Vivo Capital’s Evolving “Bridge Strategy” Helps Nanjing King-friend Go Public

August 1, 2017

On July 19, 2017, Nanjing King-friend Biochemical Pharmaceutical Co., Ltd. was successfully listed on the Shanghai Stock Exchange. Its securities, called “King-friend Shares” for short, rose for several consecutive days since the listing, and the market capitalization has reached RMB 4.84 billion, becoming a glamour stock in the biochemical pharmaceutical field.

The successful listing of Nanjing King-friend relies on the competitive advantages of its core products, including heparin sodium and low molecular heparin series, its international business perspective, and the attention it has paid to developing a professional management team and skilled workforce. Serving as a strategic investor, Vivo Capital and its “Bridge Strategy” have been crucial to facilitate the upgrade of Nanjing King-friend’s products and business model.

Vivo Capital’s Role as Medical Advisor Helps Product Upgrading

The leap forward of Nanjing King-friend is based on the upgrading and transformation of its products, for which Vivo Capital played a crucial role by serving as a “medical advisor”.

Vivo Capital turned its attention to Nanjing King-friend in 2006 and has been continually giving guidance to its product development since then. Originally, Nanjing King-friend was a supplier providing active pharmaceutical ingredients of heparin. However, in the global market, active pharmaceutical ingredients are low value-added products with low profit margins, so transforming active pharmaceutical ingredients into higher value-added preparations may lead to a substantial rise in profits.

Heparin is extracted from the guts of pigs, and China has a high output of pigs; thus China has become one of the world’s largest production locations for heparin. Heparin extracted from the guts of pigs is in its natural form, but if heparin is converted into low molecular weight heparin by technical methods, it becomes a special biological preparation with better pharmacological effect and higher value.

Turning standard heparin into low molecular weight heparin requires numerous talented people to work together as a development team. Vivo Capital is well known as a “medical expert investor”. Its partners are top-level scholars from various medical fields, and most investment managers are experts in fields such as immunology, oncology, dermatology, cardiology, etc. Acting as a strategic investor, Vivo Capital has played a crucial role as “medical advisor” in helping Nanjing King-friend to establish the management and research teams necessary to evolve. As a result, Nanjing King-friend has successfully transformed from a supplier of active pharmaceutical ingredients of heparin into a domestic well-known manufacturing and marketing enterprise of high value-added heparin biological preparations.

Building a “Bridge” to Promote Cooperation between China and the U.S.

After the upgrading of products, Nanjing King-friend engaged in the challenge of expanding its domestic and international market. During this period, Vivo Capital played a significant role as a strategic investor by continuing the “Bridge Strategy”.

Vivo Capital was a major investor in Sagent Pharmaceuticals, a well-known biopharmaceutical company. Under the guidance of Vivo Capital, Nanjing King-friend established a multi-faceted strategic relationship with Sagent, becoming the company’s first choice as a supplier of heparin in China. Meanwhile, Vivo Capital also introduced a senior executive of Sagent Pharmaceuticals to serve as the person in charge of the Nanjing King-friend Sino-U.S. joint venture project, to promote the successful development of the project for both parties’ benefit.

Vivo Capital, by means of the “Bridge Strategy” between the Chinese market and the U.S. market, also promoted the sales of the higher value-added products overseas and reduced production costs of this type of drug in China, thus further enhancing the product value of Nanjing King-friend.

“The professional recommendations offered by Vivo Capital will facilitate China’s pharmaceutical companies going through the procedures of new drugs review overseas as well as production and manufacturing in China, and will greatly promote the enterprise value,” Dr. Frank Kung, Founding Member and Managing Partner of Vivo Capital, said. With the opening of China’s medicine policies, the channel for review of new drugs will open and Vivo Capital’s “Bridge Strategy” can provide further support to China’s pharmaceutical enterprises.

It may be stated that the “Bridge Strategy” of Vivo Capital directly helped the rapid development of Nanjing King-friend.

Upgrading the Bridge Strategy
If one calls the strategy for Sino-U.S. cooperation regarding products and business as “Bridge Strategy 1.0”, the strategy involving capital and M&A is “Bridge Strategy 2.0”, Dr. Chen Yu, Managing Partner of Vivo Capital, said. Realizing enterprise value maximization by means of asset restructuring, M&A, privatization or listing of Chinese and American enterprises is a further investment strategy of Vivo Capital.

The privatization of WuXi AppTec is a good example of “Bridge Strategy 2.0” in action. Serving as the only non-Asian strategic investor of WuXi AppTec, Vivo Capital, through restructuring the business segments of WuXi AppTec and enabling a spin-off listing after its privatization, created value for WuXi AppTec which was far higher than the total market value when it was listed on the New York Stock Exchange.

Dr. Yu stated, “The investment strategy of Vivo Capital in China is different from that in the U.S due to the differences between the Chinese market and the U.S. market.” In China, Vivo Capital is more inclined to make investments in enterprises relatively mature with profits; however, in the U.S., Vivo Capital invests in companies which may still be in their early stage. Vivo Capital carries out a two-part investment strategy in China: on the one hand, continue covering pharmaceutical, medical device, and other medical product companies which have great potential for growth, such as Nanjing King-friend; on the other hand, continue making investments in rapidly developing healthcare sectors selectively. Vivo Capital will consistently implement the “Bridge Strategy”, actively help companies on both sides of the Pacific establish a bridge for cooperative relations, promote more effective dialogues and carry out more extensive cooperation, assist enterprises in speeding up R&D and innovation, introducing new products and expanding product markets, improve corporate operating strategies, promote strategic cooperation between enterprises in the two countries, and boost the development of the medical industry. Meanwhile, Vivo Capital will continuously work to improve its “Bridge Strategy”.

About Vivo Capital
Founded in 1996, Vivo Capital is an investment firm focused on investing in the fields of bioscience and healthcare with more than $1.8 billion under management. Vivo Capital has offices in Palo Alto, California and Beijing, Shanghai and Taipei, Greater China. So far, Vivo Capital has invested in more than 100 private and publicly listed healthcare companies.

About Nanjing King-friend
Nanjing King-friend Biochemical Pharmaceutical Co., Ltd. is located in the national development zone, Nanjing New & High Technology Industry Development Zone, covering an area of over 40 mu; the company is recognized as a high-tech enterprise of Jiangsu Province and Nanjing City and honored as president unit of the China Chamber of Commerce for Import & Export of Medicines & Health Products, Heparin Sodium Branch. Heparin sodium and low molecular weight heparin are the main products of the company whose production and sales are among the best in China, among which the output of heparin sodium accounts for approximately 20% of global heparin sodium output. The products of the company have been certified by China GMP, the U.S. FDA and the European EDQM. It exports mainly to European and American countries, and has established long-term cooperative relations with several top 500 pharmaceutical companies.