Viva Biotech and Langhua Pharmaceutical Enter Strategic Integration Agreement to Accelerate Upgrading of Innovative Drug Industry Service Chain

On August 8, 2020, Viva Biotech Ltd (hereinafter referred to as “Viva Biotech”) entered into a share purchase agreement, pursuant to which Viva Biotech agreed to acquire, and the sellers agreed to jointly sell, an 80% equity interest in Zhejiang Langhua Pharmaceutical Group Co., Ltd. (hereinafter referred to as “Langhua Pharmaceutical”), for a consideration of RMB 2,560 million.

This strategic integration will fully leverage the business synergies between Viva Biotech and Longhua Pharmaceutical in research and development, design, and manufacturing within the global pharmaceutical market. It holds significant strategic importance for the Company’s vertical integration across the industry chain, expansion into CDMO (Contract Development and Manufacturing Organization) services, and the establishment of a comprehensive, one-stop drug service platform.

Viva Biotech’s mission is to serve as an incubator for innovative biotechnology companies worldwide, boasting a world-leading structure-based drug discovery service platform. The company provides preclinical drug development services to global biotechnology and pharmaceutical clients through its Cash-for-Service (CFS) model, while investing in and incubating high-potential biotech startups globally through its Equity-for-Service (EFS) model. As a comprehensive pharmaceutical R&D and manufacturing company, Lonhua Pharma is committed to becoming the preferred CDMO partner for its clients, primarily engaged in the production of small-molecule active pharmaceutical ingredients (APIs) and intermediates, as well as CDMO services.

In 2017, Longhua Pharmaceutical was recognized as the “Most High-Growth Enterprise” on the list of internationalized pharmaceutical companies. Its clientele includes numerous multinational pharmaceutical corporations worldwide. The company holds GMP certification from China’s National Medical Products Administration (NMPA), as well as official certifications from the U.S. Food and Drug Administration (FDA), the European Directorate for the Quality of Medicines & HealthCare (EDQM), the World Health Organization (WHO), and the Pharmaceutical Supply Chain Initiative (PSCI).

Through this strategic integration, Viva Biotech will gain immediate access to Lonhua Pharma’s established CDMO platform, which boasts a proven track record and strong reputation. This move will diversify the client base and expand geographic coverage, extend CDMO services to existing and potential customers through more comprehensive end-to-end solutions, effectively increase revenue streams for the CFS business, empower the rapidly growing service demands of incubated companies under the EFS model, and enlarge the portfolio of potential incubation projects.

Viva Biotech will also leverage its existing core strengths to further strengthen and broaden the parties’ capabilities in drug research, development, and manufacturing by investing in additional high-caliber talent and facilities. This includes, but is not limited to, expanding its CMC capabilities and integrating its business operations with the Group’s existing businesses. By delivering more comprehensive and high-quality services, Viva Biotech aims to enhance its market competitiveness and become the preferred partner for integrated outsourcing services among multinational pharmaceutical companies and innovative biotechnology firms.

Dr. Mao Chen, Chairman and Chief Executive Officer of Viva Biotech Group, stated: “This strategic integration with Lonhua Pharmatech will effectively enhance both parties’ end-to-end service capabilities in new drug development and overall market competitiveness. We are confident in Lonhua Pharmatech’s business prospects and future growth potential. Moving forward, Viva Biotech will continue to leverage its existing technological platforms, talent in innovative drug R&D, and advantages in customer acquisition. Through various forms of strategic cooperation and mergers and acquisitions, we will consistently extend our reach downstream along the industry chain, improve operational efficiency and platform capabilities, accelerate the integration of the innovative drug industry service chain, and support our clients and incubated companies in the R&D and commercialization of innovative drugs.”

Mr. Shan Mengchun, Chairman of Lanhua Pharmaceutical, stated: “The strategic integration agreement reached with Viva Biotech marks a significant milestone in the development journey of Lanhua Pharmaceutical. Lanhua Pharmaceutical’s extensive industry experience in the CDMO sector will create strong synergies with Viva Biotech’s technological advantages and high-quality client flow in the field of innovative drug R&D. Moving forward, we will continue to provide customers with more comprehensive integrated drug development services, driven by R&D innovation, cultivating differentiated competitive advantages, and striving to be the most valuable and creative CDMO partner for our clients.”

This resolution is subject to approval at an extraordinary general meeting of shareholders. If approved, Viva Biotech will become the exclusive CDMO platform for small-molecule drugs and advanced intermediates, responsible for related activities in the development, optimization, and commercialization of small-molecule drugs and intermediates.

Viva Biotech’s mission is to become the cradle of innovative biotechnology companies worldwide. We have developed a highly scalable business model that combines the traditional Cash-for-Service (CFS) model with our proprietary Equity-for-Service (EFS) model.

The Group’s CFS business provides world-leading structure-based drug discovery services for the preclinical development of innovative drugs for global biotechnology and pharmaceutical clients. Its services cover the full spectrum of early-stage drug discovery needs, including target protein expression and structural studies, drug screening, and lead compound optimization through to the identification of clinical candidates.

The Group’s EFS business also provides drug discovery and incubation services to high-potential biotech start-ups worldwide. As of December 31, 2019, Viva Biotech had provided drug discovery services to 438 biotechnology and pharmaceutical clients globally, studied more than 1,200 independent drug targets, delivered over 13,700 protein structures to clients, and invested in and incubated a total of 46 biopharmaceutical start-ups.

Zhejiang Langhua Pharmaceutical Co., Ltd. is a comprehensive pharmaceutical manufacturer primarily engaged in the production of active pharmaceutical ingredients (APIs), intermediates, and contract development and manufacturing (CDMO) services, while also holding licenses for the production of pharmaceutical formulations. Langhua Pharmaceutical is a national high-tech enterprise that obtained GMP (Good Manufacturing Practice) certification for its pharmaceutical quality management system from the State Food and Drug Administration in 2006.

Since 2012, it has obtained certifications from the U.S. FDA, the World Health Organization (WHO), and the European Directorate for the Quality of Medicines & HealthCare (EDQM). It has successfully undergone on-site audits conducted by numerous renowned multinational pharmaceutical companies, established extensive and in-depth collaborations with them, and become their qualified supplier as well as a research, development, and manufacturing base.

All active pharmaceutical ingredient (API) products have obtained China GMP certificates. Meanwhile, to meet the needs of international customers, our main products have also passed GMP on-site audits conducted by the U.S. FDA, the European Union, the WHO, and Brazil's ANVISA, and have obtained the corresponding certificates.