Fosun Pharmaceutical, a leading Chinese pharmaceutical conglomerate, recently attempted to take full control of its biopharma subsidiary, Henlius Biotech, by purchasing the remaining minority shares. This strategic move aimed to consolidate Henlius under Fosun’s complete ownership, leveraging the opportunity presented by the suppressed stock prices in the market. However, the buyout effort ultimately failed, leaving investors and industry analysts speculating about the future trajectory and viability of Henlius Biotech in the highly competitive biotechnology landscape.
The Buyout Proposal and Its Rejection
Fosun Pharma’s proposal to buy out the minority shareholders of Henlius Biotech involved an offer of HK$24.60 ($3.15) per share, which valued the entire transaction at HK$5.4 billion. This offer was a significant step down from the IPO subscription price of HK$49.60 back in 2019, a detail that did not sit well with many investors. Despite the seemingly strategic move by Fosun Pharma to capitalize on current market conditions, the proposed buyout required the approval of at least 75% of the H-shareholders. The response was telling; 19.25% of these shareholders voted against the buyout, ultimately leading to its failure.
The dissatisfaction among the H-shareholders stemmed largely from the proposed buyout price, which they perceived as undervaluing their investment in Henlius Biotech. Despite a majority of the company’s shareholders approving the buyout, the resistance from the substantial portion of H-shareholders was enough to derail the plan. Fosun Pharma, acknowledging the rejection, expressed regret but stated that it respected the shareholders’ decision. The company also reaffirmed its commitment to support Henlius Biotech’s long-term growth and development despite not being able to consolidate full control as initially intended.
Market Context and Shareholder Sentiment
The backdrop for this buyout drama was set against a persistently weak performance in the Hong Kong market, where the Hang Seng Healthcare Index—a barometer for the biopharmaceutical sector—had experienced a prolonged downturn over four consecutive years. This broader market context partly influenced Fosun Pharma’s decision to propose the buyout, hoping to make the most of the depressed stock valuations. However, this same context also contributed to the lukewarm reception from Henlius Biotech’s investors, who were wary of accepting an offer that significantly undervalued their shares.
In the eight trading days leading up to the announcement of the buyout, shares of Henlius Biotech had fallen by 27.5%, reflecting a lack of confidence among investors. This decline highlighted the anticipation of unfavorable terms and a general sense of disillusionment among the shareholders. The sentiment underscored the challenges Henlius Biotech faced in rallying investor trust, a critical factor for the success of the buyout attempt. Despite Fosun Pharma’s strategic intentions, the prevailing market conditions and investor sentiments culminated in the plan’s rejection.
Financial Performance of Henlius Biotech
Setting itself apart from many of its industry counterparts, Henlius Biotech has distinguished itself by achieving net profitability, driven primarily by the success of its innovative drug portfolio. Henlius has introduced six significant products targeting various diseases, with notable contributions from its cancer therapeutics—such as trastuzumab, serplulimab, and rituximab. This robust product lineup has bolstered Henlius’s financial standing and provided it with a certain degree of market resilience and strength.
In 2023, Henlius Biotech witnessed a noteworthy revenue surge of nearly 68%, reaching a total of 5.40 billion yuan ($741 million), which propelled the company into profitability for the first time. This positive momentum extended into the first half of 2024, with revenues climbing by an additional 9.8% to 2.75 billion yuan and a substantial profit increase of 61% year-on-year, totaling 383 million yuan. The flagship product, trastuzumab, primarily used for breast cancer treatment, saw a 13.5% increase in the Chinese market’s sales. This product also gained significant international recognition and approvals, including those from the United States and Europe.
Similarly, serplulimab, a monoclonal antibody utilized in cancer treatment, experienced a nearly 22% year-on-year rise in revenue, reaching 678 million yuan. The widespread acceptance and market integration of these drugs indicate Henlius’s commitment to innovation and its ability to navigate complex regulatory landscapes. The accomplishments signal strong potential for further international growth, as serplulimab has secured sale approvals in multiple markets, including China, Indonesia, Cambodia, and Thailand.
Future Prospects and Market Potential
The failed acquisition attempt raises questions about how Fosun will navigate this juncture and what strategic adjustments might be necessary to ensure Henlius Biotech’s growth and viability moving forward. The setback has led to substantial speculation among investors and industry analysts regarding Henlius Biotech’s future direction and sustainability in the fiercely competitive biotechnology sector.
