China’s First Private Medical Fund to Be Set up with an Initial Fundraising about 600 Million Yuan
2009-11-22
China’s first private medical fund is to be set up by Jiuding Capital with an initial fundraising about 600 million yuan. The principal of the fund said that over 500 medical companies met listing standards in the survey, and 30-40 ones would be picked up for investment.
China’s first private medical fund
It’s reported that Kunwu Jiuding (Beijing) Pharmaceutical Investment Management Co., Ltd. (Jiuding Pharmaceutical), a wholly-owned subsidiary of Jiuding Capital, has been set up in Beijing recently, with three medical experts as its main forces. Bo YU, Jiuding Pharmaceutical’s President, has taken office for one month. Graduated from Shenyang Pharmaceutical University, Bo YU once worked in State Pharmaceutical Administration (current China Food and Drug Administration) and acted as General Manager of Sea Rainbow Electronic Trading Service Co., Ltd, Assistant Executive of Sea Rainbow Group, Secretary General of China Pharmaceutical Elite Club, etc.
“Bidding is a necessary procedure in drug sales. Sea Rainbow Electronic Trading Service Co., Ltd is engaged in the bidding of drugs nationwide, which has been called as the distribution center of medical information in China and controlled the latest trends of Chinese drug markets,” said Jiuding Capital President Zhongyi ZHAO. What Jiuding Capital values much is the industrial experience of Bo YU’s team. In addition, China Pharmaceutical Elite Club was built up by Bo YU, with over 700 members currently. Bo YU introduced in an interview, “We often organize activities to exchange ideas, so we are very familiar about the drug industry.” It’s his over ten years of drug procurement experience and rich club resources that promote him to engage in drug investment.
Zhongyi ZHAO said Bo YU knew Jiuding Capital early, once helped Jiuding Capital review projects and showed his interests in PE, so the two parties reached an agreement to set up Jiuding Pharmaceutical.
Besides Bo YU, another two drug experts are Wu Jiantao, who served on Southern Medial Economics Institute, and Chen Xiaosong who specialized in chain drugstores. The above three professionals together with Jiuding Capital’s medical team comprise of the key members of Jiuding Pharmaceutical. “We plan to acquire an initial fund of 500 million yuan, but the subscription amount has exceeded 1 billion yuan.” said Bo YU. The pharmaceutical industry has undergone an unprecedented growth and PE capital been attracted to invest under the push of pharmaceutical reform. Especially after the financial crisis, the drug industry has become Safe Harbor for capitals. Among the first batch of 28 firms listed on the GEM, 6 pharmaceutical enterprises are supported by investment institutions, such as Lepu Pharmaceutical that is very popular among the secondary markets.
Therefore, special pharmaceutical funds were set up. Zhangjiang Biomedical Industrial Promotion Fund and CCB International Medical Fund were set up in the first half of this year, both of which are state-owned funds, but Jiuding Capital is a private PE. It’s said that Zero2IPO Group’s VC institution intends to increase pharmaceutical investment and is recruiting pharmaceutical talents, too.
Chances and risks coexist
A series of pharmaceutical policies have been released this year, which will impact the whole industry heavily. “China is expected to become world’s biggest pharmaceutical market within 5 or 7 years,” Bo YU said. At that time, the total output will reach 2 trillion yuan, 3 or 4 times as much as present. Meanwhile, it’ll be very risky. Bo YU thought that the medial industry is a typical state capital strategy, so it’s still not determined whether private enterprises can set foot in the field although the market is expanded.
Simultaneously, with the deepening of pharmaceutical reform, the industry will be more centralized and integrated, and some companies will be washed out, so it’s a test for investors to select suitable investees. “It’s believed that no more than five province-level pharmaceutical companies and less than six logistic companies can survive finally,” Bo YU said.
After thoroughly investigated more than 100 companies with sales over 100 million yuan and profits over tens of million yuan, Jiuding Capital found that over 500 enterprises reached listing requirements and were eager to be listed. Hence, it’s a best time to invest now.
Bo YU thought there were too many companies which are worth investing, most of which grew at a speed of more than 50%. Jiuding Capital would select thirty or forty from 500 to invest.
Moreover, there are some small but potential enterprises to be cultivated. Bo YU said they would consider those companies after expansion. Unlike global pharmaceutical enterprises, excellent Chinese pharmaceutical enterprises have only strong marketing abilities rather than research abilities, so it’s very risky for VC to invest in pharmaceutical research sector and the business modes of pharmaceutical enterprises are particularly important for equity investment.
“We can set up a bridge between the companies with good products but poor sales channels by our industrial resources,” Bo YU said. Jiuding Pharmaceutical divides its investees into three types:
1. Pharmaceutical manufacturers with strong R&D ability;
2. Top-ranking pharmaceutical logistic companies;
3. Large pharmaceutical chain institutions like chain drugstores and brand hospitals.