Why does a pharmaceutical company acquire a loss-making pharmaceutical factory for more than 200 million yuan?

CDMO (Contract Development and Manufacturing Organization) is a customized R&D and manufacturing organization that mainly provides multinational pharmaceutical companies and biotechnology companies with clinical new drug process development and preparation, as well as listed drug process optimization and large-scale production services.
It is preclinical And the production of clinical trials and research drugs, and the production of commercial drugs
.
It is understood that pharmaceutical companies are gradually stripping off production functions and establishing customized contract production with third-party cooperation agencies to achieve specialized division of labor due to the impact of medical expenses and the potential profitability of innovative drugs
.
The CDMO business is a rushing track in the capital market, and it is also the direction of Jiuzhou Pharmaceutical's transformation
.
The author has learned that Jiuzhou Pharmaceutical has recently acquired loss-making pharmaceutical companies for more than 200 million yuan and transformed into CDMO
.
In November of this year, Jiuzhou Pharmaceutical signed an agreement with Taihua Singapore Pharmaceutical Investment Co.
, Ltd.
("Taihua Investment").
The company will self-raised funds to acquire Taihua Pharmaceutical and Chemical (Hangzhou) Co.
, Ltd.
(Hangzhou) Co.
, Ltd.
held by Taihua Investment (Referred to as "Taihua Hangzhou") 100% equity, estimated transaction price of 34 million U.
S.
dollars (approximately 217 million yuan)
.
This acquisition is a discount transaction, and Taihua Hangzhou is still at a loss
.
Data show that in 2020, Taihua Hangzhou’s operating income was 87,575,100 yuan, and its net profit was -30,786,800.
In the first half of 2021, Taihua Hangzhou’s operating income was 45.
325 million yuan and its net profit was -15.
289 million yuan
.
However, what Jiuzhou Pharmaceutical focuses on is not Taihua Hangzhou’s profitability, but its status as a wholly-owned subsidiary of the international pharmaceutical company Teva Group, and the expansion of its advantages through cooperation with Teva Group
.
According to the announcement, Taihua Hangzhou is an API manufacturer established by Taihua Investment in China
.
After the acquisition of Taihua Hangzhou by Jiuzhou Pharmaceutical, the company can expand its production capacity and improve production efficiency, and undertake CDMO (medical contract customized research and development and production) business at home and abroad
.
Jiuzhou Pharmaceutical said that after the completion of this transaction, the company will take advantage of an international management team, a sound legal system, multiple high-efficiency production lines and expandable additional capacity space to undertake CDMO business for domestic and foreign customers
.
Within one year from the date of completion of this transaction, Jiuzhou Pharmaceutical will supply Teva Group with three products manufactured in accordance with specifications and Teva Group's proprietary technology through the target company (indications are mainly hypertension treatment and cardiovascular treatment)
.
It is understood that in recent years, Jiuzhou Pharmaceutical has actively expanded its business layout and accelerated the strategic transformation of its CDMO business
.
Statistics show that in 2008, Jiuzhou Pharmaceutical established Zhejiang Ruibo and officially began to provide CDMO services to pharmaceutical companies
.
In 2019, Jiuzhou Pharmaceutical acquired 100% equity of Suzhou Novartis with its own funds of 790 million yuan to accelerate the strategic transformation of CDMO business
.
In addition, in recent years, Jiuzhou Pharmaceutical has also strengthened its R&D capacity layout through mergers and acquisitions of American R&D centers, the construction of Hangzhou and Taizhou, and the establishment of a CDMO business service platform (Ruibo Life Sciences) to accelerate the creation of the Ruibo CDMO brand
.
The acquisition and integration of Taihua Hangzhou will further enhance the overall operation and management level of Jiuzhou Pharmaceutical, rapidly improve the ability to undertake the CDMO business of Jiuzhou Pharmaceutical, and continue to promote the development of the company's CDMO business
.
If any organization stated in response to this acquisition, Jiuzhou Pharmaceutical's mid- to long-term CDMO business expansion ceiling has been opened
.
In addition, some organizations said that after Jiuzhou Pharmaceutical's acquisition of Taihua Hangzhou, it may promote the continued high growth of the company's CDMO business
.
As Jiuzhou Pharmaceutical accelerates its strategic transformation of its CDMO business, its performance has continued to achieve breakthroughs
.
For example, in 2020, Jiuzhou Pharmaceutical's CDMO business revenue increased by 70.
82% year-on-year to 1.
293 billion yuan, accounting for 48.
85% of the current revenue
.
In the first three quarters of 2021, Jiuzhou Pharmaceutical's operating income increased by 72.
08% year-on-year to 3.
004 billion yuan; net profit increased by 97.
65% year-on-year to 473 million yuan
.