Zhongyu Capital Acquires Controlling Stake in Chenpai Pharmaceutical to Accelerate Healthcare Fund M&A

Yesterday, Zhongyu Capital Management (Beijing) Co., Ltd. and Jiangsu Chenpai Pharmaceutical Group Co., Ltd. (“Chenpai Pharmaceutical”) officially signed an agreement in Shanghai, under which a fund affiliated with Zhongyu Capital acquired controlling interest in Chenpai Pharmaceutical. Going forward, Zhongyu Capital will provide comprehensive support to Chenpai Pharmaceutical in areas such as resources and capital, aiming to enhance its business operations, drive industry consolidation, and accelerate the process of achieving a high-quality listing on the stock exchange.

It is reported that Jiangsu Chenpai Pharmaceutical Group Co., Ltd. was formerly known as Haimen Pharmaceutical Factory of Jiangsu Province, established in November 1975. In 2004, it was fully restructured into the Sino-foreign joint venture Jiangsu Chenpai Pharmaceutical Co., Ltd., with Li Jianxin serving as Chairman. Currently, Jiangsu Chenpai Pharmaceutical has developed into an enterprise group centered on the pharmaceutical industry. The company possesses fixed assets worth RMB 100 million and covers an area of 350,000 square meters. It employs nearly 600 staff members, including approximately 400 technical professionals specializing in pharmacy and related fields. Among them are 30 licensed pharmacists, 30 senior engineers, and nearly 150 engineers.

In terms of operations, Chenpai does not engage in sales activities but instead establishes close strategic alliances with distributors. By divesting from sales and focusing on production, its vision is to build China’s premier pharmaceutical manufacturing platform, aspiring to become the leading brand in China’s pure agency model for pharmaceuticals. Chenpai’s market strategy: recruit agents, train agents, serve agents, and reward agents.

Since its establishment in August 2013, Zhongyu Capital has successfully collaborated with eight domestically listed companies, including Aier Eye Hospital, Yixintang, Changhong Technology, Yunsheng Industrial, and Nanjing Gaoke, to launch eight M&A funds focused on the pharmaceutical, medical, and healthcare industries. The scope of these mergers and acquisitions covers pharmaceutical manufacturing, medical devices, mobile health, and medical services. Among these, the two M&A funds established with Weimen Pharmaceutical and Yunnan Yixintang are specifically targeted at the pharmaceutical industry, while the remaining funds are primarily directed toward the broader medical and health sectors.

Yixintang: Since the establishment of its first pharmacy in January 2001, Yixintang has grown to operate more than 3,600 directly-owned chain stores across provinces and municipalities including Yunnan, Guizhou, Guangxi, Sichuan, Shanxi, Chongqing, Tianjin, Shanghai, and Hainan. The company boasts over 10 million members and more than 4 million WeChat followers. Since 2007, it has ranked among the top ten chain pharmacies in China for eight consecutive years in terms of sales revenue and number of directly-owned stores. In recent years, Yixintang has maintained a leading position in comprehensive competitiveness within the industry, gradually expanding its market share. It has become the largest pharmaceutical retail enterprise in Yunnan Province by sales volume and store network.

Weimen Pharmaceutical: As a subsidiary of Weimen Pharmaceutical, Guizhou Weimentang Pharmaceutical Chain Co., Ltd. has developed its business with the “Weimen Grand Health WeChat Mall” as the core, leveraging the advantages of the “Internet+”-enabled Weimen Grand Health e-commerce platform to achieve integrated online-to-offline (O2O) sales of the Weimen Pharmaceutical Group’s products.

VCBeat Analysis:Zhongyu Capital’s decision to acquire Chenpai Pharmaceutical was driven by the latter’s 40 years of experience in drug development, its longstanding focus on R&D, and its comprehensive pharmaceutical product portfolio spanning multiple therapeutic areas. In 2013, Chenpai generated RMB 400 million in sales revenue and over RMB 40 million in profits and taxes. Given Chenpai’s expertise in pharmaceutical manufacturing and its high profit margins, coupled with Zhongyu Capital’s mature and extensive online-to-offline (O2O) sales channels through its healthcare M&A fund, the synergistic market impact resulting from their complementary strengths is highly promising.