Cash Acquisition Completed in the Multi-Billion-Yuan Urokinase Market: ADB Acquires Controlling Stake in Nanda Pharma

Recently, Aidea Pharmaceutical (688488.SH) announced that the company has signed an "Letter of Intent for Equity Acquisition of Nanjing Nanda Pharmaceutical Co., Ltd." (hereinafter referred to as the "Equity Acquisition Letter of Intent") with Huaxi Yinfeng Investment Co., Ltd., Hunan Kecheng Innovation Investment Partnership (Limited Partnership), Xu Zhihuai, Chen Lei, and Yao Fandi, who are shareholders of Nanjing Nanda Pharmaceutical Co., Ltd. (hereinafter referred to as the "Target Company" or "Nanda Pharmaceutical"). The company plans to acquire a 31.161% equity interest in the Target Company through cash payment. Upon completion of this transaction, the company will achieve controlling interest in the Target Company. This transaction is expected to constitute a major asset restructuring.

However, the market was not overly surprised by Aidea Pharmaceutical’s move, as achieving actual controlling interest in Nanda Pharmaceutical appeared to be an inevitable choice for the company.

Reaching this conclusion is not difficult. In fact, as early as July 2022, Jiangsu Aidea Pharmaceutical Co., Ltd. acquired a 19.9646% equity stake in Nanjing Nanda Pharmaceutical Co., Ltd. through an equity transfer and signed a "Strategic Cooperation Agreement." At that time, Jiangsu Aidea Pharmaceutical stated that it hoped to deepen cooperation with Nanjing Nanda Pharmaceutical in formulation production and sales while supplying crude urokinase, thereby further consolidating its industry position in the field of human-source proteins and promoting the implementation of its "integrated strategy for human-source protein raw materials and formulations."

Revisiting the “Integrated” Strategy After Two Years

Nanjing Nanda Pharmaceutical Co., Ltd. was established by Nanjing University in July 1998, building upon the former Nanjing University Biochemical Factory and Pharmaceutical Factory. Leveraging Nanjing University’s academic disciplines and talent resources, the company successively developed Class I new drugs including Hepatocyte Growth Factor for Injection and Fuyang San, Class IV new drug Low Molecular Weight Heparin Sodium, and Class V new drug High-Purity Large-Specification Urokinase. It also pioneered the research, development, and production of povidone-iodine disinfectants.

In January 2012, following restructuring through joint capital contributions from Jiangsu Nanda Soft Technology Co., Ltd., Nanjing Zhongbei (Group) Co., Ltd., Nanjing University Asset Management Co., Ltd., and Nanjing Nanda High-Tech Industrial Technology Co., Ltd., the company leveraged the high-tech advantages and expertise of the Soft Technology Group to advance into a new phase of development.

With the release and growth of market demand for urokinase in recent years, Nanjing Nanda Pharmaceutical Co., Ltd. has achieved steady growth and sustained improvement in its operating performance.

Urokinase is an enzyme that activates plasminogen and is primarily used in clinical settings for thrombolytic therapy in acute thromboembolic events. For hemodialysis patients requiring long-term catheter therapy, urokinase plays a critical role. According to the "China Urokinase Market Assessment and Investment Strategy Report (2020 Edition)" released by Limu Information Consulting, China's demand for urokinase increased from 478.55 billion units in 2016 to 600.02 billion units in 2019. In 2021, due to the pandemic-induced shortage of urine-derived raw materials, the price of urokinase surged dramatically, with supply disruptions occurring in some cases.

Meanwhile, according to the cumulative data from 2019 to 2021 in the Yaozhi Database, Urokinase for Injection produced by Nanjing Nanda Pharmaceutical Co., Ltd. accounted for 41.36% of the market share of finished human-derived urokinase preparations in China, ranking first in market share.

Against this backdrop, Jiangsu Aidea Pharmaceutical Co., Ltd. has taken action.

