Tiansheng Pharmaceutical Receives CSRC Approval for IPO, Post-IPO Valuation Expected to Reach RMB 10 Billion

On May 2, Tiansheng Pharmaceutical announced that its initial public offering (IPO) application had been approved by the China Securities Regulatory Commission (CSRC). The company is scheduled to launch its public share offering on the 10th of this month, planning to issue no more than 53 million new shares, with the offer price to be determined.

VCBeat (WeChat: vcbeat) has learned that, based on companies with comparable revenue sizes in the A-share market and their price-to-earnings (P/E) ratios, Tiansheng Pharmaceutical’s market capitalization could reach RMB 10 billion after its listing.

According to Tiansheng Pharmaceutical's prospectus, the company was established in 2001 and completed its joint-stock reform in 2007. Its current registered capital is RMB 159 million, and its legal representative is Liu Qun.

Tiansheng Pharmaceutical is primarily engaged in pharmaceutical manufacturing and pharmaceutical distribution, and isA pharmaceutical enterprise group integrating R&D, manufacturing, and distribution.

In the pharmaceutical manufacturing sector, Tiansheng Pharmaceutical oversees four subsidiaries: Hubei Tiansheng (Kangdi Pharmaceutical), Hunan Tiansheng, Sichuan Tiansheng, and Tiansheng Shaanxi. These entities are primarily engaged in the production and sales of various oral solid dosage forms (including tablets, hard capsules, granules, pills, etc.), large-volume injections, small-volume injections, pharmaceutical hollow capsules, and processed traditional Chinese medicine decoction pieces.

Tiansheng Pharmaceutical is capable of producing 18 dosage forms and over 200 drug varieties, holding more than 300 drug production approval numbers issued by the National Medical Products Administration (NMPA), including those for pharmaceutical excipients and drug packaging materials.77 drug varieties have been included in the National Essential Medicines List, and 152 drug varieties have been listed in the National Reimbursement Drug List.Tiansheng Pharmaceutical owns two exclusive products: Yanshen Jianwei Capsules and Dizhen Granules.

In the pharmaceutical distribution sector,Tiansheng Pharmaceutical's primary business region is in Chongqing.. The Group’s two holding subsidiaries, Changsheng Pharmaceutical and Tiansheng Pharmaceutical, sell and distribute pharmaceutical products to hospitals at all levels in the Chongqing region.

According to the information disclosed in the prospectus, Tiansheng Pharmaceutical has achieved consecutive growth in recent years, with revenue exceeding RMB 2 billion in 2016 and net profit reaching RMB 234 million.When viewed against the backdrop of more than 160 listed pharmaceutical companies, Tiansheng Pharmaceutical’s revenue and net profit both stand at a median level.

Key Data from Tiansheng Pharmaceutical's Consolidated Income Statement

According to the Letter of Intent, Tiansheng Pharmaceutical will issue no more than 53 million new shares in this offering, accounting for 25% of the total share capital after the issuance. Notably, based on Tiansheng Pharmaceutical’s net profit level in 2016, its earnings per share (EPS) stood at RMB 1.47. Generally, the average price-to-earnings (P/E) ratio (market capitalization/earnings per share) of A-share listed pharmaceutical manufacturing companies is around 50x. Based on this estimation, Tiansheng Pharmaceutical’s post-issuance share price could reach the range of RMB 60–70.Market Capitalization Poised to Reach Tens of Billions. Even if the IPO price is considered low, Tiansheng Pharmaceutical’s post-listing scale should not be underestimated.

Tiansheng Pharmaceutical disclosed in its prospectus the intended use of proceeds from the offering. After deducting issuance expenses, the funds will be invested in four projects, prioritized by urgency and importance, including: GMP technical transformation for oral solid dosage forms; GMP transformation for non-PVC flexible bag large-volume parenterals; Tiansheng (Chongqing) Modern Pharmaceutical Logistics Base; and the construction of a logistics R&D center.

Tiansheng Pharmaceutical’s feasibility study on the market prospects of its investment projects indicates that, upon commissioning, the GMP technical transformation project for oral solid dosage forms will have an annual production capacity of 600 million capsules, 400 million tablets, and 320 million sachets of granules; meanwhile, the GMP technical transformation project for non-PVC flexible bag large-volume parenterals will add an annual capacity of 90 million bags of large-volume injections. Tiansheng Pharmaceutical will strengthen the development of its marketing network to absorb the additional production capacity and further increase its market share. However, if the company encounters difficulties in building its marketing network or fails to enhance its sales capabilities,existsRisk of Inability to Timely Absorb Newly Added Production Capacity.

Prior to this issuance, Liu Qun, the actual controller of Tiansheng Pharmaceutical, held 43.17% of the company’s shares; following the completion of the issuance, his shareholding will be reduced to 32.38%, while he will remain the actual controller. Based on previous calculations, if Tiansheng Pharmaceutical’s market capitalization reaches RMB 10 billion after the issuance,The net worth of its actual controller, Liu Qun, will also exceed RMB 3 billion.。

According to official records, Liu Qun was born in September 1965. He is a Chinese citizen with no right of abode outside China, holds a Master’s degree in Agricultural Extension, and is a recipient of the State Council’s Special Allowance. He previously served as a teacher at Shuanglong Middle School in Changshou County, Sichuan Province. Currently, he serves as the Director of the Village Committee of Shiling Village, Guixi Town, Dianjiang County, Chongqing; Chairman of Tiansheng Pharmaceutical Co., Ltd.; Chairman of Changlong Group; and a Deputy to the 4th Chongqing Municipal People’s Congress, among other positions.

Liu Qun has received honors such as “National Model Worker,” “Second Prize of the National Science and Technology Progress Award,” “National Advanced Individual in Assisting People with Disabilities,” “Chongqing Municipal Advanced Individual in Earthquake Relief and Disaster Response,” and “Chongqing Municipal Model Worker.”

Regarding post-listing plans, Tiansheng Pharmaceutical stated in its prospectus that it intends to extend its core business into the healthcare services sector and is currently undertaking “791 Internet Healthcare Initiative“791 Internet Healthcare Initiative” is a novel healthcare delivery model based on big data and cloud computing platforms, leveraging mobile internet to provide online consultations and offline diagnosis and treatment, integrated with chain pharmacies.Real-time connectivity between patients, hospitals, and physicians enabled by mobile internet technology, to establish a patient-centered, 24/7, and comprehensive three-dimensional medical service system, fully realizing efficient, information-driven, and convenient services for medical diagnosis and treatment activities.

The program has been officially launched at Chongqing No. 5 People's Hospital, Chongqing Banan District People's Hospital, and Chongqing Jiangbei District People's Hospital, where it is being implemented.Appointment Registration, Specialist Consultation, Report Inquiry, Self-Service Payment, E-Prescriptions, and O2O Pharmaceutical Services。

Tiansheng Pharmaceutical will conduct online and offline subscriptions on May 10. The offline subscription period is from 9:30 to 15:00, while the online subscription hours are 9:15–11:30 and 13:00–15:00. If the total number of shares subscribed and paid for by offline and online investors falls short of 70% of the total public offering size, the sponsor (lead underwriter) will suspend this initial public offering.