Sinopharm Accord Completes Integration of Four Sinopharm Group Distribution Subsidiaries, Files Prospectus for Share Issuance

VCBeat (WeChat: vcbeat), May 12 — Sinopharm Group Pharmaceutical Co., Ltd. (Sinopharm Holdings, 600511) announced this morning that its major asset restructuring has been approved by the Anti-Monopoly Bureau of the Ministry of Commerce and the China Securities Regulatory Commission (CSRC). Sinopharm Holdings has integrated four wholly-owned or controlled subsidiaries under Sinopharm Group Holding, and has fully completed the equity transfer and registration changes with the Administration for Industry and Commerce.

According to the announcement by Sinopharm Group Co., Ltd., this round of transactions involves 100% equity interest in Sinopharm Holding Beijing Co., Ltd. (hereinafter referred to as “Sinopharm Beijing”), 100% equity interest in Sinopharm Holding Beijing Kangchen Biopharmaceutical Co., Ltd. (hereinafter referred to as “Beijing Kangchen”), 60% equity interest in Sinopharm Holding Beijing Huahong Co., Ltd. (hereinafter referred to as “Beijing Huahong”), and 51% equity interest in Sinopharm Holding Beijing Tianxing Puxin Biopharmaceutical Co., Ltd. (hereinafter referred to as “Tianxing Puxin”).

Overview of the Target Assets in This Round of Transactions

According to VCBeat’s inquiries through the National Enterprise Credit Information Publicity System and the official websites of the relevant companies, all enterprises involved in this round of restructuring by Sinopharm Group Co., Ltd. are related to the distribution of pharmaceuticals and medical devices.

Among them, Beijing Guokong is the largest in scale. It was previously Sinopharm Group’s only wholly-owned subsidiary based in Beijing, with a registered capital of RMB 600 million. Its primary focus is on the terminal market for hospitals at all levels and retail pharmacies in Beijing. It is designated by the national government as a central pharmaceutical reserve unit, appointed by the Beijing municipal government as the supplier of narcotic and psychotropic drugs, and recognized as one of the five distributors of essential medicines for community health services in Beijing.

According to the official website of Beijing Guokong, its network covers more than 200 secondary-and-above hospitals, nearly 1,500 primary and community hospitals, approximately 3,000 retail pharmacies, and over 100 pharmaceutical commercial distribution clients in the Beijing area. Among these, the coverage rate for tertiary hospitals approaches 100%, while that for secondary hospitals exceeds 92%.

Sinopharm Holding Beijing Huahong Co., Ltd.The predecessor of Sinopharm Holding Beijing Huahong Co., Ltd., Beijing Huahong Pharmaceutical Co., Ltd., was established in June 1993. It joined Sinopharm Group Co., Ltd. in December 2003. In 2009, it was restructured into a Sino-foreign joint venture jointly established by Sinopharm Group Co., Ltd., Mitsubishi Corporation (Japan), Medipal Holdings Corporation, and Beijing Changxin Yida Investment Consulting Co., Ltd., making it the only Sino-foreign joint venture pharmaceutical distribution enterprise under China National Pharmaceutical Group. In 2010, it acquired the sales branch of China National Pharmaceutical Foreign Trade Corporation. The core business of the new Huahong covers direct sales and distribution of pharmaceutical products in the Beijing region; domestic agency, nationwide distribution, and marketing of imported and domestically produced innovative and specialty drugs; as well as value-added services for hospitals.

Sinopharm Holding Beijing Tianxing Puxin Biopharmaceutical Co., Ltd. was established in July 2002 with a registered capital of RMB 100 million. As a comprehensive pharmaceutical enterprise, it integrates the sales of hospital pharmaceuticals, medical devices, and consumables with cross-regional product distribution, while providing customers and suppliers with comprehensive distribution, logistics, and value-added services. In April 2010, it officially became a subsidiary of Sinopharm Group Co., Ltd. In 2015, Tianxing Puxin achieved sales revenue of RMB 5.3 billion.

Regarding the specific payment method, this round of transaction will be conducted through the issuance of shares to purchase assets. Sinopharm Group Co., Ltd. still needs toIssue 212,736,835 shares to Sinopharm Group Co., Ltd., 11,990,012 shares to Changxin Yida, and 20,075,116 shares to Kangchen Pharmaceutical; issue no more than 41,035,851 shares to eight investors for the purpose of raising matching funds.Sinopharm Group Co., Ltd. has applied to the Shanghai Branch of China Securities Depository and Clearing Corporation Limited and the Shanghai Stock Exchange for share registration, listing, and other related procedures concerning the changes in shareholding involved in this transaction.

The aforementioned share accumulation totals approximately 286 million shares, exceeding Sinopharm Group’s current float—Sinopharm Group currently has 278 million shares in public float and a total share capital of 479 million shares. Based on Sinopharm Group’s current stock price, the transaction value of this round is approximately RMB 9.7 billion. Meanwhile, listing procedures for these shares have been applied for, potentially enabling liquidation through the secondary market.

Notably, Sinopharm Group Co., Ltd. is the largest shareholder of Sinopharm China National Medicines Corporation Limited (Sinopharm Shares). As of March 31 this year, data shows that Sinopharm Group holds 44.01% of the tradable A-shares of Sinopharm Shares. For Sinopharm Group, this round of transactions is equivalent to an internal restructuring within the group.

It should also be noted that Sinopharm Group Holding Co., Ltd. and Sinopharm Group Co., Ltd. are both subsidiaries of China National Pharmaceutical Group Corporation (Sinopharm). According to the official website, Sinopharm is the largest, most comprehensive in terms of industrial chain, and strongest in overall competitiveness among pharmaceutical and healthcare industry groups in China, directly administered by the State-owned Assets Supervision and Administration Commission of the State Council. Its core businesses include the distribution, retail, research and development, and manufacturing of health-related products such as those for prevention, treatment, diagnosis, and nursing care.

Sinopharm Group owns 10 wholly-owned or holding subsidiaries and six listed companies: Sinopharm Group Co., Ltd., Shanghai Pharmaceuticals Distribution Co., Ltd. (Guoyao Shares), Shenzhen Nepstar Chain Drugstore Ltd. (Guoyao Yizhi), Beijing Tiantan Biological Products Corporation Limited, Shanghai Modern Pharmaceutical Co., Ltd., and China Traditional Chinese Medicine Holdings Co. Limited. From 2005 to 2015, the Group’s annual average growth rates were 26.89% in operating revenue, 35.28% in total profit, and 31.16% in total assets. In 2016, the Group’s operating revenue exceeded RMB 300 billion, making it the only Chinese pharmaceutical enterprise currently listed on the Fortune Global 500.