Drugmaker Bets Big on Biopharma

A Chinese drugmaker plans to issue more than 1 billion yuan ($151.85 million) in bonds to build a new biopharmaceutical industrial park in the eastern city of Hangzhou.

The bond issuance makes Zhejiang Huahai Pharmaceutical Co. Ltd. just the latest of an army of biotech companies to invest big in biopharmaceutical research and development.

Huahai Pharmaceutical, whose major business is providing active ingredients for drugs to foreign and domestic pharmaceutical companies, announced it will issue 1.8 billion yuan in convertible bonds, 68% of which will be used to fund the biopharmaceutical park in Hangzhou, the capital of Zhejiang province.

The company will fund three other projects with the remainder.

In late 2011, the Ministry of Science and Technology projected the biology industry will grow 15% annually through to 2015. In January this year, China’s National Development and Reform Commission forecast that the output of China’s drug companies will hit 600 billion yuan by the end of the decade.

Following the political winds, venture capital funding in Chinese biopharma companies from 2012 to 2016 surged more than sixteenfold to more than $1 billion, according to BioCentury’s online intelligence service BCIQ.

In 2013, Huahai Pharmaceutical signed a partnership with U.S. biotech drugmaker Oncobiologics Inc. to secure the marketing rights for four drugs in China. The pair also planned to set up a joint venture in the U.S. for drug development.

However, the two companies have since scaled back the deal so that Huahai Pharmaceutical only has the rights to two drugs. The planned joint venture was also scrapped due to a “market change,” the Chinese company said in a filing to the Shanghai Stock Exchange in February 2016.

The Chinese drug supplier has shown a revived interest in biopharma this year. In May, it invested 36 million yuan in Chinese biopharma developer Hangzhou DAC Biotech Co. Ltd., and earlier this month it bought a stake in South Korean peer Eutilex Co. Ltd.

Contact reporter Coco Feng (renkefeng@caixin.com)