Lianhuan Pharma Acquires Majority Stake in Changle Pharmaceutical, a Veteran Henan-based Drugmaker, for Over RMB 200 Million

On January 23, Jiangsu Lianhuan Pharmaceutical Co., Ltd. issued an announcement stating that it and Huixian Construction Investment jointly acquired a 54% stake in Xinxiang Changle Pharmaceutical Co., Ltd. through cash payments. Specifically, Jiangsu Lianhuan Pharmaceutical acquired a 49% equity interest in Changle Pharmaceutical for RMB 183.26 million, while Huixian Construction Investment acquired a 5% equity interest for RMB 18.7 million (totaling RMB 201.96 million).

Upon completion of this acquisition, Xinxiang Changle Pharmaceutical Co., Ltd. will become a controlled subsidiary of Jiangsu Lianhuan Pharmaceutical Co., Ltd. and will be included in the scope of its consolidated financial statements. This transaction does not constitute a related-party transaction, nor does it constitute a major asset restructuring as defined under the "Administrative Measures for Major Asset Restructuring of Listed Companies."

Compared with other companies active in the M&A sector, Xinxiang Changle Pharmaceutical Co., Ltd. (Changle Pharmaceutical), based in Xinxiang City, Henan Province and acquired today, presents a more low-key and down-to-earth profile. Formerly known as Huixian Changcun Pharmaceutical Factory of Henan Province, the company was originally established in October 1978 with a registered capital of RMB 850,000 and was collectively owned by the township. In December 2001, pursuant to the approval under Document Hui Xiang Qi [2001] No. 53 issued by Huixian City, Huixian Changcun Pharmaceutical Factory was restructured into Xinxiang Changle Pharmaceutical Co., Ltd., which is the current Changle Pharmaceutical.

To date, Xinxiang Changle Pharmaceutical Co., Ltd. has evolved into a comprehensive pharmaceutical enterprise integrating research and development, manufacturing, sales, and services. The company holds 80 drug approval numbers, 20 patents, and has 24 drugs under development. It boasts an annual production capacity of 600 million units of small-volume injections and 4 billion units of oral solid dosage forms. Its product portfolio covers various dosage forms, including small-volume injections, tablets, capsules, and granules, which are widely applied across multiple therapeutic areas, including but not limited to antibiotics, cardiovascular diseases, and digestive system disorders.

Among these, Changle Pharmaceutical's key products, Vitamin C and Dexamethasone Acetate Tablets, rank among the top three in domestic market share, while Sucralfate Granules are an exclusive product in China.Sucralfate Granules are indicated for chronic gastritis and for the relief of gastric pain, heartburn, and acid regurgitation caused by hyperacidity. This product addresses the previous lack of a granule formulation for sucralfate, featuring a manufacturing process that is pioneering in this niche sector. Xinxiang Changle Pharmaceutical Co., Ltd. also led the development of the National Drug Standard for Sucralfate Granules (Standard No. WSI-(X-161)-2004Z).

Leveraging several key product lines, Xinxiang Changle Pharmaceutical Co., Ltd. achieved revenue of RMB 386 million in 2023. Notably, this nearly RMB 400 million in revenue was underpinned by a workforce of local farmers from Xinxiang. Public records indicate that while the company employs over 300 staff members, more than 60% are local farmers.

This is because, unlike most biotech companies that require higher academic qualifications and have not yet commercialized their products, Xinxiang Changle Pharmaceutical Co., Ltd. focuses primarily on generic drugs, with multiple pharmaceutical products already on the market. On one hand, the company requires highly educated professionals to lead its R&D projects; on the other hand, it has a greater need for a large workforce of skilled production technicians to handle the commercialization of dozens of products. According to Xinxiang Changle Pharmaceutical’s 2023 ESG Report, employees with an associate degree or higher account for 32% of the total workforce. The company employs 36 technical staff dedicated to product R&D, including 3 senior technicians (or PhD holders), 11 intermediate-level technicians, and 15 junior-level technicians.

However, it is evident that this pharmaceutical company, supported by the local community, has achieved remarkable results in both scientific research and revenue performance. Furthermore, Changle Pharmaceutical has established the “Changle Fund” internally, with all funds dedicated to assisting employees in overcoming difficulties. The company’s “Love in Golden Autumn, Helping Dreams Come True” campaign, which supports employees’ children in attending university, has been held for five editions. In 2022 alone, Changle Pharmaceutical provided scholarships to 19 employees’ children who were admitted to universities. In addition, Changle Pharmaceutical has made multiple donations to the School of Pharmacy at Henan University over the years, demonstrating its attention to and support for the university’s development. During the pandemic, the company also made numerous donations of funds and supplies, underscoring its strong sense of social responsibility as a pharmaceutical enterprise.

