Caixin
Feb 18, 2020 07:59 PM
BUSINESS & TECH

Hillhouse Bets Big on Clinical Testing Specialist

The fast-growth biotech sector has been a focus for Hillhouse in recent years.
The fast-growth biotech sector has been a focus for Hillhouse in recent years.

Domestic private equity heavyweight Hillhouse Capital will invest 2.3 billion yuan ($328 million) in a specialist in outsourced clinical testing services for drugmakers, marking its latest move into the lucrative and fast-growing biotech sector.

Hillhouse will make the investment through a private placement that will see it buy up to 18.7 million shares of Asymchem Laboratories (Tianjin) Co. Ltd., according to a filing (link in Chinese) by Asymchem to the Shenzhen Stock Exchange dated Monday. The purchase would give Hillhouse more than 5% of Asymchem’s stock, the announcement added.

Asymchem’s shares have jumped more than 13% over the last two trading days, most of that on Monday after news of the investment came out. Even before the jump, the stock was trading about 30% above the 123.56 yuan per share that Hillhouse will pay for the investment. Asymchem said the sale price represents a discount of no more than 20% from its stock’s price over the 20 trading days before the announcement.

Founded in 1998 and listed since 2016, Asymchem is a contract development and manufacturing organization (CDMO) that helps to develop and make drugs for other companies based on their designs and other specifications. It specializes in conducting clinical trials and provides other services during that phase of drug development.

Asymchem first announced its plan to raise funds last July, saying it would seek up to 2.3 billion yuan by selling shares to up to 10 investors. The company reported 1.74 billion yuan in revenue during last year’s first three quarters, up 44.6%, while its profit rose 40% to 370 million yuan.

The fast-growth biotech sector has been a focus for Hillhouse in recent years. Its investments include biotech drugmaker WuXi AppTec Co. Ltd., as well as Hangzhou Tigermed Consulting Co. Ltd. In a recently submitted document to the U.S. securities regulator, Hillhouse said that 25 of the 54 companies in which it had invested by the end of last year were from the biotech space.

The global CMO/CDMO industry posted compound annual growth of more than 12% between 2012 and 2017, according to a research report from Sinolink Securities. The market was worth $66.4 billion in 2018, and is forecast to reach $102.5 billion by 2021, the report said.

Hillhouse’s focus on biotech comes as it exits a major investment in the new-energy car space. The company recently disclosed that it had sold off its entire stake in Nio Inc., a Chinese electric-vehicle maker that has been compared to U.S. giant Tesla but has been aggressively raising new funds as it continues to rapidly burn through cash.

Contact reporter Yang Ge (geyang@caixin.com)

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