The Battle of the Blood Kings in China

The controlling party of blood product company PLBIO (000403.SZ) has finally emerged.

On June 10, PLBIO announced that its controlling shareholder, Qiongqingcheng Shengbang Yinghao Investment Partnership (Limited Partnership), plans to transfer all of its shares (21.03%) to China National Biotechnology Co., Ltd. (hereinafter referred to as "China Biotechnology").

The control of PLBIO by China Biotechnology also means that the actual controller of the latter will change from Shaanxi State-owned Assets to Sinopharm Group.

However, China Biotechnology also controls the blood product company Tiantan Biological (600161.SH), which leads to a competitive situation with PLBIO.

The market expects that China Biotechnology may promote the integration of Tiantan Biological and PLBIO, which could potentially rewrite the competitive landscape.

Although Tiantan Biological has always led the industry in plasma collection volume, its revenue scale has never matched that of "China's Blood King" Shanghai Raas (002252.SZ), which derives over 40% of its revenue from imported albumin.

However, if Tiantan Biological and PLBIO merge, their combined revenue scale of over 8 billion yuan could potentially catch up with Shanghai Raas, leading to further concentration in the supply of the blood product industry.

Integration "On the Agenda"

China Biotechnology intends to make an all-cash payment for this transaction, which amounts to 3.844 billion yuan.

Based on this, the pricing for this control transaction is roughly calculated at 24.96 yuan/share, a premium of 47% over PLBIO's closing price of 16.96 yuan/share on June 6; with its projected net profit attributable to the parent company of 745 million yuan in 2024, the corresponding price-to-earnings ratio for this transaction is close to 32 times.

Such a valuation level is significantly higher than that of several A-share blood product companies.

As of the close on June 9, the PE (TTM) ratios of Tiantan Biological (600161.SH), Shanghai Raas (002252.SZ), and Hualan Biological (002007.SZ) were generally around 25 times, with only Boya Biological (300294.SZ) reaching 36 times.

After the controlling shareholder acquires PLBIO, Tiantan Biological, which also engages in blood product business, will face competition.

Therefore, one of the key points of the transaction is how Tiantan and PLBIO will integrate under the same roof in the future.

An industry insider in the blood product sector anticipates that China Biotechnology may integrate PLBIO into Tiantan Biological to complete the merger.

"The market actually also expects Tiantan Biological to directly acquire, but the efficiency of a listed company like Tiantan Biological participating in the acquisition may be relatively low," pointed out an investment banker in Beijing. "However, China Biotechnology is not a listed company and is not bound by disclosure rules, making the operation more efficient."

As of the end of 2024, Tiantan Biological and PLBIO have 85 and 38 plasma collection stations respectively, with corresponding plasma collection volumes of 2,781 tons and 1,400 tons, ranking first and fourth in the industry, respectively If the two parties complete the integration, it means that China National Pharmaceutical Group will have no less than 123 plasma collection stations, with a total plasma collection volume reaching 4,181 tons, further widening the gap with other competitors.

The number of plasma collection stations for Shanghai Raas, Hualan Biological Engineering, and Boya Bio-Pharmaceuticals are 44, 34, and 21 respectively, with plasma collection volumes of 1,600 tons, 1,586 tons, and 631 tons.

Based on China's plasma collection volume of 13,400 tons in 2024, the market share of "Tiantan + PLBIO" in the industry will approach 30%, an increase of over 10 percentage points, further solidifying its leading position.

Moreover, the integration could drive Tiantan Biological's revenue scale to match that of Shanghai Raas.

In 2024, the revenues of Tiantan Biological and PLBIO are projected to be 6.032 billion yuan and 2.655 billion yuan respectively, totaling 8.687 billion yuan, slightly ahead of Shanghai Raas's revenue of 8.176 billion yuan during the same period.

However, a key reason for Shanghai Raas's consistently high revenue is its partnership with global blood products giant Grifols, becoming the exclusive agent for its human albumin products in China—imported albumin contributed over 40% of Shanghai Raas's revenue in 2024.

At the same time, since China National Pharmaceutical's subsidiary Wuhan Biological Products Research Institute Co., Ltd. holds a 7.25% stake in blood product company Weigao Bio (002880.SZ), there is great anticipation regarding whether it can facilitate the integration of Weigao Bio with Tiantan Biological.

In 2024, Weigao Bio's revenue is expected to reach 1.203 billion yuan.

If China National Pharmaceutical can promote the integration of Tiantan with PLBIO and Weigao in the future, it means that Tiantan Biological is likely to firmly sit at the top of China's blood products industry.

However, the subsequent challenge of this transaction lies in whether China National Pharmaceutical can resolve the internal conflicts within PLBIO.

As the second-largest shareholder of PLBIO, Harbin Tongzhi Cheng Technology Development Co., Ltd. (hereinafter referred to as "Tongzhi Technology") holds a 10.99% stake.

However, the actual controller of Tongzhi Technology, Fu Shaolan, has numerous conflicts with Shaanxi State-owned Assets.

In October 2023, the board of directors of PLBIO was re-elected, with Shaanxi State-owned Assets nominating 13 directors and ousting the original chairman Fu Shaolan from the board.

Fu Shaolan quickly launched a counterattack.

