Tigermed Acquires Additional 40.565% Stake in Guanhe Pharma for RMB 140 Million to Strengthen Integrated CRO Capabilities

On September 28, 2024, Hangzhou Tigermed Consulting Co., Ltd. (hereinafter referred to as “Tigermed”) issued an announcement stating thatThe Company intends to acquire, in cash, a total of 40.5650% equity interest in Shanghai Guanhe Pharmaceutical Technology Co., Ltd. (“Guanhe Pharma”) held jointly by Dian Diagnostics Group Co., Ltd. (“Dian Diagnostics”) and Suzhou Yingkai Xinyun Enterprise Management Consulting Co., Ltd. (“Suzhou Yingkai”), for a total purchase price of RMB 140.3641 million, as detailed below:

Image source: Hangzhou Tigermed Consulting Co., Ltd. Announcement on External Investment and Related-Party Transactions

Upon completion of this transaction,Tigermed and its wholly-owned subsidiary, Jiaxing Xinge Pharmaceutical Technology Co., Ltd., will collectively hold 72.8169% of the equity interests in Guanhe Pharma directly and indirectly, and Guanhe Pharma will be included in the Company’s consolidated financial statements. This transaction constitutes a related-party transaction.

The announcement indicates that Guanhe Medicine was established in 2016 as a joint venture between Dian Diagnostics Group and Tigermed. Guanhe Medicine is a one-stop CRO laboratory service solutions provider built in compliance with international standards, dedicated to providing laboratory services for Phase I to Phase IV clinical drug trials to pharmaceutical companies, CROs, and research institutions.

To date, Guanhe Pharma has established a professional integrated clinical research center laboratory platform for biopharmaceuticals, dedicated to providing central laboratory testing, bioanalysis, and related project management solutions to clients such as new drug developers, vaccine manufacturers, and medical device companies during clinical trials.

As one of the few companies in China specializing in central laboratories for clinical trials, Guanhe Medicine holds significant advantages within the industry. The company has assembled a team of laboratory scientists with interdisciplinary backgrounds spanning biotechnology, clinical medicine, medical laboratory science, and pharmacy. It has accumulated extensive project experience across multiple fields, including targeted oncology drugs, cellular immunotherapy, gene therapy, metabolic and autoimmune diseases, antiviral therapies, and vaccines. Guanhe Medicine has participated in clinical trials for several benchmark innovative drugs in the industry and established strong collaborative relationships with many well-known pharmaceutical enterprises in China.

In terms of strategic cooperation, the company has first entered into strategic partnerships with numerous leading overseas central laboratories, including U.S. CRO giants ICON and PAREXEL, U.S.-based HematoGenix and NeoGenomics, Belgium’s Cerba Research, Germany’s mlm Medical Labs (a leading European central laboratory), the Netherlands’ ViroClinics-DDL (a global virology central laboratory), and Taiwan’s Act Genomics (a leading provider of oncology genetic testing). These collaborations have enabled the establishment of a global service solution framework, facilitating the localization of world-class technologies and project expertise in China to meet the needs of domestic and international pharmaceutical companies conducting global multi-center clinical trials.

As of the first half of 2024, Guanhe Medicine has participated in more than 1,100 drug clinical trials, assisted sponsors in successfully passing multiple on-site inspections by the China National Medical Products Administration (NMPA) and various provincial medical products administrations, and supported the successful NDA submissions and market approvals of over 35 new drugs through the Center for Drug Evaluation (CDE). The company has accumulated extensive laboratory technology and project management experience in specialized therapeutic areas, including solid tumors, hematologic disorders, cellular immunotherapy, diabetes, hepatitis, cardiovascular diseases, and vaccines.

As a leading CRO in the field of clinical trials, Tigermed provides comprehensive and integrated clinical research solutions for global pharmaceutical and medical device innovators. The company’s core business encompasses multiple key sectors, including technical services for clinical trials and clinical trial-related and laboratory services.

The announcement shows,Upon completion of this transaction, Guanhe Medicine will become a key component of Tigermed’s end-to-end clinical trial services, enhancing its one-stop service capabilities. Meanwhile, it will further expand the company’s business scope and increase its market share and influence.

Since its establishment in 2004, Tigermed has undergone rapid business expansion and internationalization. Over the past two decades, Tigermed has successfully built an innovative ecosystem that empowers the entire industry chain through more than 100 subsidiaries covering various fields. This ecosystem aims to help the biopharmaceutical industry improve R&D efficiency, reduce R&D risks, accelerate the marketization of pharmaceutical products, and ultimately meet patients’ unmet medical needs.

To date, Tigermed has become a leading integrated biopharmaceutical R&D service platform in the industry, ranking first in China in terms of market share for clinical outsourcing services. According to its 2024 semi-annual report,In 2023, Tigermed held a 12.8% share of the Chinese clinical outsourcing market and, with a 1.4% global market share, became the only Chinese clinical outsourcing service provider to rank among the top ten globally in 2023.

