On June 23, an acquisition news hit the official website of China’s State Administration of Market (SAM), with the buyer being the central enterprise China National Investment Corporation (CIC) and the seller being a multinational pharmaceutical chemical company: Takeda Pharmaceutical.
China State Investment High-Tech intends to indirectly acquire sole control of Haisen Bio-Pharmaceutical Co. through its affiliated entities by way of a capital increase. Haisen Bio will acquire some of Takeda’s assets in China, involving five drugs including the anti-hypertensive injection “Yaningding”.
Ltd. is a forward-looking, strategic emerging industry investment platform, mainly engaged in M&A investment and equity fund investment in the fields of advanced manufacturing, new materials, medicine and health. By the end of 2020, the total assets of Guotou High-Tech were 48.9 billion yuan, and the fund management scale was nearly 150 billion yuan.
In the capital market, there is the saying of “Guotou system”. As a central enterprise investment platform, Guotou has at least direct participation in listed companies in the pharmaceutical field, such as Zhejiang Pharmaceutical, Furey, Changshan Pharmaceutical, etc. There are even more companies invested through equity funds. But the acquisition of foreign pharmaceutical companies business, this is the first time.
Once this transaction is completed, it will become the first successful case of a central enterprise acquiring the business of a multinational pharmaceutical chemical company in China.
CIC High-Tech mentioned in the public announcement material: this acquisition is valued by Takeda Pharmaceuticals in the production and sales of cardiovascular and metabolic field brand products in China. After the transaction, Guotou High-Tech will gain control of some of Takeda Pharmaceutical’s assets through Haisen Bio. Why did such an ordinary merger and acquisition make it to the official website of the Antimonopoly Bureau?
In fact, as early as 2018, the Anti-Monopoly Bureau of the State Administration of Market Supervision formulated the rules for declaration of operator concentration cases according to the Interim Provisions on the Applicable Criteria for Operator Concentration Summary Cases. In late June, the declarations of the acquisitions of Tencent and Koji Medical, a subsidiary of High Tide, were also made public respectively. The acquisition of Takeda Pharmaceutical’s assets by Guotou High-Tech also starts from the cooperation between Takeda Pharmaceutical and Haisen Bio.
In December 2020, Japan’s Takeda Pharmaceutical announced that it would transfer its non-core prescription drugs in China to Hysen Biotech for $322 million. At the time, some analysts pointed out that Takeda had made a money-losing deal. However, Takeda was in a global rush to sell its non-core businesses, so the low price for the assets was not a surprise. Instead, it was the background of Hazen Bio that raised the media’s attention.
According to the Health Knowledge Bureau, Haisen Bio was established only three months ago when Takeda’s assets were acquired, and the financier standing behind Haisen was the industrial investment-oriented local government, Hefei. Hefei had cultivated three national strategic emerging industry clusters by virtue of its success in new display devices, integrated circuits and artificial intelligence, which included such well-known companies as BOE, Changxin Storage and Azure Automobile, but the biomedical industry had not been Hefei’s strong point. The investment logic and strategic layout behind the acquisition of Takeda Pharmaceuticals’ business pipeline by Haisen Bio is self-explanatory.
In January this year, Takeda Pharmaceuticals China President Shan Guohong, Haisen Pharmaceuticals CEO Qian Kang, Hefei Feidong County, the Standing Committee of the County Party Committee, Executive Vice Mayor Wang Shuwu jointly participated in the “Hefei International Pharmaceutical Port base project Haisen Pharmaceuticals launch”, Haisen commitment to invest 3 billion yuan in Feidong County to establish a drug industrialization base. But not even half a year, Haisen Pharmaceuticals project has been a major change. The central enterprise, the State Investment Bureau, replaced the Feidong County government as the controlling party of Haisen. This means that Takeda’s non-core prescription drug assets will be included in the sequence of central enterprises. State investment as a central enterprise investment platform, standing obviously higher than the Hefei State Capital, can bring more resources, management experience and market space for Hesen Pharmaceuticals, which is conducive to the subsequent development of Wu Tian Pharmaceuticals non-core prescription drug business.
Takeda Pharmaceuticals has indicated that it will continue to repay its debt through the proceeds of the business divestiture between fiscal year 2021 and fiscal year 2023. Thus, this transaction is only the first step in Takeda’s large-scale divestment of its pipeline in China. The acquisition of some of Takeda’s assets in China by Guotou High-Tech has undoubtedly set a precedent for the industry, and may become a trendsetter for the pharmaceutical industry in the future, with more cases of M&A of multinational pharmaceutical companies by central enterprises to come.
Multinational pharmaceutical companies have been accelerating their moves to focus on innovation in recent years, especially, Takeda Pharmaceuticals’ $62 billion acquisition of Char in 2018: although Takeda thoroughly sat on the throne as the N0.1 global rare disease, it also took on huge debts to do so. 2020, Takeda Pharmaceuticals has completed its goal of divesting over $10 billion in non-core assets.
In 2021, this strategy continues: In January Takeda sold 16 non-core prescription drugs sold in Europe for $562 million. Subsequently, Takeda also divested non-core products in Latin America, in Japan, and in Europe, as well as packaging and selling its Consumer Healthcare Ltd. However, Takeda is not alone in choosing to “slim down” in the context of the changing global pharmaceutical industry.
On June 28, Sanofi decided to sell 16 consumer healthcare assets sold in Europe to Stada, a German company, and the transaction is expected to be completed in the third quarter of this year. At a time when multinational drug companies are divesting their non-core businesses, domestic innovative drug companies are coincidentally making gains in the global new drug market. On June 15, Yashang Pharmaceuticals announced that its Phase Ib/II clinical trial application for APG-2575 was approved by the FDA. Just one day earlier, Sansheng Guojian announced on June 14 that the company’s HER2/PD-1 bispecific antibody SSGJ-705 was approved by the U.S. FDA to enter Phase I clinical studies. There are numerous cases like this.
According to ChinaBio, a consulting firm, there were a total of 271 cross-border transactions between Chinese pharmaceutical companies and overseas pharmaceutical companies in 2020, an increase of 300% compared to 2015. With the frequent slimming of multinational pharmaceutical companies, it is undoubtedly an opportunity for domestic pharmaceutical companies to merge and acquire. However, analysts point out that the Chinese pharmaceutical market is becoming increasingly competitive, and it does not matter if the acquisition is successful, but if you want to win in the market, you also need to improve your own hard power.