He stated on the official website of Harbin Picefiko Biopharmaceutical Co., Ltd., a subsidiary of PLBIO, "I hope the major shareholder will abandon the position of monopolizing and controlling the 'three meetings', jointly establish a reasonable corporate governance structure, and promote the healthy development of PLBIO together; there are deities three feet above, and the heavens are vast and wide, those who do evil will pay a heavy price, and those who assist the evildoers are no exception."

Afterwards, both parties reached a settlement. Although Li Hao, nominated by Shaanxi State-owned Assets, became the chairman, a co-chairman position was also created for Fu Shaolan, who has held the position ever since.

After China National Pharmaceutical took over, how to handle the relationship with Fu Shaolan for a smooth transition is under scrutiny.

Supply-side Integration Trend

Industry demand is on the rise, but blood products are scarce, which is the backdrop for China's recent cash expenditure of over 3.8 billion yuan.

Since 2001, no new blood product production enterprises have been approved in China. However, the "Blood Product Management Regulations" stipulate that a single plasma collection station can only supply raw plasma to one blood product production unit with which it has signed a quality responsibility agreement.

Due to the high difficulty and low efficiency of establishing new plasma stations, industry players generally expand their market share through acquisitions.

Since 2024, foreign capital has gradually exited the domestic blood product production industry, and many strong local enterprises have seized this opportunity to increase their merger and acquisition efforts, driving industry consolidation.

In June 2024, global blood product leader Grifols officially sold its 20% stake in Shanghai RAAS to Haier Group's Haiyingkang for 12.5 billion yuan.

Backed by Haier, Shanghai RAAS acquired 100% of Nanyue Biopharmaceutical Co., Ltd. for 4.2 billion yuan in cash this March, thereby gaining the latter's nine plasma collection stations located in Hunan Province.

In July last year, South Korea's Green Cross sold its 100% stake in its domestic blood product entity Green Cross (China) Biopharmaceutical Co., Ltd. to Boya Biopharmaceutical for 1.82 billion yuan, with the latter adding four plasma collection stations.

In August of the same year, global blood product industry leader CSL exited the plasma company Wuhan Zhongyuan Ruide Biopharmaceutical Co., Ltd. (hereinafter referred to as "Zhongyuan Ruide") and sold its 100% stake for 138 million USD.

As a result, Tiantan Biological added five plasma collection stations in one go.

After the increase in industry concentration, the terminal competitiveness of leading enterprises has improved.

The raw materials for blood products such as albumin are still primarily sourced from human plasma, and the volume of plasma collected directly affects the quantity of the final supply products.

Taking albumin, which accounts for over 70% of clinical usage, as an example, Pacific Securities estimates that according to the World Health Organization, a country needs at least 10L per 1,000 people of plasma collection to meet the basic clinical demand for albumin in the market. Therefore, with a population of 1.4 billion, China needs at least 14,000 tons of plasma collection, but in 2024, the total plasma collection in China was only 13,400 tons.

Moreover, a significant portion of this contribution comes from imports.

According to Pacific Securities' statistics based on batch release data, four overseas blood product giants—Octapharma, CSL, Takeda, and Grifols—account for over 60% of the batch release of albumin in China.

Under the influence of tariff policies, the cost of imported blood products may further increase.

Many market views believe that this, to some extent, benefits domestic blood products in capturing terminal market share.

However, due to the lower cost of overseas plasma, whether this will put significant pressure on the sales of imported products in China remains uncertain.

In September 2023, Beijing led the Beijing-Tianjin-Hebei alliance to conduct centralized procurement for five blood products, including human albumin, human coagulation factor VIII, and human fibrinogen.

In the case of human albumin (50ml:10g) products with large usage, the winning bid prices for CSL, Grifols, and Takeda ranged between 361 yuan and 374 yuan, while Shanghai RAAS, PLBIO, and Boya Biopharmaceutical reached as high as 412 yuan, 410 yuan, and 485 yuan, respectively, with the maximum price difference reaching 124 yuan From this perspective, the bid price for imported blood products in centralized procurement has significantly fallen below that of domestic products. Not considering extreme tariff policies, the cost pressure caused by an additional 10%-20% tariff may ultimately only level the prices between the two.

Moreover, the supply of domestic plasma is already limited, and the pricing is not entirely determined by the market. In the short term, the impact of tariff policies on the supply side of domestic blood products may not be significant.

In the long run, domestic companies seizing plasma collection stations is just one means of capturing market share; promoting innovation in blood products to reduce reliance on human-derived plasma may be the feasible path.

Currently, domestic companies have made breakthroughs in the exploration of innovative products for recombinant albumin.

The core product HY1001 of Wuhan Heyuan Biotechnology Co., Ltd., which is under review for an IPO on the Sci-Tech Innovation Board, is derived from rice, but the purity of the extracted protein product can reach over 99.9999%, and it is currently in the listing review stage;

The yeast-expressed recombinant human serum albumin drug of Tonghua Anruite Biopharmaceutical Co., Ltd., which is undergoing IPO guidance, has been launched in Russia, and domestic clinical trials have completed phase 3 unblinding, showing efficacy comparable to human serum albumin.

These developments bring more possibilities to the industry, and the market looks forward to the day when the "plasma dilemma" is resolved.

Risk Warning and Disclaimer

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