Venture capital and private equity investments in China’s healthcare industry slowed in 2016, amid an overall cooling of the broader venture market. But despite the slowdown, healthcare remained relatively vibrant with both deal volume and deal value ranked at the second highest level since 2011, and following a feverish 2015. Venture and private equity firms invested in the sector managed to achieve a slight increase in average book value return from a year earlier.
A total of 204 investment deals in China’s healthcare industry, with US$5.6 billion in aggregate deal value were recorded in 2016, down 38.37% and 22.23% year-on-year respectively, according to ChinaVenture.
The pharmaceutical and medical devices sector were the most active categories in the industry, completing US$2 billion and US$1.8 billion in total investment deal value last year, respectively. CITIC Private Equity’s US$1 billion privatization of Biosensors International Group, a Singapore-based medical device company, in April 2016, was the largest deal in the sector last year.
2011-2016 VC And PE Deals In Healthcare Industry
(Bars represents fundraising value in US$1 million unit, while line represents the number of deal)
Similarly, the merger and acquisition market in healthcare remained steady compared to the last five years, but also experienced a year-on-year drop following a record 2015. A total 647 announced M&A deals with disclosed deal value of US$22.4 billion were recorded in 2016, down 11.73% and 15.99% year-on-year. In terms of completed M&A deals, 308 transactions with disclosed deal value of US$12.9 billion were registered last year, down 9.94% and 11.62% year-on-year. Beijing Jialin Pharmaceutical Co., Ltd’s US$931 million back-door listing via Xinjiang Tianshan Wool Tex Stock Co., Ltd., was the largest transaction of its kind.
2011-2016 M&A Deals In Healthcare Industry
(Red bars represents announced M&A value in US$1 million unit, yellow bars represent completed M&A value, while red line represents the number of announced cases, yellow line represents the number of completed cases)
In terms of exits, 25 healthcare companies completed initial public offerings in 2016, raising a total of US$3.9 billion, down 24.24% and 42.64% year-on-year, respectively. Among them, seven companies have raised over US$100 million, with three listed on the Hong Kong Stock Exchange, three listed on domestic exchanges, and one listed in the NASDAQ in New York. China Resources Pharmaceutical raised US$1.8 billion in Hong Kong and was the largest IPO of the year.
2011-2016 IPOs Fundraising Value In Healthcare Industry
(Bars represents IPOs fundraising value in US$1 million unit, while line represents the number of companies issuing IPOs)
The bright spot was exits, with 66 venture and private equity firms achieving exits with aggregate total book value return of US$2.1 billion in 2016. Despite a spike in total book value return value and the number of exits, these funds realized an average book value return of 2.83 times, slightly up from last year.
China Healthcare IPO Exits 2011-2016
(Bars represent aggregate returned book value in US$1M unit, red line represents the number of IPO exits, and the yellow line represents average book value return ratio)