In July 2022, Jiangsu Aidea Pharmaceutical Co., Ltd. disclosed the "Announcement on External Investment," stating that the Company intended to use its own funds of RMB 86 million to purchase a 19.9646% equity stake in Nanjing Nanda Pharmaceutical Co., Ltd. held by Jiangsu Shengfeng Medical Technology Co., Ltd. ("Shengfeng Medical") at a premium of eight times. Following this investment, Jiangsu Aidea Pharmaceutical Co., Ltd. would become the second-largest shareholder of Nanjing Nanda Pharmaceutical Co., Ltd.

Such a high-profile move even drew an inquiry letter from the Shanghai Stock Exchange.

In 2022, Jiangsu Aidea Pharmaceutical Co., Ltd. has become a leader in the upstream industry by deeply cultivating the human-derived protein sector, possessing advantages such as technological barriers, resource networks, large-scale production, and raw material quality control. Its main human-derived protein products for external sales include crude urokinase, crude ulinastatin, and crude urinary kallidinogenase. This investment will also help the company extend downstream along the industrial chain, making it well-equipped to respond to inquiries.

Coincidentally, the "Integrated Human-Derived Protein Raw Materials and Formulations" strategy proposed by Aidea Pharmaceutical in 2022 remained a topic of discussion in 2024.

Integrating the Industrial Chain vs. Prioritizing Performance

It is worth noting that in 2022, the 100% equity valuation of Nanjing Nanda Pharmaceutical Co., Ltd. exceeded RMB 430 million, with the transaction consideration for a 19.96% equity stake amounting to RMB 86 million—nearly equivalent to all the cash reserves available to Jiangsu Aidea Pharmaceutical Co., Ltd. Jiangsu Aidea Pharmaceutical also acknowledged that although Shengfeng Medical, the controlling shareholder holding a 60.36% stake in Nanjing Nanda Pharmaceutical, intended to divest its entire equity interest in the company, Jiangsu Aidea Pharmaceutical had neither the intention nor the financial capacity to acquire it.

Returning to Nanjing Nanda Pharmaceutical Co., Ltd., while maintaining a high market share, the company’s operating performance has achieved steady growth and sustained improvement, which is reflected more in pricing than in sales volume. This is because crude urokinase, the primary active pharmaceutical ingredient (API) for producing finished urokinase formulations, can only be extracted from fresh urine using traditional processes. Due to the technical challenges in the collection and production stages, the difficulty of sourcing fresh urine, and its susceptibility to contamination, this method conflicts with China’s urbanization progress and environmental hygiene requirements, leading to increasingly constrained supply.

In other words, the sustained high-performance growth of the urokinase for injection industry, and indeed of Nanjing Nanda Pharmaceutical Co., Ltd., was primarily driven by price increases rather than significant changes in sales volume. In contrast, a direct acquisition by Jiangsu Aidea Pharmaceutical Co., Ltd., leveraging its various advantages to optimize the supply chain and directly integrate “active pharmaceutical ingredients (APIs) with finished dosage forms,” appears more reasonable.

However, whether Aidea Pharmaceutical can truly integrate the supply chain through this acquisition remains to be seen.

A review of Jiangsu Aidea Pharmaceutical Co., Ltd.’s performance from its 2020 IPO through the first quarter of 2022 is cause for concern, particularly given the 54.96% year-on-year decline in Q1 2022. As a result, there is an urgent need for new orders to revitalize its crude human-derived protein business. Therefore, the acquisition of equity in Nanjing Nanda Pharmaceutical Co., Ltd. in 2022 can be viewed as a strategic move driven by the expectation that Nanda Pharmaceutical would secure orders for this crude human-derived protein business.

Nevertheless, the urokinase market continues to experience sustained growth: the global urokinase market reached a total size of RMB 15.391 billion in 2021 and is projected to grow steadily at a compound annual growth rate (CAGR) of 3.57%, with analysts forecasting that the global market will reach RMB 18.998 billion by 2027. During this period, Jiangsu Aidea Pharmaceutical still has time to explore its path toward “integration of human-derived protein raw materials and formulations.”