October
2006 issue
China Tapping U.S. Capital Markets - Health Care IPOs Start Coming To
America As Chinese Market Expands
An obliging venture capitalist satisfied some of our curiosity about
opportunities for investors in China, sparked by the IPO of a China-based
company.
...
VCs Investing At A Vigorous Pace - Health Care Companies Raise More Dollars,
Announce More Deals In Q3:06
Quarterly results indicate the health care venture capital market is
maintaining momentum, with corporate investors making their mark through
equity and strategic investments.
...
Public Equity Market
Although the initial public offering priced by a China-based company was the
largest this month, it was not the only one, and there are more on tap.
...
Mergers and Acquisitions
With five billion-dollar deals announced, it was a busy month in health care
M&A, with some interesting activity from REITs and pharmas.
...
Venture Capital Market
Venture capitalists continue to channel money into health care, and we talk
with an investor in one of the largest deals announced this month.
...
Private Equity Market
Private placements during September amounted to about what they did last
year, which is to say the market has been quiet, but certainly not boring.
...
Notes & Briefs
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Healthcare Corporate Finance
News Read the past
headlines.
Companies Mentioned in this issue:
October 2006
Acchillion p3
Accuitive Medical Ventures p7
ActoGenix NV p8
Acusphere p10
Adcare Health Systems p4
Addex Pharmaceuticals p8
Advanced Medical Optics p9
Advent Venture Partners p8
Alphatec Spine p5
Altana p6
Altana Pharma p6
Alteon p10
Alvine Pharmaceuticals p8
Amaranth Medical p8
Amarillo Biosciences p11
AmerisourceBergen p5
Amicus Therapeutics p7, p9
Anodyne p8
AnorMED p5
Applied Imaging Corp. p5
Aradigm p9
Artisan Pharma p9
Asahi Kasei Pharma p9
Ashbourne Pharmaceutic. p5
Asian American Manufacturing Association p2
Aspyra p3
Astellas Venture Management p7
Athenagen p7
Auriga Laboratories p5
Austin Ventures p8
Auxilium Pharmaceuticals p10
Avlar BioVentures Fund p8
AXA Private Equity p8
Azimuth Opportunity Limited p10
B
BA Venture Partners p9
Babraham BioConcepts p8
Baird Venture Partners p8
Barr Laboratories p3
Barr Pharmaceuticals p1
Barrier Therapeutics p10
Bay Area Equity Fund p8
Bio*One Capital p7, p8
BioAdvance Ventures p8
BioLok p5
BioMed Rlty. Trust p3
BioVex Group p3
BioX Biosciences p8
Birchmere Ventures p8
Blue Cross Bl. Shld. MI p5
Brook Venture Partners p8
C
C.E. Unterberg, Towbin p3
Cabrellis Pharmaceuticals p9
Caden Biosciences p8
Canaan Partners p7
Canaan Venture Partners p8
Cell Therapeutics p10
Charter Life Sciences p7
Charter Life Sciences p8
CHL Medical Partners p7
CIBC p3
CID Capital p8
Citigroup p3
Claremont Creek Ventures p8
Clarus Ventures p7
Cleveland BioLabs p3
CoAxia p8
Conforma Therapeutics p9
Crdentia Corporation p5
Credit Suisse p3
D
Deltamed p5
Deutsche Bank Securities p4
Domain Associates p7, p9
Dow Chemical Company p9
Dow Employees Pension Plan p7
E
EastMed p8
eHealth, Inc. p4
Eisai p5
Elbit p9
Electro Scientific Industries p9
Elephant Pharmacy p8
Eli Lilly & Co. p7
Elron p9
Elscint Biomedical p8
Emdeon p5
Enterix p5
EnteroMedics p1
EpiPharm p5
Esprit Pharmaceuticals p9
Essex Woodlands Health Ventures p7
Exelixis p3
F
Fisk Ventures p8
FLAVORx p12
Fortis Bank p10
Forward Ventures p7
FoxHollow p3
Frazier Healthcare Ventures p7, p8
Frontier Capital p8
Frost & Sullivan p4
G
Galapagos NV p10
Galloway Pharmacy p5
Gamida Cell Limited p8
Genepharm Australia p5
General Atlantic p5
Genetix Group p5
Genta p10
GIMV p8
GlaxoSmith-Kline p4
Goldman (Asia) p3
Goldman, Sachs p4
H
H.I.G. Capital p8
H.I.G. Ventures p8
H.J. Thomas Memorial p5
Hana Biosciences p3
HBM Biocapital p8
HCA p5
Health Advocates p5
HealthpointCapital p5
HealthSouth p12
HealthSpring p3
HealthTran p5
Holiday Retirement p5
Home Diagnostics p3, p4
Hospira p5
I
Ideal Image Development p8
ImaRx Therapeutics p3
In-Q-Tel p9
Indevus Pharmaceuticals p12
Index Ventures p7
Industrial and Commercial Bank of China p1
InnovationsKapital p8
Inovio Biomedical p10
Institute for Research on Pathological Gambling an p12
