China's Leading Cell Culture Media Company Announces Major Asset Restructuring to Acquire Prestigious CRO Firm

On the evening of January 16, Optimize announced that it had signed an "Intent Agreement for Equity Acquisition" with PharmaLegacy Hong Kong Limited, Jiaxing Huituo, and Jiaxing Hetuo, the major shareholders of Peng Li Biomedical Technology (Shanghai) Co., Ltd. The agreement stipulates that the company will acquire a controlling interest in Peng Li Biomedical through the issuance of shares and cash payments. The final transaction price shall be determined through negotiation among the parties involved, based on the valuation results provided by an appraisal agency engaged by the company and qualified to conduct securities-related appraisals.

Based on preliminary calculations, this transaction is expected to constitute a major asset restructuring as stipulated in the "Administrative Measures for Major Asset Restructuring of Listed Companies." As the aforementioned agreement represents only the preliminary intent reached by the parties involved regarding this transaction, the specific plan will be separately agreed upon through formal agreements to be signed by the parties. Relevant matters remain subject to uncertainty. To ensure fair information disclosure and safeguard the interests of investors, Optimize suspended trading of its shares from the market opening on January 17, with the suspension period expected not to exceed five trading days.

Peng Li Biomedical, the acquired company, was founded in 2008 and is one of the earliest CRO companies in China to focus on preclinical pharmacodynamic research and evaluation for innovative drug development.

Peng Li Biomedical has established a comprehensive, end-to-end service system integrating laboratory animal breeding, evaluation method development, disease animal model construction, experimental design, and bioanalysis. The company has built four core technology platforms, including a pharmacodynamic evaluation platform for immunology and inflammation. It has developed over 1,500 disease animal models covering more than 40 therapeutic areas, such as immune/inflammatory diseases, oncology, metabolic disorders, bone diseases, ophthalmic diseases, and cardiovascular diseases.

Leveraging its core technology platforms, the company has provided preclinical drug development services to over 700 clients worldwide, covering international pharmaceutical giants such as Sanofi, Boehringer Ingelheim, Teva, Takeda, and Johnson & Johnson, as well as renowned domestic innovative biopharmaceutical companies and research institutions including Hengrui Medicine, Kelun-Biotech Biopharmaceutical, WuXi Biologics, Chia Tai Tianqing Pharmaceutical, Mabwell Bioscience, I-Mab Biopharma, Changchun GeneScience Pharmaceuticals, and Shanghai Pharmaceuticals. In terms of CRO services for medical devices, Peng Li Biomedical’s clientele includes prominent innovative medical device companies such as MicroPort Endovascular, Sino Medical Sciences Technology, Acandis, and Johnson & Johnson.

Peng Li Biomedical Technology (Shanghai) Co., Ltd. submitted its prospectus in March 2023, preparing for an initial public offering on the STAR Market. However, in February 2024, Peng Li Biomedical and its sponsor, Haitong Securities, ultimately chose to withdraw the listing application. According to the prospectus, several entities affiliated with Sequoia China and Hillhouse Capital are significant shareholders. Specifically, Sequoia Hengchen directly holds a 7.72% stake in Peng Li Biomedical, making it the third-largest shareholder. Hillhouse Chenjun, Hillhouse Qirui, and Hillhouse Liangheng collectively hold a 6.32% stake in the company, with Hillhouse Chenjun holding a 4.05% stake as the seventh-largest shareholder.

Amidst the backdrop of increasingly stringent IPO reviews, mergers and acquisitions have become one of the options for companies withdrawing their IPO applications. The acquisition of Peng Li Biomedical Technology (Shanghai) Co., Ltd. will enable it to integrate resources with the listed company Optimize, thereby enhancing its competitiveness in the pharmaceutical industry chain and accelerating its development.

Founded in 2013 and headquartered in Zhangjiang, Shanghai, Optimize is a company specializing in providing cell culture solutions and end-to-end CDMO services. According to public information, the company ranked first among domestic enterprises in market share for culture media used in protein and antibody drug production in both 2019 and 2020, trailing only three imported brands: Thermo Fisher Scientific (GIBCO), Danaher (HyClone), and Merck. It is currently one of the few domestic manufacturers of serum-free cell culture media whose product processes and quality are comparable to those of imported brands.

In fact, with the rapid development of the pharmaceutical industry, a number of excellent domestic cell culture media companies have emerged in China in recent years. Chinese enterprises such as Optimize, Osmose, Biogrow, ImmuneOnco, and Yuanpei Biology have worked together to break the monopoly of foreign brands on the domestic market. They have increased the market share of domestically produced cell culture media to 30% and reduced the price of imported media by nearly 70%, making a significant contribution to cost reduction and efficiency improvement in the pharmaceutical industry.

However, the cell culture medium market is a niche yet high-quality segment. According to Frost & Sullivan data, China’s cell culture medium market reached RMB 2.63 billion in 2021, with a compound annual growth rate (CAGR) of 44.0% from 2017 to 2021, and is projected to reach RMB 7.10 billion by 2026.Thus, it is evident that even with complete domestic substitution, this niche sector cannot yield a market valued at tens of billions of yuan. Expectations for Chinese cell culture media companies lie more in their second growth curve—namely, the CXO business, which represents a market worth hundreds of billions of dollars. According to incomplete statistics from VCBeat, leading Chinese cell culture media companies such as Optimize (OPM Biosciences), Auscan, and Baiyinuo have already begun laying out their CXO operations.

Cell culture dish manufacturers possess inherent advantages in expanding into the biologics CDMO sector. In fact, the cell culture dish segment originally spun off from biologics CDMO companies. Specifically, biologics CDMO services primarily encompass cell line development, optimization of cell culture processes, antibody expression and pilot-scale production, as well as commercial-scale antibody manufacturing and preparation. These services are grounded in cell culture and antibody expression technologies and span the entire lifecycle of biologics research, development, and production. With the continuous iteration of cell culture dish technologies, the industry is extending further downstream into outsourced services, representing a form of strategic return to its roots.

Optimize also confidently stated in its prospectus that the organic integration of cell culture media products with biologics contract development services would create a synergistic effect. Taking protein/antibody drug development as an example, leveraging its profound understanding of culture media formulations and optimized platform processes, Optimize can develop tailored processes for different cell lines, providing customers with customized drug development workflows that significantly enhance development efficiency and outcomes—namely, higher expression titers and faster turnaround times. Meanwhile, in-house production of culture media reduces the cost of contract development services and ensures a stable supply of media.

Overall, Optimize and Peng Li Biomedical exhibit strong business synergies, as both serve clients in the biopharmaceutical sector. Optimize specializes in cell culture media and CDMO services, while Peng Li Biomedical focuses on preclinical CRO services. Their overlapping customer bases allow for mutual client referrals, and post-integration, they will be able to provide clients with end-to-end R&D and manufacturing services spanning from preclinical development to commercialization. We look forward to these two industry leaders joining forces to weather the downturn and achieve greater scale and strength together.

References:

1. “A Two-Way Rush! Leading Cell Culture Media Company Acquires Preclinical CRO Firm: Analysis of Transaction Challenges!”

2. “First Cell Culture Media Stock Surges Nearly 70% on Debut: How High Is the Ceiling for This Sector?”