China’s health care sector consolidation to produce global champions, says investor in newest Hong Kong IPO winner
Fu expected 30 to 50 companies to dominate various segments of China’s health care industry…
China’s rapidly growing health care industry will consolidate within a decade, with a few dozen top players establishing a global presence, according to a specialist investor.
Greater transparency and competition will drive capital and talent towards companies that have the best track records, said Fu Wei, founder and chief executive officer of Singapore-based CBC Group which manages US$2 billion of assets mainly focused on health care.
“In the information age, the good companies will be known to all the investors, the industry, the government and talent very quickly,” he told the Post. “Most of the resources will go to the top players.”
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He expected 30 to 50 companies to dominate various segments of China’s health care industry within 10 years.
The nation has over 7,000 companies in the pharmaceutical industry alone, according to Adam Zhang Yu, a Hong Kong-based managing director of global investment bank E.J. McKay, who spent 15 years advising on pharmaceutical deals.
“In the next five to 10 years, the Chinese pharmaceutical market will embrace an investment (frenzy), and China-rooted global companies may emerge,” Yu said. “Mergers and acquisitions will be the trend as some companies fall while others rise.”
China’s health care sector attracted 50.8 billion yuan (US$7.5 billion) of private equity financing in the first half of the year, of which 30 per cent came from biotech and pharmaceutical firms – up from 18 per cent in the same period a year earlier, according to venture capital information supplier itjuzi.com.
CBC-backed drugs developer Everest Medicines is one of the companies that benefited from the boom, which followed Beijing’s reform in the past few years that made new drug approval much faster and diverted more health insurance funds to pay for more effective, innovative drugs.
Everest, which produces late clinical-stage medication for oncology, immunology, cardio-renal disease, and infectious diseases, surged 32 per cent in its trading debut at HK$72.75, compared with its initial public offering price of HK$55. It followed another strong 22 per cent debut by Genor Biopharma on Wednesday.
Its HK$3.3 billion (US$421 million) IPO was 27-times oversubscribed by institutional investors and 654 times by retail investors.
The IPO came four months after it completed a US$310 million series C private financing round for the three-year old company. CBC, the largest shareholder, will own just under half of Everest after its stock offering.
Everest has built a portfolio of eight drug candidates in 18 months by licensing from their patent owners the development and marketing rights in China and Asia.
Chinese drugs firm aims to bring down cost of breast cancer treatment
Everest’s lead drug candidates include Trodelvy which developed by New Jersey-based Immunomedics, a drugs developer acquired by California-based Gilead last month for US$21 billion.
Immunomedics was granted accelerated approval in April this year by US regulators for relapsed late-stage breast cancer patients. Everest licensed the candidate in April last year for clinical development and marketing in Greater China, South Korea, Mongolia and Southeast Asia.
“When we in-licensed Trodelvy, Immunomedics’ market capitalisation was only US$4 billion,” said Fu, who is also the chairman of Everest. “We had intensive internal discussions on whether to do the deal or not … our decision was based on our conviction that oncology is a category we must enter and Gilead’s acquisition proved we made the right decision.”
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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
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