Investing In 9 Companies Consecutively, Jiuding Capital Logically Chose Its “Medicine”
As many PE investors were cautious about pharmaceutical industry, Jiuding Capital, with the efforts of its professional team, has rushed to occupy the market within half a year. It’s revealed in the interview of Shanghai Securities News that the company invested 90 million yuan in Guangxi Liuzhou Pharmaceutical Co., Ltd. in June and 60 million yuan in Hunan Fangsheng Pharmaceutical Co. Ltd. in July, totaling 9 medical corporations plus the prior 7 companies including Shanxi Powerdone Pharmaceutics Co., Ltd. , Haikou Qili Pharmaceutics Co., Ltd. and Zhuhai Ebang Pharmaceutics Co., Ltd., which have covered most sectors in pharmaceutical industry.
Latest News: Jiuding Capital invests in two medical companies
Since its reconstruction in 2002, Guangxi Liuzhou Pharmaceutical Co., Ltd. has kept growing at an annual sales rate of over 30%. In 2008, its sales reached 1.42 billion yuan, ranking 46th among Chinese Top 100 Pharmaceutical Companies of 2008. Since 2004, it has been listed No. 1 in sales in Guangxi medical sectors and become the sole largest and fastest-growing leading enterprise outside the provincial capital city in China.
Hunan Fangsheng Pharmaceutical Co. Ltd. works to make medicines used for gynecology and pediatrics, with 7 national patents.
It’s worth noting that Fangsheng and previous 7 companies are all pharmaceutical companies, except for Liuzhou Pharmaceutical, a medical commercial enterprise. Jiuding Capital’s Partner Zhongyi ZHAO said that Liuzhou Pharmaceutical performed well in terms of circulation channels. Modern economy features the principle of centralized production and scattered consumption. How to achieve scattered consumption in centralized production among the huge Chinese markets? It’s better to pay attention to the channel, which is also the reason why we invested in Chengdu Hongqi Chain and Gifore. and market are two potential development prospects for Chinese enterprises. Chinese market is huge, and an enterprise can develop prosperously if its channel is ok.
For medical businesses, Zhao thought that its logistics will certainly be concentrated, which should be supported by national policies and business principles. As a regional leader, Liuzhou Pharmaceutical will enhance its industrial position and market share in next 3 years and probably compete with national counterparts in 5 years.
Nine invested companies are operated to develop synergetically
When talking about the reasons of investing in Liuzhou Pharmaceutical, Zhongyi ZHAO replied as follows:
1. Logistics enterprises often tie up huge amounts of money and need financing;
2. Good circulation channels cannot be separated with medical companies. At present, Jiuding Capital’s pharmaceutical enterprises have circulated smoothly.
3. It’s beneficial to its strategic predictions on medical circulation systems;
4. Following two crucial value-added services are provided by Jiuding Capital:
a. M&A assistance when Liuzhou Pharmaceutical expands to more surrounding areas;
b. Professional services in choosing drugs based on its medical expert team.
In addition, he introduced the features of its invested companies. Shanxi Powerdone with good manufacturing capacity is one of the most advanced and powerful pharmaceutical manufacturers in China; Zhuhai Ebang and Haikou Qili boast strong R&D and channel capacity and innovative capacity (two national Class A new drugs) respectively.
Jiuding Capital’s medical fund team attributes its successful investments to its powerful industrial resources and understanding. Jiuding Capital has taken more than one year to find a suitable medical leader among 10-plus candidates and finally selecting Bo YU which has acted as Head of Jiuding Medical Fund till now. Before joining Jiuding Medical, Bo YU has worked at the former State Pharmaceutical Administration (current China Food and Drug Administration) over ten years and acted as General Manager of Sea Rainbow Electronic Trading Service Co., Ltd. for about ten years. Besides, he is the Secretary General of China Medical Elite Club, with abundant industrial resources.
“In addition to the nonprescription drugs directly sold in drug stores, bidding is another necessary measure used to sell drugs. Sea Rainbow Electronic Trading Service Co., Ltd. is mainly responsible for organizing the drug bidding businesses nationwide, which is called the distributing center of Chinese drug information and masters the latest trends of Chinese medicine markets. Under the leadership of Bo YU, a professional team composed of top managers of drug firms, industrial researchers, medical salespersons and clinicians has been established, which is also known as Dream Team of Medical Investment,” said Zhongyi ZHAO.
After designating the investees, the investment proportion should be determined and a large percentage of investment can stimulate PE’s enthusiasm about value-added services. “In the principle of centralized production and scattered consumption, we invest heavily in enterprises we preferred and deny to put even a little money in enterprises we do not think good,” Zhongyi ZHAO said, “We have invested in 110 million yuan in Powerdone and 80 million yuan in Ebang, respectively accounting for 10% ~20% of their total shares.”
“Industrial synergistic effect can be achieved by PE capital once several enterprises have been invested in one industry. This kind of value-added service is actually useful,” said Zhao, “For example, Ebang can outsource its drug production business to Powerdone that has strong manufacturing ability and Powerdone can ask Ebang that has strong sales ability to sell its medicines.”
Jiuding Capital has invested in pharmaceutical enterprises and medical circulation enterprises separately. In future, it will involve medical chain sales and health care sectors so as to perfect its industrial layout and achieve stronger synergistic effect.
Industrial prospect: Over 20% of growth rate
Taking about the investment rule, Zhongyi ZHAO said, “We insist Chinese people will become more and more rich. In terms of medical industry, it should be clear to know which changes will happen in bodies when Chinese become richer and how to change. Afterwards, we began to attach importance to drugs used in those fields. As to detailed segments, our professional team will have a thorough research.”
“For instance, as people’s living standards are improved, more and more elderly people are suffering from coronary heart diseases. Zhuhai Ebang is the one specialized in cardiovascular and antibiotic drugs. To invest such enterprises can enhance investors’ market recognition, get good economic returns, and achieve great social value,” said Zhongyi ZHAO.
Experts predicted that the medical industrial production would be up more than 25 percent and industrial profit more than 27 percent in 2010.
He believed that:
1. Medical industry is a rigidly demanded industry because people always need drugs.
2. The medical demands will increase heavily with the improvement of living standards. Those people that were not willing to have medicines began to take or take those with better effects and few side effects.
3. The proportion of total output of Chinese medical industry in GDP has a large distance with that of the USA, which has a huge space to increase.
The medical industry has kept a 20% of growth rate in recent three years. Zhao predicted that the production value of the industry would increase from 1 trillion yuan to 5 trillion yuan in next 10 years, at a rate of over 20%. Other medical authorities also predicted that Chinese medical industrial would maintain a growth rate of over 20% in next 4 years and China’s contribution to global medical markets would be up to 21% in 2013.
However, he thought, “the industry will be merged or integrated from current about 5000 enterprises into hundreds of ones in next 5-10 years and good medical enterprises will be listed and merge other small ones, which accords with the industrial rules and is full of opportunities.”
Jiuding Capital has set up corresponding strategies. Its medical fund expresses that over 500 medical companies have complied with listing standards and are worth to invest, and Jiuding Capital decides to select 30-40 to invest, which will promote the industrial M&A while helping investees develop. “We have made a list of investment and M&A, and will accelerate its implementation,” said Bo YU.