The past and present life of the Chinese Blood King .

Visual China.

Text |Giant Tide w**e, Author |Xie Zefeng, edYang Xuran.

Since the raw materials come from human blood, the industry is strictly controlled by policies, and the downstream is connected to the biomedical industry, and the products are used to save lives, prevent and treat diseases and maintain vital signs, and blood products are a very high threshold business.

Generally speaking, because China no longer issued new approvals as early as 2001, the stock of enterprises is basically in a state of "lying and earning". But Shanghai RAAS, the largest, is an exception.

Due to the aggressive capital operation and enthusiasm in the past, Shanghai RAAS once suffered huge losses, accumulated a lot of goodwill on the books, and the stock price experienced a large amount of ** and then suffered a huge **.

Compared with Hualan Biotech, which has devoted itself to the main business since its inception and rarely has any capital operation, Shanghai RAAS is obviously not very reassuring to investors. This is one of the reasons why, after the founder and Kerui Tiancheng exited, its net profit hit a record high, but the stock price is still rubbing on the floor.

Today, Haier Group has spent 12.5 billion yuan to become the owner of Shanghai RAAS. Compared with the Kerui system that "plays with flowers" and Grifols, which does not pursue a controlling stake, the domestic capital with stronger industrial genes will be stationed, and the fate of the "Chinese blood king" will also be completely rewritten.

Starting with low-temperature storage equipment, Haier's layout has always revolved around the word "breakthrough".

Overall, the plate of medical devices is very large, but the ceiling of a single subdivision is very low, and there is a large difference between each sub-industry. Therefore, mergers and acquisitions in the field of medical devices are not uncommon.

In the field of medical cryogenic storage, where Haier Biotech is located, the market size in 2021 will only be 4.9 billion yuan, and it is expected to be 6.8 billion yuan in 2022.

In terms of breakdown (2021), the scale of blood safety is only 61.7 billion yuan, 154.2 billion yuan, 13 pharmaceutical reagents8.5 billion yuan, vaccine safety 135.9 billion yuan.

Due to its early start and strong R&D strength, Haier Biotech has long been among the top three in the world and firmly controls the top position in China. In 2017, it had a market share of more than 35% in China, and its market share is as high as 42% as measured by 2022 data.

So, in recent years,Haier Biotech adheres to the group's thinking of "one person and one person" and "demand solutions", but in fact, it achieves breakthrough development through the integration of resources.

Since November 2020, Haier Biotech has successively acquired Chongqing Sanweiye Pharmaceutical, Jinweixin Equity, Suzhou Kangsheng and Suzhou Houhong, and has entered the fields of blood safety, vaccine safety and smart pharmacy.

Another listed company, Yingkang Life, has also acquired Guangci Hospital, Erikosen and Shengnuo Medical.

However, in the first three quarters of 2023, Haier Biotech showed a double decline in revenue and profit, with a net profit of only 35.7 billion yuan, down 2259%。

When the traditional home appliance industry is becoming more and more "saturated", the three giants have begun to transform across borders. Gree made mobile phones and acquired Zhuhai Yinlong New Energy; Haier's entry into the medical industry has shown its determination in a new direction.

After 2021, China will no longer approve new blood product enterprises, and the industry will enter an era of stock competition. Moreover, for a long time, blood products have been in short supply in China, and China only allows the import of human albumin and recombinant coagulation factor products, and other blood products need to be produced by domestic enterprises.

Therefore,The blood product production license is a scarce "golden" license. At present, among the six A-share listed blood product companies, Shanghai RAAS ranks first in terms of total market capitalization, revenue and net profit.

This time, Haier Group plans to acquire a 20% stake in Shanghai RAAS from Grifols for 12.5 billion yuan, and at the same time take over the latter 658% of the voting rights, becoming the new "talker" of Shanghai RAAS.

In this transaction, Haier gave Shanghai RAAS a total valuation of 62.5 billion yuan, corresponding to about 26 times dynamic PE, which is not high.

If the acquisition is officially finalized, Shanghai RAAS will become the biggest piece of the puzzle in Haier's big health layout, and Haier will also get the scarce blood product business qualification. Haier can also use this to open up the whole industrial chain of "blood products-blood cryogenic storage-smart blood network scenario solutions", which can be described as killing two birds with one stone.