From its establishment in 2004 to 2023, the Company provided R&D services for 61% of all Class 1 new drugs marketed in China. As of the end of the reporting period, the Company had 800 ongoing drug clinical research projects, compared with 772 in the same period of the previous year and 752 at the end of the previous year.

In terms of revenue,In the first half of 2024, Tigermed achieved main business revenue of RMB 3.295 billion, a year-on-year decrease of 10.21%; net profit attributable to shareholders of the parent company was RMB 493 million, a year-on-year decrease of 64.50%; net profit after deducting non-recurring gains and losses was RMB 640 million, a year-on-year decrease of 19.30%; and net cash flow from operating activities was RMB 177 million, a year-on-year decrease of 52.72%.

Among them,Revenue from clinical trial technical services amounted to RMB 1.637 billion, a year-on-year decrease of 22.17%. However, clinical trial-related and laboratory services achieved a 5.84% growth, with revenue reaching RMB 1.658 billion.

"From the perspective of Tigermed's diversified revenue structure, this acquisition of equity in Guanhe Pharmaceutical for RMB 140 million will further enhance its competitiveness in clinical trial-related and laboratory services, offsetting the shortfall from declining revenues in other business segments."

According to the announcement, in the first half of 2024, Guanhe Medicine reported operating revenue of RMB 73.0009 million and net profit of RMB 5.9082 million. This strong financial performance demonstrates Guanhe Medicine’s potential profitability and growth prospects. With Tigermed’s integration and optimization of Guanhe Medicine, its operational efficiency is expected to improve further.

Image source: Hangzhou Tigermed Consulting Co., Ltd. Announcement on External Investment and Related-Party Transactions

As the leading CRO in China, Tigermed not only focuses on providing high-quality clinical trial technical services and related services but also actively engages in the investment sector.To further promote innovation in biopharmaceuticals, the Company and its invested funds make minority equity investments in start-up companies focused on innovative biopharmaceuticals and medical devices.

It is reported that,Tigermed has invested in funds managed by renowned investment institutions such as Qiming Venture Partners, Yingke Capital, Yunfeng Capital, Legend Capital, Yida Capital, and Boyuan Capital, as well as specialized funds including the AstraZeneca CICC Healthcare Fund, the Shanghai Lingang Life Blue Bay Fund, and the Hankang Biopharma RMB Fund. Furthermore, the company has acquired equity stakes in multiple IPO-bound companies through its investment platforms, including Genor Biopharma, CanSino Biologics, and Zhiyun Health.

Furthermore, Tigermed has invested in Hangzhou Taikun Equity Investment Fund Partnership through its subsidiaries Tailong Investment and Tigermed Equity Investment, with the aim of investing in healthcare startups and venture capital funds. It also co-established Suzhou Taifu Huaijin Venture Capital Partnership with Walvax Biotechnology and Qiaoxin Equity to invest in biotechnology and biopharmaceutical companies.

Tigermed’s 2024 interim results show that,As of June 30, 2024, the investment portfolio comprised 181 companies and 61 funds in the healthcare industry, with a book value of invested assets amounting to RMB 10.55 billion. During the reporting period, Tigermed’s total investment reached RMB 965 million, representing a year-on-year increase of 7.03%, and the cumulative investment income from financial assets measured at fair value was RMB 650 million. Among these, the company received RMB 300 million in cash from divestments in the first half of 2024, and realized an investment income of RMB 70 million in the first half of 2024 based on cost measurement.

Image source: Hangzhou Tigermed Consulting Co., Ltd. 2024 Semi-Annual Report

Meanwhile, Tigermed is controlling operating costs by optimizing resource allocation. Data shows that during the reporting period, the company's cost of core business amounted to RMB 2,006,201,700, representing a year-on-year decrease of 9.33%.

Therefore, although Tigermed’s operating revenue and net cash flow from operating activities are both declining, its investment income from financial investments and reduced operating costs have provided additional cash flow, alleviating the pressure caused by the decrease in net cash flow.

According to its 2024 semi-annual report,Tigermed has achieved business growth through multiple acquisitions and investments in the past. Going forward, the Company will continue to pursue selective acquisitions and investments. Meanwhile, anticipating sustained business development, the Company will continue to expand its service offerings and enhance its global influence.。

For example,In July 2024, Tigermed announced the completion of its acquisition of the Japanese CRO company Medical Edge, further expanding its R&D service capabilities and business scale in Japan and the Asia-Pacific region.Going forward, the Company will continue to enhance its service capabilities and scope in overseas markets through team expansion and potential mergers and acquisitions, while also pursuing business development to drive overseas growth and improve synergies in global clinical operations.

As one of the most investment-savvy CRO companies, Tigermed has carved out a unique development path through a diversified strategy of “funds + investments + M&A.”In this process, Tigermed will gain access to more high-quality investment project resources and achieve higher investment returns through its investments. However, Tigermed is not merely a passive investor but also an active strategic partner. It has established long-term cooperative relationships with these companies, providing them with comprehensive support and services. On this basis, Tigermed can acquire potential customers and capture more business opportunities through its portfolio companies, while also securing corresponding financial returns.

References:

1. VCBeat. "China's Leading CRO Acquires Another Company"