China Resources Pharma to Acquire Contraceptive Drug Leader Zizhu for RMB 3.115 Billion at 170% Premium

On February 24, China Resources Double-Crane issued an announcement stating that it would acquire 100% equity interest in China Resources Zizhu Pharmaceutical Co., Ltd. (hereinafter referred to as “China Resources Zizhu”) held by Beijing Pharmaceutical Group for RMB 3.115 billion. The acquisition price represents a premium of 170.4% over the book value of net assets of RMB 1.152 billion reported in China Resources Zizhu’s standalone financial statements.

The announcement stated that this transaction aligns with the overall strategic planning of China Resources Double-Crane and facilitates the company’s business layout and inorganic growth through mergers and acquisitions. By acquiring China Resources Zizhu Pharmaceutical Co., Ltd., China Resources Double-Crane will enrich its product portfolio in women’s health medications, ophthalmic preparations, and oral care drugs, thereby expanding its specialized therapeutic lines. In addition to acquiring the relevant assets of China Resources Zizhu, synergies from its existing marketing resources and cost advantages are expected to have a positive impact on China Resources Double-Crane.

In addition to entering the women's health sector through the acquisition of China Resources Zizhu, China Resources Double-Crane also plans to actively collaborate with enterprises on related products, expanding its pediatric portfolio from traditional pediatrics to "broad pediatrics," thereby establishing a specialized product lineup focused on “Women’s Health + Pediatrics.”

This acquisition is one of the measures taken by China Resources Group to integrate its chemical pharmaceutical business segment.

China Resources Double-Crane, a subsidiary of China Resources Group, is positioned as a pillar enterprise within the group’s chemical pharmaceutical platform. Its core business spans new drug R&D, formulation manufacturing, pharmaceutical sales, active pharmaceutical ingredient (API) production, and pharmaceutical equipment. The company has established four major business platforms: generic drugs, infusion therapies, differentiated pharmaceuticals, and innovative drugs.

Based on the assessed value of the total equity interest in China Resources Zizhu Pharmaceutical Co., Ltd. as confirmed in the asset appraisal report, the transfer price for 100% equity interest in China Resources Zizhu is RMB 3.115 billion, representing a premium of 170.4% over its net asset book value of RMB 1.152 billion as shown in its standalone financial statements.

Regarding the reasons for the value increase, China Resources Double-Crane stated in its announcement that this valuation objectively and truthfully reflects the fair market value of China Resources Zizhu Pharmaceutical Co., Ltd. It is not merely a simple summation of the values of individual assets, but rather a comprehensive reflection of the overall value embodied by the company’s operational scale, industry position, and mature management model. From the company’s perspective, the domestic generic drug market offers broad prospects; China Resources Zizhu Pharmaceutical Co., Ltd. has over twenty years of industry experience, holds a competitive advantage in the sector, and continues to demonstrate improving operational performance.

The announcement indicates that China Resources Zizhu Pharmaceutical Co., Ltd. maintains product lines encompassing medications and devices for women’s health, oral care, ophthalmology, diabetes management, and active pharmaceutical ingredients (APIs). Since their market launch, its reproductive health pharmaceuticals have consistently held a significant position in both domestic and international markets, and the company currently serves as a supplier of reproductive health drugs to the United Nations Population Fund (UNFPA). Notably, its core products, Yuting and Jin Yuting, have ranked first in market share within the industry for many years.

“Yuting” is China’s first over-the-counter emergency contraceptive, jointly developed by the former National Family Planning Commission and China Resources Zizhu Pharmaceutical Co., Ltd., and was launched in 1998. As one of the core products under China Resources Double-Crane, Yuting has not only generated revenue but also significantly enhanced brand recognition. The 2022 annual report of China Resources Pharmaceutical Group noted that the Yuting and Jin Yuting product lines consistently ranked first in sales volume within the oral contraceptive category in the O2O market, with online sales increasing by 36% year-on-year in 2022. China Resources Zizhu Pharmaceutical Co., Ltd. has also stated that since its successful launch in 1998, Yuting has maintained the leading market share nationwide.