The blood product industry chain is divided into slurry collection, storage, preparation, diagnosis, clinical application and other links. "The achievement of this strategic cooperation will deepen the layout of Yingkang's life in preparation, diagnosis and other links, and improve the blood industry chain. Haier said to "Giant Tide W**e".

In recent years, based on the advantages of the group, Yingkang Life is actively promoting the "solution of the Internet of Things scenario", after the completion of the transaction, Haier will use the Internet of Things technology to optimize the management of the first chain, and use its own accumulation in intelligent manufacturing, corporate governance and other aspects to empower Shanghai RAAS.

The story of Shanghai RAAS and Grifols began in December 2018.

In order to maintain the company's huge market value and peak stock price, the original controlling shareholder threw out a sky-high acquisition of 40 billion yuan, planning to buy Grifols' GDS equity (valued at 34.4 billion yuan) and 100% equity of Tiancheng Germany (valued at 4.7 billion yuan).

However, investors have long not bought this kind of restructuring drama, and the capital market feels more "frightened" than "surprised".

After the resumption of trading, Shanghai RAAS's share price "collapsed", suffered ten consecutive fall limits, and the market value evaporated by 63 billion. Since then, the acquisition plan has been changed several times until March 2020, when Shanghai RAAS announced that the purchase of GDS equity was reduced from the original 40 billion yuan to 13.2 billion yuan. Upon completion of the transaction, Grifols became the largest shareholder of Shanghai RAAS.

Grifols is one of the world's oligarchs in blood products, and its number of pulp stations together with Jet Belling, Oct Farma and Takeda accounts for nearly 70% of the world's pulp production capacity.

Through continuous mergers and acquisitions, there are currently less than 20 blood product companies left in the world, and the momentum of oligopoly is becoming more and more obvious. Jet Belling, the largest in size, has a market value of 670 billion yuan and an annual income of nearly 16 billion.

After becoming a major shareholder, Shanghai RAAS refocused on its main business, and its performance began to pick up.

In addition, China's blood products industry has been in a state of short supply for a long time, with only about 16% of the world's slurry and only 14 companies with the largest variety of products. Moreover, China only allows the import of albumin and recombinant coagulation factor products, and other blood products need to be produced by domestic enterprises.

In 2021, the Big Four accounted for 60% of the overall market8%, import dependence is more serious. Among the domestic enterprises, Tiantan Biology is the largest manufacturer of human albumin drugsBut it occupies only 73% market share, domestic substitution space is larger.

Starting in 2021, Shanghai RAAS has obtained an exclusive ** agreement from GrifolsSimilar to Zhifei Biotech's **Merck HPV vaccine, in 2022, **albumin alone will bring 2.7 billion yuan of revenue to Shanghai RAAS.

Relying on Grifols' strength and "support", Shanghai RAAS has come out of the trough, with a net profit of 18 in 2022800 million yuan, a record high. In the first three quarters of 2023, he earned 178.8 billion yuan, a year-on-year increase of 1146%。

It is also stipulated in Haier's acquisition agreementShanghai RAAS will lock in the exclusive right to import albumin from Grifols for the next ten years, and will still have the right of first refusal to renew the contract after expiration. Considering the shortage of supply in the domestic market, Shanghai RAAS has basically determined the performance fundamentals for the next many years.

Since becoming a major shareholder, Grifols has been wavering in seeking actual control of Shanghai RAAS. Three years ago, Grifols promised not to seek control, but when this letter of commitment expired, it planned to nominate five non-independent director candidates, and if the candidates were successfully elected, it would end the status of Shanghai RAAS without actual controllers.

And on June 14, 2023, Grifols said it was planning to sell its stake for about $1.5 billion.

Now, the dust has settled on the plan, and Haier Group is also quite sincere, with 12.5 billion yuan **20% equity, equivalent to a premium of 176%。Cherich can also get out of the way.

Shanghai RAAS was founded by Vietnamese Hoang Kai, who first conducted plasma sample testing at Abbott. and helped Abbott Laboratories obtain the first plasma sample testing license issued by the Bureau of Biology (the predecessor of the FDA).

After that, he set up his own business and founded the American Rare Antibody Antigen ** Company (RAAS, USA). In 1988, the World Health Organization proposed that "each country should be self-sufficient in blood products", and Huang Kai was keenly aware of the market prospects of the world's most populous country.

