China Resources Sanjiu Becomes Largest Shareholder of Runsen Pharma with $227M Investment, Gaining Exclusive Rights to Respiratory Inhalation Products

Recently, CR SANJIU announced that it had invested in Runsheng Pharmaceutical by acquiring a portion of its equity and making additional capital contributions, thereby securing a package deal for the exclusive distribution and promotion rights in mainland China for Runsheng Pharmaceutical’s Fluticasone Propionate Powder for Inhalation post-launch., sign the "Cooperation Agreement" and arrange for the execution of specific "Equity Transfer Agreement," "Capital Increase Agreement," and "Shareholders' Agreement" at the agreed-upon price.

According to the announcement, CR SANJIU acquired a registered capital contribution of RMB 7.8 million in Runsheng Pharmaceutical held by Boyi Fund (an existing shareholder), a registered capital contribution of RMB 20 million held by Cao Yuan, and a registered capital contribution of RMB 15.2 million held by Juxin Investment, for a total consideration of RMB 58.91 million. Meanwhile, CR SANJIU injected RMB 102.38 million into Runsheng Pharmaceutical as a capital increase, subscribing to RMB 16.097634 million in newly added registered capital. Upon completion of the equity transfer and capital increase, CR SANJIU will hold a 4.1899% equity interest in Runsheng Pharmaceutical, which will achieve a post-money valuation of approximately RMB 2.443 billion.

In 2020, CR SANJIU also injected RMB 200 million of its own funds into Runsheng Pharmaceutical, subscribing to RMB 31.453665 million in newly added registered capital and acquiring an 8.6393% equity stake in Runsheng Pharmaceutical.Upon completion of the transaction, CR SANJIU will hold a total of 23.5689% equity interest in Runsheng Pharmaceutical, becoming its largest shareholder.

With this, CR Pharma’s industrial landscape has expanded once again.

In fact, in recent years, CR SANJIU has been aggressively pursuing an acquisition strategy, successively acquiring companies such as Huangshi Pharmaceutical, Zhejiang Zhongyi, Kunming Shenghuo, Aonuo Pharmaceutical, Shenzhen China Resources Hall, Anhui Jinchan Biochemical, Benxi San Yao, Hefei Shenlu, Shuanghe Gaoke, Guangdong Shunfeng, Guilin Tianhe, Linqing Huawei, Shandong Shenghai, and Aonuo Pharmaceutical, thereby expanding its footprint in the pharmaceutical sector.

Major subsidiaries of CR SANJIU. Image source: CR SANJIU official website

Through continuous investment and mergers and acquisitions, CR SANJIU has currently positioned its core business in the fields of Consumer Health Care (CHC) products and prescription drugs. The CHC product portfolio covers nearly 10 categories, including cold and flu, dermatology, gastrointestinal health, cough relief, orthopedics, pediatrics, and dietary nutritional supplements, with its core products holding significant market share. The prescription drug business spans therapeutic areas such as oncology, cardiovascular and cerebrovascular diseases, digestive system disorders, orthopedics, and pediatrics. It features a diverse portfolio of prescription medications, including the flagship 999 Lixuewang Brand Xuesaitong Soft Capsules, Shenfu Injection, Huachansu Tablets and Injections, and Yixuesheng Capsules, enjoying a strong reputation within the medical community.

CR SANJIU is particularly adept at seizing M&A opportunities involving local state-owned pharmaceutical enterprises. The aforementioned A-share listed pharmaceutical companies, including CR SANJIU, China Resources Double-Crane Pharmaceutical, Jiangzhong Pharmaceutical, Dong-E-E-Jiao, and Boya Bio-Pharmaceutical, were all incorporated into the China Resources Pharmaceutical portfolio through acquisitions from state-owned assets authorities in their respective provinces and municipalities.

It is reported that leading listed traditional Chinese medicine (TCM) companies with market capitalizations in the hundreds of billions, such as Yunnan Baiyao, Pien Tze Huang, and CR SANJIU, have historically attempted to expand their pharmaceutical portfolios through mergers and acquisitions. Despite considerable efforts, these attempts ultimately proved unsuccessful.

Respiratory and anti-infective therapies, the focus of this collaboration, have also been among CR SANJIU’s key strategic areas in recent years.CR SANJIU offers a wide range of products for adults and children, including cough suppressants, anti-inflammatory agents, expectorants, and antibiotics. Household staples such as “999 Ganmaoling,” “999 Pediatric Cold Medicine,” “999 Antiviral Oral Liquid,” and “999 Strong Loquat Syrup” are widely recognized and commonly found in homes.