Jiangsu Lianhuan Pharmaceutical Co., Ltd. is also a pharmaceutical company with a long history. Established in December 1999, it was jointly founded by Jiangsu Lianhuan Pharmaceutical Group Co., Ltd. (formerly Yangzhou Pharmaceutical Factory) as the primary promoter, along with China National Pharmaceutical Industry Corporation, Shanghai Lianchuang Venture Capital Co., Ltd., Suzhou Industrial Park China Pharmaceutical University New Drug Development Center Co., Ltd., and Jiangsu High-Tech Industry Investment Co., Ltd.Currently, the controlling shareholder of Jiangsu Lianhuan Pharmaceutical Co., Ltd. is Jiangsu Lianhuan Pharmaceutical Group Co., Ltd., and the actual controller is the Yangzhou State-owned Assets Supervision and Administration Commission.

In 2023, Jiangsu Lianhuan Pharmaceutical Co., Ltd. achieved operating revenue of RMB 2.174 billion, a year-on-year increase of 11.20%, primarily driven by its two core businesses: pharmaceutical manufacturing and pharmaceutical distribution. Specifically, revenue from pharmaceutical manufacturing amounted to RMB 906 million, while revenue from pharmaceutical distribution reached RMB 1.246 billion.

In the pharmaceutical distribution sector,Subsidiaries Lianhuan Marketing, Nanjing Medical, Lianhuan Smart, and Yangzhou Lianyou have established and maintained long-term, stable cooperative relationships with numerous renowned pharmaceutical enterprises, and have sustained business interactions over the years with public hospitals, private hospitals, and primary healthcare institutions both within and outside the province.

In the field of pharmaceutical manufacturing,The company operates 10 production lines for intelligent manufacturing, covering tablets, hard capsules (including hormonal products), suppositories (hormonal products), and granules, with an annual production capacity of up to 5 billion tablets/capsules. It also has four production lines for small-volume injections, with an annual capacity of up to 500 million units. Additionally, the company maintains more than 20 modern active pharmaceutical ingredient (API) production lines certified under Good Manufacturing Practice (GMP), with multiple API varieties having passed on-site inspections by the U.S. Food and Drug Administration (FDA) consecutively since 1984.

Its main products span several major series, including urological drugs, antihistamines, cardiovascular agents, steroidal hormones, and antibiotics. These offerings cover a variety of dosage forms, such as chemical active pharmaceutical ingredients (APIs), injections, and solid preparations. The portfolio includes Class I new drug epristeride tablets (Chuanliu), Class II new drug ebastine tablets (Sudi), as well as felodipine tablets (Lianhuan Erding), felodipine sustained-release capsules (Lianhuan Xiaoding), simvastatin tablets (Zhengzhi), danazol capsules and suppositories, metformin hydrochloride and gliclazide tablets (Duhe), lumbrokinase capsules, balofloxacin tablets, and sertraline hydrochloride capsules (Lianhuan Youding). Currently, the company has 103 drug specifications, with 33 included in the National Essential Medicines List and 72 included in the National Basic Medical Insurance, Work-Related Injury Insurance, and Maternity Insurance Drug Catalog, demonstrating a robust product reserve.

Notably, one of its flagship products, Epristeride Tablets, is an exclusive offering from Jiangsu Lianhuan Pharmaceutical Co., Ltd., indicated for the treatment of benign prostatic hyperplasia (BPH). Medications for benign prostatic hypertrophy constitute the best-selling subcategory within urological drugs; in 2023, their sales volume at public medical institutions in China increased by 2.29%, with a market share exceeding 72%.According to data from Menet, sales of Epristeride Tablets in China’s public medical institutions reached approximately RMB 60 million in 2013 and maintained positive growth for ten consecutive years thereafter. By 2023, sales had surged to over RMB 230 million, making it the second-leading brand in the benign prostatic hyperplasia (BPH) medication market, with a market share less than 1% behind the top-ranked brand, Organon’s Finasteride Tablets.

Overall, Jiangsu Lianhuan Pharmaceutical Co., Ltd. and Xinxiang Changle Pharmaceutical Co., Ltd. are both established players in the generic drug sector. Many of their resources and technologies in R&D and industrialization could potentially be shared to accelerate and enhance the development of both companies. As stated in the announcement, Lianhuan Pharmaceutical pursued this acquisition based on considerations of strategic synergy, layout optimization, market expansion, and cost reduction with efficiency improvement, aiming to further strengthen its chemical drug manufacturing segment and better support the company’s high-quality development. It is anticipated that the combination of Changle Pharmaceutical’s dozens of product varieties, Lianhuan Pharmaceutical’s hundreds of varieties, and Lianhuan’s mature pharmaceutical distribution business will yield a “1+1>2” effect, bringing more cost-effective medicines to patients.

References:

“Getting Closer to Changle Pharmaceutical: Witnessing Medical Innovation”

"This Jiangsu Pharmaceutical Company Is Impressive! Exclusive Product Sees 'Ten Consecutive Price Hikes,' Blockbuster New Drug Races Toward Market Launch, and Two New Products Aim for First Generic Approval"