PAG Asia bets $250m on Chinese pharmco

Last week, PAG Asia invested $250 million in Shaanxi-based Bicon Pharmaceutical Holdings and became its largest investor. Weijian Shan, chairman and CEO of PAG, has been appointed chairman of the company's eight-member board.

Founded in 2007, Bicon develops active pharmaceutical ingredients (APIs), modern Chinese medicine, generic drugs, bio-pharmaceuticals and vaccines, among other products. The company's research capabilities had already caused several local and international institutional investors to come on board, including China Everbright, China Construction Bank, Sequoia Capital, Singapore's United Overseas Bank and SIG.

PAG's investment will be used to support Bicon's manufacturing and research efforts, as well as finance acquisitions. "With our resources, capabilities and experiences, PAG will do everything in its power to help the development of Bicon Pharmaceutical," Shan says, adding that the new board will enhance Bicon's the corporate governance and management practices to an international standard.

China's pharmaceutical industry is expected to grow by 20% per year for the next four years. "More sophisticated sectors such as the pharma companies will come to China for Chinese emerging research and development rather than cheap manufacturing and labour costs," says Norbert Meyring, pharma sector head for China and Asia Pacific at KPMG.

Industry consolidation has also been largely encouraged by the central government, which would like to create at least five pharmaceutical giants with annual revenues of RMB50 billion ($8 billion) by 2015. It also hopes to see the emergence of another 100 companies with revenues at least RMB10 billion a year.

In order to tap the opportunities offered by this process, Bicon has in recent years acquired and integrated a number of pharmaceutical companies in China, including Wuhan Wujing Pharmaceutical, Jiangsu Kangbao Pharmaceutical and Chengdu Changqing Pharmaceutical.

One potential disadvantage of this consolidation is that large drug companies have been moving up the value chain, creating substantial disagreement about valuations - especially for companies which have the potential to IPO.

Meyring, though, emphasizes there are still opportunities for PE firms to participate in the industry if they target the right company. ""PE companies may need to eye smaller acquisitions in the hope of selling them on to experienced multinational firms at a later stage," he says. "But I don't think the golden age has passed."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Investments
• Healthcare
• PAG
• healthcare
• Pharmaceuticals
• China