Sinopharm Subsidiary Xinhua Pharma to Acquire Majority Stake in International Omega-3 Leader NovoSana (Taicang)

On December 9, Shandong Xinhua Pharmaceutical Company Limited issued an announcement stating that, to meet the needs of extending and strengthening its industrial chain, optimize its industrial structure, and promote high-quality development in its big health sector, the Company has entered into a Letter of Intent for Equity Acquisition with NovoSana (Europe) B.V. The Company intends to acquire no more than 75% of the equity interest in NovoSana (Taicang) Biotechnology Co., Ltd. (hereinafter referred to as “NovoSana” or the “Target Company”).

Upon completion of the acquisition, the Company will become the controlling shareholder of the Target Company, and the Target Company will be included in the Company’s consolidated financial statements. The specific acquisition plan, transaction price, and other terms shall be determined based on the results of the Company’s due diligence, audit, and valuation, and through negotiations among all parties to the transaction.

Shandong Xinhua Pharmaceutical Company Limited, established in 1943, is a pharmaceutical enterprise with a profoundly rich history.

Shandong Xinhua Pharmaceutical Company Limited is not only a key national backbone large-scale pharmaceutical enterprise, but also the largest production and export base for antipyretic-analgesic drugs in Asia, as well as an important domestic manufacturer of cardiovascular, anti-infective, digestive system, and central nervous system medications. The company’s annual output of chemical active pharmaceutical ingredients (APIs) exceeds 50,000 metric tons, making it the world’s largest producer of APIs such as metamizole (analgin), ibuprofen, aspirin, caffeine, and levodopa, with several of its API flagship products holding leading market shares in China. According to an analysis report by Huajin Securities, Shandong Xinhua Pharmaceutical dominates the global market for antipyretic-analgesic APIs, with an annual ibuprofen production capacity of 8,000 metric tons, ranking first worldwide.

After years of development, Shandong Xinhua Pharmaceutical Company Limited has now formed four major business segments: pharmaceutical intermediates, active pharmaceutical ingredients (APIs), pharmaceutical formulations, and commercial logistics. The company operates five industrial parks and 15 subsidiaries, and has obtained certifications from China's NMPA, the UK's MHRA, the US FDA, and EU GMP standards, with its products exported to more than 60 countries and regions worldwide.

However, as a traditional state-owned active pharmaceutical ingredient (API) manufacturer, Shandong Xinhua Pharmaceutical Company Limited has largely remained unremarkable in the capital market. This is particularly evident as the pharmaceutical industry enters an era of comprehensive innovation-driven competition, with the chemical drug segment showing signs of decline. Consequently, Xinhua Pharma urgently needs to transform and upgrade its operations to identify new growth drivers.

Shandong Xinhua Pharmaceutical Company Limited’s strengths lie in its comprehensive industrial chain integration and its significant share of the global active pharmaceutical ingredient (API) supply, which consistently ensures a certain level of profitability. Its weaknesses, however, stem from the low value-added nature of bulk API products, which are highly susceptible to cost fluctuations and other factors. This results in a clear revenue ceiling and fails to generate sufficient investor imagination in the capital markets.

In light of this, during its transformation, Shandong Xinhua Pharmaceutical Company Limited proposed the “Grand Formulation Strategy” and the “Grand R&D Plan,” vigorously developing new therapeutic areas such as anticancer drugs, hepatitis B medications, and diabetes treatments, while also entering the medical aesthetics industry and launching health supplement brands.

Shandong Xinhua Pharmaceutical Company Limited has been developing its fish oil segment for over a decade, leveraging advanced production technologies to manufacture fish oil products. Currently, three high-purity fish oil health supplements have been launched on the market. The company is establishing a comprehensive industrial chain strategy that spans from high-purity EPA, high-purity DHA, and mixed fish oil raw materials to related health supplements and pharmaceuticals.

Shandong Xinhua Pharmaceutical Company Limited plans to further improve its fish oil industry chain by acquiring the equity of Noah Shengnuo.

Noah Shengnuo is a company with over 25 years of experience in the international fish oil industry, having established long-term and stable strategic partnerships with global Omega-3 industry leaders. In 2011, with the completion and commissioning of its 47,000-square-meter manufacturing facility, Noah Shengnuo officially launched its fish oil operations in China. After more than a decade of development, the company now processes over 10,000 metric tons of crude fish oil annually, making it the largest producer of natural fish oil in China.

According to the company’s announcement, Nuoya Shengnuo and Shandong Xinhua Pharmaceutical Company Limited’s fish oil business are highly complementary and synergistic. This equity acquisition aligns with the company’s strategic planning and layout in the big health sector and facilitates the extension of its industrial chain. Upon completion of the acquisition, subsequent resource integration and empowerment will leverage synergies, helping to further enhance the company’s overall operational efficiency and market competitiveness in the fish oil industry.

In recent years, the fish oil product industry has experienced rapid development, driven by the influx of foreign brands seeking to capitalize on the Chinese market and the growing public awareness of self-healthcare.

Data shows that omega-3 fish oil products have consistently ranked high among dietary supplements in the Americas, including the United States. According to research reports, global sales of omega-3 polyunsaturated fatty acid fish oil products were projected to grow by 13.1% by 2022, with the market size exceeding $3 billion.