China Resources Double-Crane stated that this transaction is a significant step in the integration of the chemical pharmaceutical segment within the China Resources Group. By injecting high-quality assets into the listed company, it will further advance strategic restructuring and specialized integration, thereby enhancing the overall quality of the listed company. This transaction will help the listed company amplify its competitive advantages and improve future performance, generating substantial investment returns and aligning with the objective of maximizing shareholder interests. Meanwhile, through this transaction, the company will concentrate its efforts and resources on the pharmaceutical industry, further strengthening the core competitive advantages of its main business, consolidating its industry position, and enabling the listed company to focus its resources on fortifying its core operations.

According to the latest quarterly financial report, as of the third quarter of 2023, China Resources Double-Crane’s total revenue was approximately RMB 7.546 billion, representing a year-on-year increase of 5.42%; the net profit attributable to shareholders of the listed company was RMB 1.078 billion, a year-on-year growth of 10.12%. As of the end of the reporting period, China Resources Double-Crane’s total assets amounted to approximately RMB 15.047 billion.

As a key listed company in China Resources Group’s chemical pharmaceutical segment, China Resources Double-Crane has been continuously expanding its business scope through mergers and acquisitions in recent years.

In 2015, China Resources Double-Crane acquired 100% equity interest in CR Saike to enhance its independent R&D capabilities; acquired 100% equity interest in Jinan Limin to enrich its product portfolio in the field of chronic diseases; acquired a 50.11% equity stake in Shenzhou Bioengineering to enter the bio-fermentation sector; and took control of Xiangzhong Pharmaceutical to establish a presence in the psychotropic drug business.

In September 2023, China Resources Double-Crane acquired an 89.681% equity stake in Guizhou Tian’an Pharmaceutical Co., Ltd. for RMB 260 million. Tian’an Pharmaceutical’s portfolio includes several oral antidiabetic drugs, such as “Anduoke” Metformin Hydrochloride Enteric-coated Tablets, “anduoming” Calcium Dobesilate Capsules, “anduomei” Glimepiride Tablets, and “anduojian” Pioglitazone Hydrochloride Dispersible Tablets. According to China Resources Double-Crane, the transaction aims to further enrich the company’s diabetes drug pipeline, strengthen its market position in the diabetes sector, and enhance its profitability and overall competitiveness.

After a six-month interval, China Resources Double-Crane has once again announced an acquisition plan, aiming to expand into the women’s health sector by acquiring China Resources Zizhu Pharmaceutical. As a wholly-owned subsidiary of China Resources Pharmaceutical Group, China Resources Zizhu currently maintains product lines encompassing medications and medical devices for women’s health, oral care, ophthalmology, diabetes management, and active pharmaceutical ingredients (APIs), while also advancing research and development in the field of reproductive health. In its 2023 interim report, China Resources Pharmaceutical noted that a Class 2 new drug in the reproductive health sector, introduced by the company in December 2022, was undergoing Phase I clinical trials.

In fact, it is not only China Resources Double-Crane that has been active; in recent years, the “China Resources” group has continuously strengthened its pipeline layout through acquisitions and mergers. Early this year, China Resources Sanjiu invested in Runsheng Pharmaceutical and secured a package deal granting it exclusive distribution and promotion rights in mainland China for Runsheng’s fluticasone propionate inhalation powder following its market launch.

It is reported that Runsheng Pharmaceutical focuses on the research, development, and production of respiratory medications, serving patients with asthma and chronic obstructive pulmonary disease (COPD). Its first core product, Salmeterol Fluticasone Powder for Inhalation, is a high-end generic version of GSK’s Advair® Diskus®. This transaction enriches China Resources Sanjiu’s respiratory drug portfolio, enhances its professional image in the respiratory field, and supports its subsequent new product development.

According to public information, China Resources Pharmaceutical’s healthcare sector currently comprises six major companies: in addition to China Resources Double-Crane and China Resources Sanjiu, the portfolio includes China Resources Pharmaceutical Group, China Resources Pharmaceutical Commercial Group, China Resources Jiangzhong, and China Resources Health Group.