Institute of Medicine p12
InterWest Partners p7
InterWest Partners p7
Intranasal Therapeutics p1, p9
Investor AB p7
Invitrogen p5
invivodata p8
Inyx p5
Israel Healthcare Ventures p8
iVOW p5
J
Janney Montgomery Scott p3
Japan Asia Investment Co. p8
Jefferies & Co. p3
Jefferies & Company p12
JMI Equity p8
Johnson & Johnson Development Corporation p9
JPMorgan p3, p4
K
KBL Healthcare Ventures p7
King Pharmaceuticals p5
Kos Pharmaceuticals p9
L
LDR Holdings p8
Lee Memorial Health p5
Lehman Brothers p8
Life Sciences Partners p8
Lilly Ventures p9
Longworth Venture Partners p8
Ludesi AB p8
Lupus Ventures p8
Lurie Investments p7
M
M-CARE p5
MacuSight p8
Maxygen p9
Mayne Pharma p5
MDS Capital p7
Medegen Medical p5
Medical Action Indus. p5
MedImmune p9
Medior p8
Medtronic p9
MedVenture Associates p8
Merck p5
Merck & Co. p12
Merck KGaA p5
Mercy Hospital p5
Merlin BioMed Group p7
MerLion Pharmaceuticals p9
Merrill Lynch p3, p4
Metastatix p8
Micardia p8
MicroIslet p3
Millennium Pharma. p5
Mindray Medical International p1
Mitsubishi p9
Montreux Equity Partners p7
Morgan Stanley p4
Morgenthaler Ventures p8
N
NationsHealth p5
Natus Medical p5
NeoGuide Systems p8
Neuronetics p7
New Enterprise Associates p7
New Enterprise Associates p9
Newbridge Securities p4
NewSpring Capital p8
NovaCardia p7
NovaQuest p7
Novartis p5
Novartis Bioventures p9
Novo Nordisk p9
Nupathe Pharmaceuticals p8
Nycomed Pharma p6
O
Obagi Medical p3
OccuLogix p3
Oculus p3
ONSET Ventures p7
Onyx Pharmaceuticals p10
ORIX Venture Finance p8
Oxxius p8
P
Pacific Growth Equities p10
Palo Alto Investors p7
Pappas Ventures p7
Patients & Physicians p3
Paul Capital p7
Peak Surgical p8
Pepscan Systems p8
Pfizer p5
Pharmapac UK p5
Picis p4
Piper Jaffray p3, p4
Polaris Venture Partners p8
Portico Systems p8
Prestwick Pharmaceuticals p9
Primedex Health p5
Prism Venture p8
Prolog Ventures p8
Prospect Medical p3
Prospect Venture Partners p7, p8
ProStrakan Group p5
Q
Quaker BioVentures p7
Quaker BioVentures p7
Quality Care Solutions p5
Quest Diagnostics p5
R
Radius Ventures p7
RedPath Integrated Pathology p8
Remedent p3
RenaMed Biologics p7
River Cities Capital p8
Roche Venture Fund p8, p9
Rodman & Renshaw p10
Rosetta Genomics p3
Roth Capital Partners p10
Rothschild Private Equity p8
S
S.R. One p8
S.W. Bach & Company p4
Safeguard Scientific p9
Safeguard Scientifics p8
Saint Francis Hospital p5
Sanderling Ventures p7
Saratoga Ventures p8
Schwarz Pharma p5, p6
Scient’X p5
Sears Capital Management p7
Sentigen Holding Corp. p5
Sermo p8
Serono p5
Shinogi & Co. p7
SIM Equity p7
Sinclair Pharma p5
Singulex p8
Skyline Ventures p7, p8
Sofinnova Ventures p7, p8
Sonic Innovations p3
SpinalMotion p8
St. Francis Medical p3
Standard Mgmt. Cp. p3
State University of New York p12
Sunrise Senior Living REIT p6
Sutter Hill Ventures p8
SV Life Sciences p1
T
TC3 Health p8
Teva Pharmaceuticals p9
The Aurora Funds p8
The Generic Pharmaceutical Association p12
Thomas Weisel Partners p10
Three Arch Partners p7
Tibion p8
Ticonderoga Capital p8
Transgenomic p3
TriZetto Group p5
TSC BioVenture Capital p7
Tudor Investment Corp. p8
TVM Capital p7
U
UBS p3
UCB, S.A. p5
Unigene Laboratories p3
University of Kentucky at Lexington p1
UPMC Health System p5
V
Vanderbilt University p9
VantageMed p3
VantagePoint Venture Partners p7
Venrock Associates p8
Ventas p6
Venture Investors p8
Versant Ventures p7, p8
Vertex Pharmaceuticals p4
Vivo Ventures p1
W
Warner Chilcott p3
William Blair & Company p4 |
China Tapping U.S. Capital Markets - Health
Care IPOs Start Coming To America As Chinese Market Expands
Email Editor
Like many investment bankers
and venture capitalists, lately we have been keeping an eye on activity in
the Asian markets, including China. According to a recent article in the
Taipei Times, China-based companies are the NASDAQ’s biggest source
of new listings. China cannot be ignored as a growing force in the global
economy, especially as its largest bank, Industrial and Commercial Bank
of China, is currently planning for its initial public offering in the
United States, and Mindray Medical International (NYSE: MR) priced
the largest IPO in the health care sectors in September (see page 4).
