More and more mergers and acquisitions (M&A) deals take place in China's pharmaceutical industry. In 2021, Chinese pharma companies participated in a total of 782 domestic and cross-border M&A deals, amounting to 34,436 million USD.1
From 2017 to 2021, the number of M&A deals continuously increased. The total value topped in 2020 due to China's polices for encouraging medical innovation and the relaxation of listing and refinancing rules. In 2021, the deal value slightly declined with fewer huge-value deals.
Source: Thomson Reuters, CVSource, and PwC Analysis
Top 10 Pharma M&As Involving Chinese Companies in 2021
The top 10 pharmaceutical M&A deals added up to 7.2 billion USD, accounting for 20.8% of the all the deals in 2021. In the 10 highest-valued deals, investors focused on China-based companies developing innovative biopharmaceuticals and vaccines.
The top deal was Yunnan Baiyao spent 2,238 million USD buying stocks of Shanghai Pharma. The former sought more innovative drug pipelines and public hospital sales channels from the latter, and the latter could gain retail channels and raw ingredients from the former.
Date | Investor | Investor Type | Target Company | Field | Value (mln USD) |
05-12 | Shanghai Tandong; Yunnan Baiyao | State-owned company | Pharma R&D, manufacturing, and supply | 2,238 | |
08-17 | Shanghai Fanglang | Investment organization | Calcium drug product manufacturing | 896 | |
08-19 | Temasek; Invesco Developing Markets Fund; Loyal Valley Capital, etc. | Investment organization | Innovative mRNA drug and vaccine | 700 | |
10-26 | Fosun Pharma | Listed company | Bacterial vaccine | 627 | |
01-22 | Lhasa Alec Investment, etc. | Investment organization | Monoclonal antibody, recombinant protein, vaccine, and other biomedicines | 613 | |
04-23 | Chengtong Holdings; Huihe Equity Investment; Longjiang, etc. | Investment organization | Blood product | 514 | |
02-20 | YF Capital; TF Capital, etc. | Investment organization | Immunotherapy for cancer and stem-cell therapy for degenerative disease | 410 | |
08-11 | OrbiMed; Sino BioPharm, etc. | Investment organization; listed company | AI drug R&D outsourcing service | 400 | |
02-10 | Hillhouse; Vivo Capital | Investment organization | Therapy for cancer and immunological disease | 392 | |
11-08 | CR Medical | Listed company | Blood product and biochemical drug | 384 | |
Source: Thomson Reuters, CVSource, and PwC Analysis | |||||
China Outbound Pharma M&As in 2021
Chinese capital was also eyeing overseas drug makers, which were mainly in the US developing innovative small molecule drugs, anti-cancer drugs, neurological disease drugs, as well as cell and gene therapy.
Date | Investor | Investor Type | Target Company | Field | Value (mln USD) | Target Market |
08-04 | Ally Bridge; Lilly Asia Ventures; OCTA Capital, etc. | Investment organization | T-cell therapy | 265 | The US | |
05-27 | OCTA Capital; Ally Bridge; Lilly Asia Ventures; Cambridge Capital; Matrix Partners, etc. | Investment organization | Innovative small molecule drug | 200 | The US | |
07-17 | Tybourne Capital Management; Lize Capital, etc. | Investment organization | Natural killer (NK) cell and T-cell therapy | 172 | The US | |
03-30 | Lake Bleu Capital; Partners Investment; Superstring Capital, etc. | Investment organization | Digital therapy for disease in ophthalmology, nervous system, and psychiatric system | 170 | The US | |
07-01 | Grand Pharma; Natixis | Listed company | Grand Pharma Sphere Pte. Ltd. | Radioactive therapy targeted at liver cancer | 150 | Singapore |
11-02 | Ally Bridge; BeiGene, etc. | Investment organization | Induced pluripotent stem cell (iPSC) standardization; NK and T-cell immunotherapy | 140 | The US | |
03-01 | Pharmaron | Listed company | CDMO for cell and gene therapy (CGT) | 120 | The UK | |
03-11 | Cormorant Asset Management; Decheng Capital, etc. | Investment organization | Epilepsy and central nervous system (CNS) drug | 114 | The US | |
07-16 | Decheng Capital; Breton Capital; Willett Advisors, etc. | Investment organization | RNA editing gene therapy | 112 | The US | |
08-20 | Globe Net Wireless Corp | Listed company | Stem cell healthcare product | 110 | The US | |
03-22 | Sino BioPharm | Listed company | Innovative drug for respiratory disease | 110 | Belgium | |
11-09 | Puhua Capital; MetaPlanet Holdings; Foresite Capital, etc. | Investment organization | R&D on cellular reprogramming technology platform | 103 | The UK | |
Source: Thomson Reuters, CVSource, and PwC Analysis | ||||||
Outlook with Benefits and Risks for Pharma Companies
As Chinese companies are enhancing innovative drug R&D capabilities, they are expected to attract capital from more investors.
On the one hand, with the investment, the acquired company, especially startups, will be able to reduce the financial risks in costly clinical trials.
On the other hand, the buyer company can enrich its pipelines with a new product or technology immediately rather than spending long time developing one on its own. M&A may also strengthen the buyer's manufacturing capacity in China.
Meanwhile, M&A brings financial, regulatory, and cultural challenges to buyers. Without sufficient investigation, the buyer may overestimate the target company and bear heavy debt.
Besides, the deal may be halted by the local regulator in the target market. E.g., China-based CDMO Asymchem's stopped the acquisition of US-based Snapdragon as the two companies were not able to agree to the mitigation terms that would satisfy the Committee on Foreign Investment in the United States (CFIUS), a committee reviewing foreign investments' implications on the US national security.
Furthermore, cross-border M&A requires the buyer to manage cultural differences and better understand the target market.
Despite the obstacles, Chinese pharma companies, especially those developing innovative products, will still seek cross-border M&A if they find the Chinese market is not lucrative enough under the volume-based procurement policy and turn to compete with foreign peers in the international market.
Notes: This article does not imply any investment advice.
Related: Licensing Deals Involving Chinese Pharma Companies in H1 2022
