21st Century Business Herald reporter Yan Shuo reported from Beijing

On March 26, Ma Jiye, director of the Beijing Municipal Medical Insurance Bureau, said that a new pharmaceutical M&A fund of 10 billion yuan will be set up this year to build a pharmaceutical and health industry fund system with continuous support and urban coordination.

On the same day, Shanghai Biomedical M&A Private Equity Fund Partnership (Limited Partnership) was formally established. According to the enterprise investigation, the fund is jointly funded by Shanghai Pharmaceutical (601607), Xinhua Insurance (601336), Tofflon (300171), Junshi Biosciences (688180), etc., with a capital contribution of 4.66 billion yuan.

In fact, since 2024, the state and local governments have successively introduced blockbuster policies to encourage mergers and acquisitions: the new "Nine Articles", "Eight Policies of the Science and Technology Innovation Board" and "Six Mergers and Acquisitions" have been released one after another; Subsequently, Shenzhen, Shanghai, Zhengzhou and other places issued three-year action plans; Beijing, Guangdong and other places held mergers and acquisitions and restructuring symposiums, and took multiple measures to activate the mergers and acquisitions market.

Zhao Heng, founder of Latitude Health, a medical strategy consulting company, pointed out to the 21st Century Business Herald reporter that mergers and acquisitions in the pharmaceutical industry are the future trend. As the market continues to clear and adjust, there will be more and more mergers and acquisitions. Different companies will focus on market segments according to their own development strategies.

Haitong Securities Research Report pointed out that mergers and acquisitions are expected to improve the efficiency of the mergers and acquisitions market and help listed companies transform and upgrade to the direction of new quality productivity. In terms of fields, mergers and acquisitions are expected to occur intensively in sub-sectors such as medical devices, traditional Chinese medicine, medical services, blood products and scientific research services. In these areas, leading companies are expected to achieve strong through mergers and acquisitions, and mergers and acquisitions will help listed companies get out of the second growth curve.

The wave of mergers and acquisitions is on the rise

In recent years, with the in-depth adjustment of the policy environment and the continuous progress of science and technology, the pharmaceutical industry is facing unprecedented opportunities and challenges. At the same time, as the capital market cooled, the valuation of pharmaceutical companies fell to the bottom, accelerating the wave of mergers and acquisitions of domestic and foreign innovative pharmaceutical companies.

According to the analysis of the Pacific Securities Research Report, the tide of mergers and acquisitions in the pharmaceutical industry is essentially the result of the joint action of the capital market, policy guidance, industry development needs and the strategic choices of enterprises themselves, which is a "win-win" situation for all parties involved. There are three main reasons behind the M&A boom.

First, acquirers usually need to rely on mergers and acquisitions to cultivate new growth points, continue to expand business boundaries, and achieve diversified layout. Second, the acquiree chooses to sell its equity to achieve capital exit and strategic transformation. On the one hand, in the cold winter of medicine, biotech can get more resources and support by cooperating with pharmaceutical giants. At the same time, the difficulty of IPO has increased, and the willingness of sellers to merge and acquire transactions has become stronger. On the other hand, the pressure from the LP level continues to superimpose, and mergers and acquisitions have gradually become the preferred option; In addition, the state has continuously introduced policies to support mergers and acquisitions to create a good policy environment for mergers and acquisitions in the pharmaceutical industry.

Based on this, medical M&A has recovered rapidly, and biomedicine is a key area of M&A. According to the research report recently released by Shanxi Securities, from January to October 2024, according to the statistics of the completed caliber, the scale of pharmaceutical and medical M&A transactions reached 62.7 billion yuan, and the number of transactions was about 101, and the market as a whole has recovered to a high level in recent years.

From January to October 2024, the total number of medical M&A transactions of more than 300 million yuan will be 40, exceeding the level of 2023. From January to October 2024, the biopharmaceutical field is a key area of mergers and acquisitions, with large-scale transactions including Genmab's acquisition of Pufang Biotech (13 billion yuan), Haier's acquisition of Shanghai RAAS (12.5 billion yuan), and AstraZeneca's acquisition of Gracell Biotech (8.1 billion yuan).

In 2025, the trend of mergers and acquisitions will continue: Shengxiang Biotech plans to acquire 100% of the equity of Zhongshan Haiji for 807.5 million yuan, Weibo Investment, a shareholding company of Bide Pharmaceutical, plans to acquire 100% of the equity of Combi-Blocks for 215 million US dollars, and Shanghai RAAS plans to acquire 100% of the equity of Nanyue Biotechnology for 4.2 billion yuan......

