Fosun Pharma to launch HK IPO

Shanghai Fosun Pharmaceutical (Group) Co Ltd will launch an initial public offering on the Stock Exchange of Hong Kong on Tuesday, the biggest share sale in the last three months, to raise some HK$4.6 billion for business expansion.

The Shanghai-based drug producer plans to use 48 percent of its net proceeds from the IPO on acquisitions and consolidations in pharmaceutical related manufacturing, distribution and retail services; healthcare services and diagnostic products and medical devices.

"Mergers and acquisitions has always been an important element in the company's development plan," Chen Qiyu, executive director and chairman of the company, told a press conference in Hong Kong on Tuesday.

Chen said the company has a clear corporate strategy - to focus on pharmaceutical business development, especially in some specific therapeutic areas.

"We will keep looking for acquisitions targetsto improve our production lines as well as to increase our market share," said Chen.

Fosun Pharmaceutical also plans to spend 19 percent of its net proceeds on funding for existing research and development (R&D) projects, expansion of R&D team and acquisition of new R&D projects.

The company, which has been listed on the Shanghai Stock Exchange since 1998, is a subsidiary of Fosun International and it distributes products through spin-off Sinopharm Group.

Chen said that currently it holds a 32.1 percent stake in the Sinopharm Group and the strategic cooperation between them is very important to the company.

"Sinopharm Group owns a perfect pharmaceutical distribution network on the mainland, and it has a leading market share in over 20 provinces," he said, adding that the cooperation enables them to respond to tenders together and to manage inventories together.

Chen stressed that currently, Fosun Pharmaceutical has no plan to change its shareholding position in Sinopharm Group.

The company has secured two cornerstone investors, one is The Prudential Insurance Company of America and the other is International Finance Corporation, together they have agreed to subscribe for $75 million worth of shares from Fosun Pharma.

The company will open its retail book on Wednesday; the minimum entrance fee for 500 shares per board lot is HK$6,909. Its shares are expected to be listed on October 30.

The stock market in Hong Kong has been volatile due to the uncertainties of global economy. When asked if the company is worried about its share price on its debut, Chen said the company has confidence in its own business and it has faith in its future after it is listed in Hong Kong.

Joseph Chee, head of Global Capital Markets of Asia at UBS, said that the Hong Kong's stock market's performance is relatively good recently, and the price range of Fosun Pharmaceutical's H share offering is reasonable and has a discount compared with its A share price.

UBS AG, Hong Kong Branch is one of the Joint Sponsors of Fosun Pharma's IPO.

Fosun Pharma's A shares closed at 10.92 yuan (HK$13.5) in Shanghai on Tuesday.