DCP invests $283m in Chinese diabetes treatment player

The private equity firm purchased 183 million shares from Dongbao Industrial Group, Tonghua Dongbao’s parent company, according to a filing. Dongbao Industrial retains a 29.09% stake in the business and will work alongside DCP and Tonghua Dongbao’s management team on growth initiatives around operational improvement, M&A, and international development. DCP will have representatives on the target company’s board.

Tonghua Dongbao’s stock closed at RMB14.03 on September 8, the day the investment was announced. It fell 4.3% the next day but rebounded to RMB14.36 as of early afternoon trading on September 11, following disclosure of DCP’s involvement.

In 1998, Tonghua Dongbao became the first in China to develop and market insulin shots for the treatment of diabetes in humans. The company produces injection kits under the Gansulin brand as well as insulin pens. Its portfolio has also become more sophisticated with an insulin glargine treatment – a long-lasting insulin – recently winning regulatory approval. Several other products are in late-stage clinical development, including a fast-acting insulin aspart treatment and type-two diabetes-focused GLP-1.

According to the International Diabetes Federation, China had 120 million diabetes patients in 2019, more than any other country. DCP said in a statement that there are still significant unmet medical needs within the broader Chinese healthcare system. It expects Tonghua Dongbao to benefit from significant planned government and public health organization investment in improvements to diabetes management.

“As a pioneer and market leader in China’s diabetes treatment space, Tonghua Dongbao has an outstanding management team and strong R&D and production capabilities. We are highly confident in Tonghua Dongbao’s long-term growth potential and will fully leverage our resources and expertise to work closely with the management team to accelerate the company’s development,” said David Liu, executive chairman of DCP.

Tonghua Dongbao generated revenue of RMB2.77 billion in 2019l, up from RMB2.69 billion the previous year. Net profit fell from RMB814.3 million to RMB809.3 million. If the company’s cumulative net profit falls short of RMB3.6 billion or doesn’t reach RMB1.35 billion for 2023 alone, DCP will receive cash compensation. Dongbao Industrial has pledged shares as a guarantee.

DCP was established by Liu and Julian Wolhardt, who previously held leadership positions with KKR in China. A debut fund closed at $2.5 billion last year, comprising a US dollar-denominated tranche of $2 billion, plus a renminbi sidecar of $500 million. The PE firm focuses on sectors – including healthcare – that benefit from consumption upgrades and industry consolidation in China.

Recent healthcare activity includes supporting a $200 million medical devices fund launched by Ascendum Capital Partners. One of the other investors is Venus Medtech, a Chinese medical devices manufacturer and a DCP portfolio company. It listed in Hong Kong last December.

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• Topics
• Greater China
• PIPEs
• Healthcare
• China
• Pharmaceuticals
• DCP Capital Partners