in profit-related payments. Upon completion, BCAC was to change name to

Xynomic Pharmaceuticals Holdings Inc.

5 28/02/2018 250 Temasek/

Hillhouse Capital/Boyu

Capital/6 Dimensions

Capital

Financial buyer Viela Bio Bio-pharma Viela Bio has incorporated as an independent inflammation- and autoimmunity-

focused biotechnology company after spinning out six molecules from

MedImmune, the global biologics research and development arm of AstraZeneca

and funded with up to $250 million from a consortium of investors led by Boyu

Capital, 6 Dimensions Capital, and Hillhouse Capital, along with Temasek and

Sirona Capital.

6 05/07/2018 208 Huadong Medicine

Aesthetics In

POE Sinclair IS Pharma PLC Medical

cosmetology

Huadong Medicine Aesthetics Investment (Hongkong) Ltd of China, a unit of

Huadong Medicine Co Ltd, acquired the entire share capital of Sinclair Pharma

PLC, a global aesthetics company headquartered in London, for GBP 0.32 (USD

0.413) in cash per share, or a total value of GBP 161.206 mil (USD 207.811 mil) in

cash, via an unsolicited offer in scheme of arrangement transaction.

PwC

Developed economies continue to be the favouredoutbound destinations, among which, North America and Europe came in top two in terms of volume in 2018

Outbound M&A deal volume by region of destination

2018 vs. 2017


21


34 18

North America

0

02018

2017

9 7

Europe

01

Africa

36

Asia Pacific

3 1

Oceanic

April 2019

South America

pwccn.com

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

© 2019 PricewaterhouseCoopers Consultants (Shenzhen) Limited. All rights reserved. PwC refers to the China member firm, and may sometimes

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m&a 2018 review...pwc foreword —explanation of data presented in this report (1/2) • the...

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