Deal focus: CBC gets counterintuitive in China

Japan’s Takeda Pharmaceuticals has embarked on a wide-ranging divestment drive in recent years. Strategic investors across North America, Europe, and South Korea have picked up assets as well as at least one private equity firm – The Blackstone Group acquired a sizeable collection of over-the-counter medicines in Japan.

China joined the list of beneficiaries in late 2020 when Hasten Biopharmaceutic secured a portfolio of cardiovascular and metabolic drugs aimed at the mainland market. The transaction was notable in that Hasten was barely three months old at the time.

The company is a brainchild of the Hefei municipal government. Hefei, the capital of Anhui province, is well-known for VC investment. The government was responsible for the bailout of electric vehicle manufacturer Nio, which shifted its headquarters to Hefei as part of the deal. It won plaudits for achieving both a financial and a strategic return.

Hefei is also keen to turbocharge its biopharmaceutical industry and the Takeda assets served this agenda. However, the government struggled with the size and complexity of the transaction. Originally slated to close in March 2021, the deal finally crossed the line 12 months later with the support of CBC Group, which claims to be Asia’s largest specialist healthcare private equity investor.

“In biotech, the greatest synergy we can create is by aligning R&D pipelines with commercialisation pipelines. CBC’s experience ranges from incubating early-stage drug discovery start-ups to in-licensing and commercialisation. We are confident that we can help Hasten increase its sales and build up its R&D pipeline,” said Wei Fu, founder and CEO of CBC.

Hasten acquired five drugs from Takeda. The final price was not disclosed, but the company initially agreed to pay USD 322m. The drug portfolio generated USD 109.5m in sales for the 2019 financial year.

The deal has since been followed by a funding round. CBC and Mubadala Investment recently took the lead in a USD 315m investment with participation from other undisclosed institutional investors. Hasten will use the capital to fund future acquisitions and develop its own pipeline of innovative drugs.

Fu describes the company’s current core strategy as sales and marketing. Revenue from the existing portfolio rose 47% year-on-year in the second half of 2022 and there are plans to license more drugs in the cardiovascular field, thereby strengthening Hasten’s position in this segment.

“It is fairly standard for biotech companies to buy commercial rights to experimental drugs, conduct clinical trials, and if those are successful, pursue regulatory approvals and commercialisation. In this way, a start-up turns into a profitable business,” said Fu. “Hasten was this process in reverse: we acquired a company that already generates profit and are helping build an innovative pipeline through in-licensing.”

He observed that R&D for novel drug development is a luxury in the current environment, adding that the “capital markets won't give you unlimited funds to burn.”

CBC has nominated Summer Xia as Hasten’s CEO. A former vice president focused on sales and marketing at Novartis Oncology, Xia is intended to strengthen the company’s commercialisation capabilities. Hasten now has 700 staff, including Takeda employees who transferred over as part of the deal. Takeda will continue to manufacture the drugs it has divested and supply them to Hasten.

In late 2021, Hasten began building its own manufacturing base. A total of CNY 190m (USD 27m) was pumped into the first phase of the project, which spans 25 acres and includes a sub-packaging plant, a quality inspection laboratory, and warehousing for raw materials and finished products. It is expected to formally begin operations in 2025, following a trial operation.

CBC started out as a China-centric investor but then broadened the scope of its activities to cover more geographies. In the past 12 months, though, investment in China has accelerated, with around USD 1.5bn put to work across CBC’s private equity, credit, and infrastructure strategies.

“This is the best time to go overweight China – it has the lowest valuations and the highest potential growth globally. In Southeast Asia and India, assets are valued at 15x-20x EBITDA whereas in China the multiples are as low as 10x. Moreover, China is a larger unified market and more transparent,” Fu said.

“However, we are investing in China in a different way to before, focusing on companies with good liquidity and high growth potential.”

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• Topics
• Greater China
• Healthcare
• Expansion
• China
• CBC Group
• Mubadala
• Pharmaceuticals