So, he did not hesitate to enter the Chinese market. In October of that year, RAAS USA and Shanghai Blood Products Transfusion Equipment Business Company established a joint venture Shanghai RAAS. This is the first large-scale Sino-foreign joint venture blood products manufacturer in China.

But after that, Shanghai RAAS's performance was mediocre and his sense of presence was not strong, until the emergence of Kerui Tiancheng led by Wu Xu and Zheng Yuewen. In 2004, Kerui Tiancheng took over 50% of the shares from Shanghai Blood Center.

Since 2014, Kerui Tiancheng has begun to show his ability to turn stones into gold. Through two "bridge acquisitions", it annexed Banghe Pharmaceutical and Tonglu Biotech, and jumped from the fourth in the industry to the largest blood product company in China in one fell swoop.

In particular, the acquisition of Tonglu Biotech has directly increased 14 plasma stations (including 3 under construction) and nearly 400 tons of pulp mining capacity. At that time, Tonglu Biotech planned to go public, and in 2013, Shanghai RAAS's revenue was less than 500 million, while Tonglu Bio's revenue was 400 million, and the difference between the two was not big.

More critically, after the merger and acquisition,Shanghai RAAS's product categories have expanded from 7 to 11 in one fell swoop, covering human blood albumin, human immunoglobulin and coagulation factors. This figure, together with Hualan Biotechnology, tied for the first place in China at that time.

Today, there are 12 types of products that can be extracted by Shanghai RAAS, second only to the 14 of Tiantan Biology.

In 2016, Tonglu Biotech incorporated Zhejiang Haikang; At the end of 2023, Shanghai RAAS also plans to acquire Guangxi Guanfeng.

After a series of mergers and acquisitions, Shanghai RAAS's performance continued to expand, and its net profit increased from 14.4 billion yuan skyrocketed to 51.1 billion yuan, breaking through the 1.6 billion mark in 2016, and the highest market value has reached 132.1 billion, making it a well-deserved "blood king" in China.

Under the leadership of the Kerui department, Shanghai RAAS has created a model of A-share "PE+ listed companies" in that era, and has become an excellent model for many listed companies to learn.

But this model comes with huge risks, and in the two most important acquisitions, both were jointly funded by major shareholders RAAS China and Kerui Tiancheng, butKerui Tiancheng's funds come from the financing obtained by continuously pledging the equity of Shanghai RAAS.

The gameplay of this game can be summarized as "pledge shares - arbitrage funds - acquisition of assets - fattening performance - stock price **" and so on.

An Kang, the founder and chairman of Hualan Biotechnology, once expressed deep concern about this model to the author. This leading private blood products company has almost no capital operation since its establishment, and has maintained a very steady growth trend, but Shanghai RAAS is the opposite.

The earth-shattering thunder finally broke out in 2018, when Shanghai RAAS lost nearly 2 billion yuan, resulting in the first loss since its listing. Since then, the major shareholder's plan to acquire Grifols GDS has also made the capital market tired and bored.

Shanghai RAAS's share price could no longer hold on, coupled with the downturn of the entire market at that time, the market value of 100 billion yuan collapsed in an instant. Because of the high proportion of equity pledges, Kerui Tiancheng was passive, and finally completely withdrew from the shareholder sequence of Shanghai RAAS.

The drama directed by Wu Xu and Zheng Yuewen ended in tragedy, and it also laid the groundwork for the twists and turns of the current "Blood King".

Whether it is the development history of the enterprise or the business model, Shanghai RAAS is a unique existence in China's pharmaceutical and medical industry.

Its ups and downs, twists and turns, and its fate is also a landmark case in the history of the development of China's capital market.

Regardless of the scale or scientific and technological research and development, Shanghai RAAS is the domestic leader, it can extract six components of products from plasma, coagulation factor products are the most complete, the amount of pulp collection is the second in China, the profitability of tons of pulp is the first in China, and it is one of the few enterprises that can export blood products.

In such a high-barrier industry, with such a deep advantage, sticking to the main business could have achieved higher performance growth, but various historical factors have caused its tortuous fate. After surviving the catastrophe, Shanghai RAAS has returned to the growth track, and now that Haier has entered the game, the "Chinese Blood King" will also be reborn, which is a blessing for both parties.