In the 2021 Comprehensive Statistical Ranking of Over-the-Counter (OTC) Drug Products in China, “999 Ganmaoling” and “999 Compound Ganmaoling” ranked first and second, respectively, among traditional Chinese medicine products for colds and coughs. According to data from Sinopharm Information, in addition to the Sanjiu Cold product line, which has become a blockbuster with retail terminal sales exceeding RMB 2 billion, the secondary and tertiary Ganmaoling products have also continued to gain momentum. From 2017 to 2019, the compound annual growth rate (CAGR) of the company’s retail terminal sales revenue for its cold-related product category reached 14.8%, surpassing the industry average. Furthermore, in the adult segment, CR SANJIU has achieved annual revenues exceeding RMB 100 million for individual products such as Compound Ganmaoling, Qiangli Pipa Lu (Strong Loquat Syrup), and Ganmao Qingre Keli (Cold-Clearing and Heat-Resolving Granules). In the pediatric cold segment, individual products such as Pediatric Ganmaoling and Pediatric Paracetamol, Artificial Cow-bezoar, and Chlorphenamine Maleate Granules have also surpassed RMB 100 million in sales.

According to data from Menet, the market for respiratory chemical drugs (including biologics) in China’s online pharmacies has seen rapid growth, with year-on-year increases exceeding 50%. Sales in the first half of 2023 have already surpassed the full-year total for 2021. By subcategory, three major segments—medications for obstructive airway diseases, cough and cold remedies, and nasal preparations—have sold exceptionally well, accounting for over 80% of the combined market share. Meanwhile, sales of cough and cold medications and throat preparations have both doubled.

Among them, asthma and chronic obstructive pulmonary disease (COPD) are chronic respiratory diseases. They have complex etiologies, high incidence rates, and a large patient population. The average duration of medication use exceeds five years, with treatment primarily relying on inhaled formulations, indicating substantial market demand.

It is estimated that there are approximately 334 million asthma patients and 328 million chronic obstructive pulmonary disease (COPD) patients worldwide. Asthma is the second leading cause of death and disability globally, after cancer, affecting approximately 300 million people, while COPD ranks as the third most prevalent disease. In recent years, the prevalence of respiratory diseases has been on the rise, making inhaled drug delivery the preferred route of administration—a consensus that has been reached globally.

The Chongqing-based pharmaceutical company involved in this collaboration, Runsheng Pharmaceutical, specializes in the development of dry powder inhaler products for the respiratory field.Currently, Runsheng Pharmaceutical has preliminarily established a high-end dry powder inhalation formulation R&D technology platform, which can support CR SANJIU in further developing dry powder inhaler products with high technical barriers. Its main products under development include Salmeterol and Fluticasone Propionate Powder for Inhalation, Fluticasone Propionate Powder for Inhalation, Tiotropium Bromide Powder for Inhalation, etc.

Currently, Runsheng Pharmaceutical’s core product, Salmeterol Xinafoate and Fluticasone Propionate Powder for Inhalation, has completed pharmaceutical studies, bioequivalence trials for one strength, and clinical endpoint studies in accordance with FDA submission requirements, and has passed the U.S. FDA’s pre-approval inspection with zero deficiencies. In China, randomized controlled trials have been completed per the Center for Drug Evaluation (CDE) submission requirements, while bioequivalence trials are ongoing. For Fluticasone Propionate Powder for Inhalation, a marketing application has been submitted in the United States; in China, in vitro equivalence and bioequivalence studies have been completed per CDE requirements, and randomized controlled trials are currently underway.

Building on its existing exclusive distribution and promotion rights in mainland China for Runsheng Pharmaceutical’s salmeterol/fluticasone propionate powder for inhalation after market launch, CR SANJIU has acquired through this transaction the exclusive distribution and exclusive promotion rights in mainland China for Runsheng Pharmaceutical’s fluticasone propionate powder for inhalation after market launch. This move helps fill CR SANJIU’s gap in inhaled dosage form products and enriches its respiratory disease medication portfolio.

On the other hand, Runsheng Pharmaceutical has established product R&D, production, and quality management systems that comply with overseas market standards, and has accumulated certain experience in product development for international markets. This will help CR SANJIU broaden its global perspective, lay the foundation for the future introduction of products into overseas markets, and enhance its overall competitiveness.

In this era of rampant respiratory diseases, we look forward to CR SANJIU adding another powerhouse to its lineup, bringing more cost-effective blockbuster products to the market.

References:

“CR Group” Adds Another Listed Company: CR SANJIU to Invest RMB 2.9 Billion to Take Control of Kunming Pharmaceutical Group

2. [Company] CR SANJIU: Leader in Traditional Chinese Medicine OTC