A brokerage analyst told the 21st Century Business Herald reporter that based on the "resonance" of the three parties of active policy guidance, passive market clearance, and technology iteration demand, the mergers and acquisitions of China's pharmaceutical industry have become an irreversible trend.

It is worth mentioning that in recent years, the attention of state-owned assets to the biomedical industry has continued to increase, and this trend will continue until 2025. According to the Pharmaceutical Cube database, more than half of the eight most active investment institutions in January this year were government guidance funds or state-owned investment institutions, including Tin Venture Capital, Guangzhou Industrial Investment, Shunxi Fund, and Hengqin Financial Investment.

Southwest Securities analysis pointed out that in 2024, central enterprises will become the main force in market mergers and acquisitions, and the State-owned Assets Supervision and Administration Commission in many places will also promote enterprise integration through capital operation, and the pace of industry restructuring will accelerate. In the field of medicine, there have been a number of mergers and acquisitions: China Resources Sanjiu acquired Tasly, KPC acquired Shenghuo Pharmaceutical, and China Resources Shuanghe acquired China Resources Zizhu.

Policy-driven

Among the many driving factors behind the wave of mergers and acquisitions, the relevant policies introduced by the state and local governments continue to trigger in-depth discussions in the market. In September 2024, the China Securities Regulatory Commission (CSRC) issued the "Opinions on Deepening the Reform of the M&A and Restructuring Market for Listed Companies", proposing to further strengthen the resource allocation function of M&A and restructuring. Subsequently, relevant policies were issued in many places to activate the M&A and restructuring market.

On November 27, 2024, Shenzhen took the lead in issuing the Action Plan for Promoting the High-Quality Development of M&A and Restructuring in Shenzhen (2025-2027) (Draft for Public Comment), setting specific goals. In December of the same year, Shanghai issued the "Shanghai Action Plan for Supporting the M&A and Restructuring of Listed Companies (2025-2027)", introducing professional track market-oriented M&A fund managers, attracting and agglomerating market-oriented M&A funds, and setting up a 10 billion yuan biomedical industry M&A fund. This is the first time that a local government has set up an M&A fund for the biomedical industry.

Previously, Shanghai Pharmaceutical announced that it planned to participate in the establishment of the Shanghai Biomedical M&A Private Equity Fund as one of the limited partners, and subscribed and contributed 1 billion yuan with its own funds, which attracted widespread attention in the market. On March 26, Shanghai Biomedical M&A Private Equity Fund Partnership (Limited Partnership) was formally established, jointly funded by 14 companies including Shanghai Pharmaceutical, Xinhua Insurance and Tofflon, with a capital contribution of 4.66 billion yuan. The business scope includes: engaging in equity investment, investment management, asset management and other activities with private equity funds.

Beijing is also accelerating the implementation of biomedical M&A funds. Ma Jiye recently said at an event during the Boao Forum for Asia that Beijing will give full play to the role of the municipal 20 billion yuan medical and health investment fund, and in 2024, the investment amount and leverage social capital will be nearly 10 billion yuan. "This year, a new pharmaceutical M&A fund with a scale of 10 billion yuan will be set up to build a pharmaceutical and health industry fund system with full-cycle continuous support and urban coordination."

Under the guidance of policies, the pharmaceutical industry has entered a new stage of high-quality development, and mergers and acquisitions have become important tools. Zheshang Securities believes that the relevant policies not only support leading enterprises to enhance their competitiveness through mergers and acquisitions, but also encourage technology-based enterprises to achieve industrial upgrading through mergers and acquisitions, and at the same time improve the tolerance of the acquisition of unprofitable assets, and improve the efficiency of review and payment flexibility. Through mergers and acquisitions, the pharmaceutical industry can achieve resource integration, enhance industrial concentration, and help enhance the overall competitiveness and innovation ability of the pharmaceutical industry.

The Pacific Securities Research Report pointed out that the wave of mergers and acquisitions in the pharmaceutical industry marks that the industry integration has entered a new stage, and it is expected to continue in the future. The competition in the pharmaceutical industry is not only a single product or technology competition, but also more reflected in the integration ability of pipelines or products. For large pharmaceutical companies with sufficient cash flow, they can integrate pipelines through M&A activities to form a synergy and build a competitive barrier in a certain disease area.