China-based companies represent opportunities for investors who can
leverage the benefits of doing business in Asia with support from the U.S.
capital markets, but in health care we may only be seeing the tip of this
iceberg right now. Dr. Frank Kung, a managing partner and founding member
of venture firm Vivo Ventures, sees the capital markets as a
leading indicator of progress in economic relations between the United
States and Asia. Vivo Ventures, founded in 1996, has more than 20 health
care companies in its portfolio. Currently the firm is seeking to invest
in creative business models that leverage the low cost of R&D and
manufacturing in Asia to produce high-quality health care products, and
can tap into and be competitive in the United States, Europe and the
global markets. This month, Dr. Kung, who has served on the board of the
Asian American Manufacturing Association and is familiar with
movements in the Asian markets, took some time to tell us about what he
sees happening in China these days. He notes the product market and
private investment activities have been advancing in China for some time,
but recently we started seeing excitement in the public financing market
in the United States because bankers are bringing over companies that have
successful products and rising revenues. The U.S. capital markets have
responded favorably to the prospects offered by Chinese companies of
profitability and also sustainability of profitable growth.
At this point, the Chinese
companies going public in the U.S. are still catering primarily to the
market in China. Looking specifically at certain sectors of life sciences,
however, this is in the process of changing, as in the past several years
China has become a very strong producer of active pharmaceutical
ingredients (APIs), which are the pure drug substances in drug products.
Looking back, said Dr. Kung, 20 years ago most U.S. companies stopped
making APIs, moving production off-shore, or started outsourcing,
primarily to Eastern Europe. But in the past five to 10 years, the API
production business has grown substantially in China to meet global
demand.
We learned
that the greatest needs in the Chinese health care system right now,
presumably representing some of the best investment bets, are generally
for the full deployment and continuous upgrade of basic health care
throughout the country. The initial investment boom in the Chinese market,
Dr. Kung observed, has been in the areas of health care delivery, medical
devices and supplies for the mass market. Venture capital funding he has
seen in China recently has been for low-end products and services such as
needles, IV bags, saline solutions and other medical necessities, as well
as hospitals and surgical centers.
Infrastructure, he said, actually represents one of the best opportunities
for investments in China right now, including companies that are providing
health care, insurance and related services. The market for higher-priced,
new medical products can be developed once a reliable reimbursement system
is put in place. In China, the government gradually began backing out of
managing benefits and insuring people about ten years ago. This has opened
up room for plenty of growth in the payer and provider market,
particularly in urban areas. In rural areas, the government is still
taking a far more active role in insurance than in the larger towns and
cities. In the more metropolitan areas of the country, Dr. Kung said,
large, private market, global insurance companies are active or looking to
become active. It is a bit unclear at this point how much play United
States-based insurance and managed care companies could eventually have in
the Chinese market, but it is likely China-based companies in this sector
will be looking at the United States’ infrastructure as the country builds
its own.
We asked if
greater interaction between the financial markets in the United States and
China will open a channel for more deals to be done between small U.S.
biotechs and biopharmas, and large companies in China. He indicated that
many Chinese companies have become much more aggressive in seeking
strategic opportunities from U.S.-based, technology-rich biotech
companies, and has seen some action in the M&A market, with Chinese
companies or investors acquiring such companies or certain technologies.
Dr. Kung pointed out most health care companies in China are large ones,
so more acquisitions of this kind and more collaborative and strategic
deals are anticipated.
The venture
capital and public equity markets for China-based health care companies
are also expected to become increasingly active. Dr. Kung has seen a
growing number of United States-based venture capital firms establishing
offices in China initially to focus on high technology, and now branching
out to health care. Investment bankers have been very aggressive in
pursuing Asian deals, the major banks active in the U.S. are also active
in China and some of the world’s largest pharmaceutical companies have set
up research and development centers in Shanghai. Other indicators that the
health care market in China is growing include a strong employment rate
and a growing wage rate, and there is no shortage of educated talent
focused on life sciences. Also recently, the Chinese government announced
a program to promote innovation-based industries and companies, which
should help expand the health care market, creating opportunities for
venture investors as well as investors in the capital markets.
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