In contrast, research on fish oil products in China started relatively late. Although the fish oil industry has experienced rapid growth in recent years, it remains in a phase of fast expansion. On one hand, the development of fish oil products in China is still in its early, extensive stage, with few high-purity products available, indicating significant untapped potential. On the other hand, as China’s population ages at an accelerating pace, the “silver-haired market” holds enormous potential. Furthermore, the prevalence of cardiovascular and cerebrovascular diseases is gradually rising, with a trend toward affecting younger demographics, driving strong demand for fish oil products with lipid-lowering effects.

The scarcity of pharmaceutical-grade fish oil and the immense potential of the industry have attracted increasing attention from enterprises. Currently, there are over 200 approved health supplements in China that use fish oil as a raw material, with the majority being imported products. Furthermore, high-purity fish oil accounts for a low market share, and there is a lack of leading brands.

As early as 2013, Xinhua Pharmaceutical entered the field of high-purity pharmaceutical-grade fish oil research and development, overcoming key technical challenges in this area. Its fish oil separation technology has reached an internationally advanced level. The company is currently capable of producing EPA-EE with a purity of ≥98% and DHA-EE with a purity of ≥95%, with individual unknown impurities controlled to within 0.05%, representing a leading position in the industry.

Multiple clinical studies have demonstrated that participants derive greater benefits from fish oil products with higher purity. Low-purity fish oil supplements fail to provide effective lipid-lowering effects and may instead adversely affect health due to excessive oil intake. Furthermore, EPA and DHA possess distinct therapeutic properties, indicating that future competition in the fish oil market will center on purity and composition. Historically, constrained by technical barriers in fish oil raw material production, China’s product offerings were predominantly limited to low-purity formulations.

By overcoming the technical barriers associated with high-purity fish oil raw materials, major domestic pharmaceutical enterprises such as Shandong Xinhua Pharmaceutical Company Limited have effectively resolved the “chip” bottleneck in the upstream supply chain. Furthermore, as national health awareness continues to rise and demand for health products becomes increasingly essential, the market dividends for high-quality products from established brands—with comprehensive service systems and strong customer loyalty—will be further unlocked. This indicates that Shandong Xinhua Pharmaceutical has secured a first-mover advantage in the market.

During this year’s Tmall 618 Shopping Festival, fish oil sales increased by 50% year-on-year, with consumers focusing their searches on “ingredients + purity.” Searches for high-purity EPA fish oil surged by 95% year-on-year. According to the cumulative GMV rankings of brands during the 2024 Tmall Double 11 Shopping Festival, Fuyaan, a high-purity fish oil brand under Shandong Xinhua Pharmaceutical Company Limited, ranked second. In 2023, Fuyaan’s transaction volume on Tmall reached RMB 30 million, further demonstrating its profit potential.

In recent years, cross-border mergers and acquisitions by Chinese pharmaceutical companies have increased significantly. In addition to industry-specific factors, national industrial policies guiding the enhancement of industry concentration have also served as a major driving force.

For instance, the “Action Plan to Support Mergers and Acquisitions and Restructuring of Listed Companies (2025–2027),” released by Shanghai Municipality on December 10, explicitly proposes supporting listed companies in carrying out mergers, acquisitions, and restructuring in key industrial sectors such as integrated circuits, biopharmaceuticals, and new materials, with the aim of cultivating listed companies with international competitiveness. The plan states that mergers, acquisitions, and restructuring will be leveraged to promote the transformation and upgrading of traditional industries, enhance industrial concentration, inject high-quality assets, and boost investment value.

Shandong Xinhua Pharmaceutical Company Limited’s acquisition of Noah Shengnuo aligns with this policy direction, accelerating its expansion in the fish oil industry. By leveraging Noah Shengnuo’s leading position in the field of Omega-3 nutritional oils and fats, the company can extend its industrial chain and enhance its competitiveness. Furthermore, following the acquisition, Shandong Xinhua Pharmaceutical will be able to integrate resources from both parties, realize synergistic effects, and improve overall operational efficiency and market competitiveness in the fish oil sector.

It is not only Xinhua Pharmaceutical; against the backdrop of rapidly increasing industry concentration in China, some pharmaceutical companies are seeking to enhance their competitiveness by advancing internationalization, integrating advanced foreign technologies, and exploring new markets. For instance, Fosun Pharma completed the acquisition of a 74% stake in Indian generic drug manufacturer Gland Pharma for RMB 7.142 billion, marking the largest overseas acquisition by a Chinese pharmaceutical company at that time. Additionally, Sino Biopharm announced the acquisition of UK-based bispecific antibody platform company F-star Therapeutics, which was in the clinical stage, for USD 161 million.

As competition in China’s pharmaceutical market intensifies, reverse mergers of foreign enterprises by domestic pharmaceutical companies are likely to become more frequent, making cross-border M&A an increasingly popular strategic option for Chinese pharmaceutical firms.

References:

Hit the Limit Up Again! One of the Former “Big Four” in API Manufacturing: When Will It Truly Complete Its Innovation Transformation? — E-Drug Manager

Rapid Surge! Xinhua Pharma’s Three High-Purity Supplements Tap into $3 Billion Fish Oil Market — Pharmaceutical Economic News