Target Company Overview

HaoYuan Pharmaceutical, a leading integrated platform for the pharmaceutical industry specializing in CRO, CDMO, and CMC services, successfully listed on the STAR Market of the Shanghai Stock Exchange on June 8, 2021. The shares debuted at a price of 335 yuan, resulting in a market capitalization of 23.3 billion yuan. This marks the first investment project of Junxin Capital's first RMB fund, in which Junxin Capital invested 120 million yuan in HaoYuan Pharmaceutical in March 2019 to support the expansion of its CDMO and tool compound businesses, achieving a remarkable floating return multiple of 14.3 times.

HaoYuan Pharmaceutical stands out as a prominent service provider for molecular building blocks and tool compounds and is recognized for its capacity in high-difficulty pharmaceutical intermediates and raw materials CDMO services. Currently, it serves approximately 3,000 pharmaceutical enterprises and research institutions worldwide, including both major international pharmaceutical companies and emerging domestic biotech firms. The company benefits from a strong position in a high-growth sector, a robust team, and an advantageous business model, positioning it as a potential leader in China's CRO and CDMO industry.

Industry Overview

The pharmaceutical sector in China has been experiencing significant growth, driven by increasing investment in research and development, coupled with a strong emphasis on innovation. The central government has implemented various reforms and incentives to promote advancements in the pharmaceutical industry, particularly in biopharmaceuticals and innovative drug development. These reforms have set the stage for companies like HaoYuan Pharmaceutical to thrive by providing essential services in the drug development and manufacturing process.

Moreover, the demand for CDMO services is on the rise as more pharmaceutical companies opt to outsource production and development to enhance efficiency and reduce costs. This trend is markedly evident in China, where local and global firms are actively seeking reliable partners that can deliver quality services in a timely manner. The growth of the biopharmaceutical sector in conjunction with the increasing complexity of drug formulations underscores the critical need for advanced CDMO providers such as HaoYuan.

As a result of these factors, the CRO/CDMO industry is expected to experience robust growth, particularly for firms that can offer comprehensive and innovative solutions tailored to the unique needs of their clients. The support from national policies and a gradually expanding biotech market reinforce the positive outlook for the industry, propelling companies like HaoYuan to the forefront.

Rationale Behind the Deal

The rationale for Junxin Capital's investment in HaoYuan Pharmaceutical is centered around the company's promising growth trajectory and strong market positioning. By investing in a firm with high potential in the rapidly expanding CDMO sector, Junxin Capital aims to capitalize on the burgeoning demand for outsourced pharmaceutical development and production services. This strategic positioning aligns with Junxin's goal of nurturing industry leaders in the healthcare sector and maximizing their investment returns.

Furthermore, the IPO represents a significant milestone for Junxin Capital, reflecting the successful execution of its investment strategy and the potential for substantial returns from its investments. The robust performance of HaoYuan since the investment has validated Junxin's decision to lead in this venture and emphasizes the importance of supporting innovative companies capable of addressing current market needs.

Investor Information

Junxin Capital is a fully market-oriented private equity investment platform under the well-known Chinese financial institution, Aijian Group. Aijian Group, a major private enterprise in China, strategically invested in Junxin Capital in September 2017, becoming its largest stakeholder. Since its establishment, Junxin Capital has focused on investing mainly in the healthcare and information technology sectors, concentrating on growth-stage companies while also supporting early-stage ventures.

The firm has successfully launched its first RMB fund amidst challenging market conditions in 2018, ultimately raising 1.16 billion yuan, exceeding its original target. The limited partners (LPs) of this fund include renowned institutional investors, such as state-owned enterprises and publicly listed companies. With a track record of investing in different sectors, including pharmaceuticals, medical devices, and technology, Junxin Capital has established itself as a significant player in the Chinese private equity market.

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The successful IPO of HaoYuan Pharmaceutical serves as a testament to Junxin Capital's strategic investment approach and its capability to identify high-potential companies within the healthcare sector. The impressive return on investment highlights the effectiveness of Junxin's dedicated focus on well-researched and strategically advantageous projects. Given the positive market dynamics and the growing demand for pharmaceutical services, this investment is poised to yield continued benefits for Junxin Capital.

Considering the increasing trend toward the outsourcing of drug development and production services, HaoYuan is positioned well to capture a substantial share of the market. Its robust client base and innovative service offerings further reinforce its potential as a leader in the CRO/CDMO space. Therefore, this investment can be deemed noteworthy not only for its initial success but also for its long-term growth potential.

Overall, Junxin Capital's investment in HaoYuan Pharmaceutical exemplifies a well-timed and strategic decision within a thriving sector. As the healthcare landscape continues to evolve, the ability of Junxin Capital to adapt and invest in innovative companies like HaoYuan will likely strengthen its market position and enhance its reputation as a premier investment firm in China.

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