On the evening of October 21, Sichuan Shuangma announced that it plans to use its own and self-raised funds to acquire 92.1745% of Jianyuan Pharmaceutical's equity for a total of 1.596 billion yuan. On October 22, Sichuan Shuangma opened at the daily limit, with a total market value of more than 14.3 billion yuan. Sichuan Shuangma was formerly known as Sichuan Shuangma Cement Co., Ltd. It was initially a building materials company focusing on the production and sales of cement products and building aggregates. It was listed on the main board of the Shenzhen Stock Exchange in 1999, and then gradually developed into a listed company engaged in industrial investment and private equity investment fund management. Its main managed assets include building materials manufacturing companies and private equity investment fund management companies.

Sichuan Shuangma, born in the traditional industry, has not been optimistic about its recent development. The financial report shows that Sichuan Shuangma's revenue in the first half of this year fell by 14% year-on-year, of which cement and aggregate operating income in the first half of the year fell by 41.83% and 30.9% year-on-year respectively; the overall net profit attributable to the parent company fell by 75% year-on-year. Of the 1.596 billion yuan to be paid for the acquisition of Jianyuan Pharmaceutical, more than 600 million yuan is expected to be paid with own funds, accounting for about 40%, and the remaining 60% is from M&A loans from multiple banks. Cross-border acquisitions with loans may be one of Sichuan Shuangma's attempts to "break the deadlock."

Sichuan Shuangma mentioned in its annual report that according to statistics from Zhizhong ZERONE, from 2020 to 2023, the track with the highest cumulative financing amount among the popular tracks is the new generation of information technology, including strategic sub-sectors such as semiconductor chips, followed by the biopharmaceutical track. In April this year, Sichuan Shuangma stated that it "actively responded to the policy direction of new quality productivity" and established a wholly-owned subsidiary, Shanghai Harmony Xinzhi Technology Development Co., Ltd., with a registered capital of 500 million yuan. It plans to focus on the direction of scientific and technological innovation industries, focusing on projects in the fields of biomedicine, artificial intelligence, industrial technology and other scientific and technological innovation fields.

Spending nearly 1.6 billion yuan on acquisitions is a substantial entry of Sichuan Shuangma into the pharmaceutical field, and peptide products have become its entry point this time. Peptide products have many similar properties to proteins. Compared with small molecules, the process technology is complex and detailed. Small tests are relatively easy, but the technical barriers to pilot-scale expansion and large-scale production are high. At the same time, the construction period of peptide API and preparation production workshops is long, the investment amount is large, and the professional requirements are high.

If you want to enter the game, acquisition becomes a more efficient and stable choice. Jianyuan Pharmaceutical, which Sichuan Shuangma intends to acquire this time, is a pharmaceutical company integrating peptide product research and development, production and sales. It currently has a complete and scale-advantaged peptide product API and preparation production platform that can quickly generate economic effects. It is reported that Jianyuan Pharmaceutical R&D Center can undertake the whole process research of innovative drugs and generic drugs mainly based on synthetic peptide drugs, covering project establishment, evaluation and screening, process research design and development, quality research, preclinical pharmaceutical evaluation and clinical application, etc. The main products include not only peptide preparations and peptide APIs, but also beauty peptides, veterinary peptides, and customized peptides.

In terms of disease areas, its main products have covered diabetes drugs, digestive system drugs, gynecological drugs, immune function regulating drugs, cardiovascular drugs, tumor drugs, central nervous system disease drugs, respiratory system disease drugs, gastrointestinal disease drugs, bacterial or fungal infection drugs, etc. Sichuan Shuangma stated in the announcement that through this acquisition, it will achieve a breakthrough in its existing business. After the acquisition, it will use Jianyuan Pharmaceutical's mature management team, R&D team and sales team to give full play to its own management advantages, realize the continuous development and growth of Jianyuan Pharmaceutical's business, expand its layout in the biopharmaceutical industry, and form a new business model and profit model.

In recent years, peptide drugs such as semaglutide have continued to gain popularity in the pharmaceutical market. According to Frost & Sullivan's forecast, the global peptide drug market has grown from US$60.7 billion in 2018 to US$89.5 billion in 2023, and is expected to grow to US$189 billion in 2028. Among them, the market size of China's peptide drugs will grow from RMB 59.7 billion in 2023 to RMB 136 billion in 2028. Jianyuan Pharmaceutical is one of the first batch of API manufacturers in China whose semaglutide listing application was accepted. In addition to semaglutide, Jianyuan Pharmaceutical has completed the US FDA DMF filing for four products including telpotide.

Benefiting from the rapid growth of GLP-1 target peptide drugs in the global market, Jianyuan Pharmaceutical's overall operating income in the United States, Europe and China has also increased significantly. According to the acquisition announcement, Jianyuan Pharmaceutical's operating income in the first half of this year was 216 million yuan, and it is expected that the total revenue will exceed last year's full-year revenue of 320 million yuan by the end of the year; the operating profit in the same period reached 82.68 million yuan, which is close to last year's full-year operating profit of 89.99 million yuan. Jianyuan Pharmaceutical said that while developing peptide drug research and development and production, it is also increasing its investment in high-end chemical drugs and biological drugs, striving for long-term operation, comprehensive development, and forming a more prominent corporate competitive advantage. After the transaction is settled, how the two can seek a path of integrated development in very different industry backgrounds will become a new challenge.

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