China Speed: Two Days after New Refinance Rule, Hillhouse Buys in Asymchen
The time of “Innovate from China” is coming, gradually taking over the time of “Copy to China”, said Zhang Lei, the founder and Chairman of Hillhouse Capital. What is the next highlight for China healthcare industry?
On February 16th, Asymchen Laborator (002821: SZ) announced that the company plans a private issuance of 18.7 million shares or fewer, at CNY 123.56 per share. Hillhouse Capital Management will take a full subscription, at a price of up to CNY 2.311 billion, to hold 5% of shares of the group from the current 0.61%.
What is worth noticing is that this deal was directly driven by the newly issued refinance amendment. Just two days before Asymchen’s announcement, the China Securities Regulatory Commission (CSRC) issued a package of decisions on amending the implementing rules for the private offering of shares by listed companies, intending to lower the refinancing threshold and ease the stress of the current sluggish market.
Soon after the new rule was released, Long Sheng Technology (300680: SZ) and Yuanli Creator (300174: SZ) adjusted their private placement program. Asymchen Medical Group suspended its 2019 private placement and disclosed its 2020 stock issuance plan on the same day.
Founded in 1998, Asymchen Medical Group has grown into one of the leading tech-driven CDMO (Contract Development Manufacture Organization) companies. It has been devoted for a long time to advancing pharmaceutical technologies and commercial applications, covering viruses, infections, tumors, cardiovascular and nervous system problems, diabetes, and other major serious illnesses.
Before a new drug meets the market, pharmaceutical companies often outsource the technical optimization process to focus resources on drug research. Advanced pharmaceutical technology is the field where CRO (Contract Research Organization) and CMO come into play. According to EvaluatePharma, the China CMO potential market size is forecast to reach CNY 60 billion, consisting of a clinical phase – CNY 10 billion – and a commercial phase – CNY 50 billion.
The CDMO business, compared to CMO, additionally covers the development phase of a new drug. In this arena, WuXi AppTec (603259: SH), Asymchen, Pharmaron (3759: HK), Tigermed (300347: SH) are on the tier-1 level, with their market shares of 5.23%, 3.56%, 2.3%, and 1.25% respectively. Among them, WuXi AppTec is the only one that covers the whole pre-marketing process, from early research, pre-clinic study to periodic clinical trials.
Another highlight related to this deal is the strategic investor, Hillhouse Capital Management. It has expanded its healthcare layout over the years with close to 50% healthcare companies in its portfolio companies, including WuXi AppTec, Hengrui Medicine (600276: SH), Junshi Pharma (1877: HK) and other biotechnological firms.
With the loosened refinance regulations for listed companies, market players are busy planning upcoming deals at the moment. Amid the continued spread of coronavirus, more opportunities in the healthcare industry may be exploited.