Hepalink to Acquire Cytovance


Cytovance Biologics, Inc., a contract biomanufacturer, will be acquired by Hepalink USA, the wholly-owned subsidiary of Shenzhen Hepalink Pharmaceutical Co., Ltd., for $205.7 million. The deal is expected to close in October 2015. Cytovance offers process development and manufacturing services for large molecule pharmaceuticals using mammalian cell culture and microbial fermentation technologies.

Shenzhen Hepalink’s primary business is supply of heparin sodium API. It was founded in 1998 and went public on the Shenzhen Stock Exchange in 2010. In 2014, it acquired Scientific Protein Labs (SPL), a US supplier of heparin sodium, pancreatin USP, and pancrelipase USP, for $337.5 million. Hepalink had revenues of $317 million in 2014, with operating income of $36 million.

Hepalink is an unknown quantity in the biologics arena. In the press release, CEO Li Li was quoted as saying “Hepalink will accelerate the realization of its strategy in the global macromolecule biopharmaceutical space.” What that strategy is has not been made public, at least not in the English-language press.

Hepalink appears to have paid dearly for Cytovance. PharmSource estimates that, based on Cytovance’s number of employees and nature and scale of operations, the price Hepalink paid represents a 5x multiple on Cytovance’s revenues. Biomanufacturing operations are in high demand and short supply from an acquisition standpoint, and multiples are high; Patheon paid about 3.5x revenues for Gallus last year. But this seems to be a very high price, especially considering the capital investment requirements.

Notably, Hepalink paid a similarly high multiple for SPL last year, so it would appear anxious to diversify its businesses beyond China.

The diversification appears all the more important given Hepalink’s recent financial results. The company’s revenues fell from a reported ¥2.49 billion ($0.39 billion) in 2011 to ¥1.51 billion ($0.24 billion) in 2013, a drop of 40%, before rebounding to ¥1.96 billion ($0.31 billion) in 2014 thanks to the SPL acquisition.

Still, the company reported cash on hand of ¥4.13 billion ($670 million) at the end of 2014, so it should have no problem funding the Cytovance acquisition and capital investment program.

This posting is taken from an article in the September 2015 issue of Bio/Pharmaceutical Outsourcing Report. To learn more, click here.

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Jim Miller is the founder and president of PharmSource Information Services, Inc. A preeminent expert in bio/pharmaceutical outsourcing, Jim established and presides over the industry’s principal resource for serious consumers of information on contract drug development and manufacturing, PharmSource STRATEGIC ADVANTAGE. He is editor and publisher of Bio/Pharmaceutical Outsourcing Report and Emerging Markets Outsourcing Report.

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