Jiuding Capital Launched the Pharmaceutical Industry Fund
2009-11-23
As is learned, Jiuding Capital Co., Ltd. (“Jiuding Capital”), the rising private equity institution in China, launched Kunwu Jiuding (Beijing) Pharmaceutical Investment Management Co., Ltd.(“Jodin Pharmaceutical”) , the first private pharmaceutical industrial PE fund in China.
“It is learned from the investment experience that only those team and fund that are more professional and better aware of the industry can control the risk better.” Mr. Zhongyi ZHAO, executive director of Jiuding Capital.
It is perceived that the scale for the first phase of the fund is 500 million yuan with over a total capital amount of 1billion willing to invest in the market. Most of those LPs are private enterprises, including some from real estate and energy sectors, etc.
“PE professionalization will become the direction and trend in the future.” Commented Mr. Chen Wei, partner of Oriental Fortune Capital
Demands for Investment Specialization
“In the past, we invested a wide range of sectors. Yet our practices show that only profound understanding is a must for a good investment. Therefore, we are always looking for a team that is equipped with comprehensive industrial knowledge to launch a division fund of that industry.”
“Industrial funds are more professional and thus are able to integrate the whole industrial chain and build a brand efficiently.” Mr. Chen Wei reckoned. “We will also launch a specified sub-fund when we have a dream team.”
It is learned that to launch this pharmaceutical industrial fund, Jiuding Capital invited Mr. Bo YU, an authority of the Chinese pharmaceutical industry, to be the general manager of Jodin Pharmaceutical fund. Before joining Jiuding Capital, Mr. Bo YU assumed the position of general manager of Searainbow Pharmaceutical E-commerce Service Co., Ltd.(www.emedchina.cn) , assistant general manager of Searainbow Group and secretary general of the National Medical Elite Club(Venlon.net). Graduated from Shen Yang Pharmaceutical University, he also had working experience with China Drug Administration and China Food and Drug Administration.
It is also learned that bidding is now a necessary procedure of pharmaceutical sales. Searainbow Pharmaceutical E-commerce Service Co., Ltd.(www.emedchina.cn) is in charge of organization of the the national pharmaceutical biddings, and thus keeps abreast of the latest development of China’s pharmaceutical market.
“With such a specialized fund, we will have the cutting edge in project development, fund raising and incentive mechanism.” Mr. Zhongyi ZHAO reckoned.
Take risk management for example. It is learned that the medical reform is now bringing a great market opportunity, though complicated and confusing at the same time when it comes to practical executions.
China has a catalogue of essential drugs and medicines. Enlisting in the catalogue will highly increase the sales of the medicine, which is a good thing for the enterprise. Yet there are other things to consider.
Here is why. “Currently the sales of drugs and medicines have two models, one of which is direct distribution to hospitals. For medicine with few local manufacturers, the price will be high and so is the profit of the enterprise. However, once the medicine is enlisted into the national catalogue after medical reforms, the price will be lowered down. This is to say that enlisting in the catalogue is not always good to the enterprise. You have to think comprehensively.” Commented Mr. Bo YU.
Some enterprises are strong in research and development yet weak in distribution. The professional team with Jiuding Capital is to help them with the construction and optimization of distribution network. Value-added services as such call for abundant expertise and social network. It is something that only professional pharmaceutical industrial team can do.
It is known that Jodin Pharmaceutical Fund will be mainly segmented by medicines, medical service, logistics and chain drugstores.
Demand of Market Trends
“The foundation of this kind of industrial funds is the large market scale.” Mr. Zhongyi ZHAO introduced.
According to the statistics he obtained, the market scale of the pharmaceutical industry in China soared from 135.4 billion yuan in 2000 to 850 million yuan and is expected to increase further.
“With the aging of Chinese population, the potential for pharmaceutical market is tremendous.” Mr. Zhongyi ZHAO said.
According to the Opinions of the CPC Central Committee and the State Council on Deepening the Health Care System Reform released on April 6th of this year, governments of all levels will gradually increase investment in the industry to ease the health care burden for individuals.
It is estimated that after the implementation of new medical reform policies, the pharmaceutical market will continue to expand, hopefully reaching a capacity of over 1 trillion yuan in three years.
Mr. Bo YU said: “The number of enterprises in the industry available for investment is over 500. We need to select the best of the best. We will first invest those in the top, while keep contact with those with strong R&D capabilities.
There have been investment and funds in the pharmaceutical industry prior to Jiuding Capital’s move, but most of them were state funds like central enterprises and local governments, which were clearly government guided.
The market-oriented system of Jiuding Capital, however, is seen in every step of operations, including raising private capitals, market-oriented decision-making system, market incentive system, market-oriented team, market-oriented approach to select investment targets and investment in market-oriented enterprises, etc.
“We’ve making a list of sectors for investment and M&A and shall advance step by step.” Mr. Bo YU commented. “We shall set up specialized sub-funds in sectors with promising market space such as retail and garment at a proper time in the future.” Mr. Zhongyi ZHAO revealed.
Jiuding Capital is a rising private equity institution in China. Since the launch of GEM, Gifore Agricultural (300022.sz) and Geeya Technology (300028.sz) which it invested have all been successfully listed on the GEM. Geeya Technology is one of the stocks with biggest first-day gains, while Gifore Agricultural is one with best post-IPO performance.