The Pharmaceutical Industry With Heavy Positions Of Warren Buffet And Sequoia

On November 17, 2020, Buffett's Berkshire company announced its position in the third quarter of 2020. In addition to his usual heavy position in technology stocks, it is worth noting that this is also the first time for Mr. Buffett to build a large number of pharmaceutical stocks: among the six new stocks, pharmaceutical stocks accounted for four of them, namely Pfizer (3.712 million shares), Merck (22.403 million shares), Bristol Myers Squibb (29.971 million shares) and Abbott (21.264 million shares).

Clearly, in Mr. Buffett's "expansion" stock pool, medicine is becoming a key area of his bets. In the authoritative list of global top 50 pharmaceutical enterprises published by pharmaceutical managers in 2020, the four companies above are ranked third, fourth, fifth and eighth respectively. Based on the operating revenue in 2019, the average annual sales of the four companies are as high as 39.4 billion US dollars, which can be seen from the strength of bafett's heavy pressure on pharmaceutical stocks.

In the primary market, the medical and health industry is also ushering in an intensive outbreak, especially the industry head institutions are beginning to enter the harvest period. The typical representative is Sequoia Capital China Fund. According to incomplete statistics, in 2020, Sequoia China has harvested nearly 10 IPO cases in the field of medical and health.

Obviously, whether it is the early layout of the primary market, or in the secondary market, we can see that the capital strength is firmly optimistic about the pharmaceutical industry.

However, due to the strictness of industry policy, the great changes of market environment, and the sudden attack of uncertain factors, there are still many practical challenges to face in the real practice of pharmaceutical investment. Different path models ultimately point to a common proposition, that is to create value for invested enterprises and create rich returns for LP. However, under the same goal, there are fewer and fewer "slow money" who really have patience to persist for a long time.

Carnival of hundreds of billions of capital: some people are happy and others are worried

The continuous influx of hot money, the gradual increase of exit channels, and the rapid promotion of enterprise valuation In 2020, despite the impact of the epidemic, the investment and financing enthusiasm in the field of biomedicine and the whole field of life and health will not decrease.

On the one hand, investment institutions are worried about missing high-quality projects. Therefore, once high-quality projects flow out of the market, various investment institutions will complete the docking as quickly as possible, and the word "grab" has become the industry norm.

In this case, some rigorous and careful investment institutions may try their best to ensure the quality of their investment decisions and complete various interviews or even pre DD before issuing TS at a faster speed. However, some more radical investors often start to compete for speed, and preemption becomes the first principle. As for whether the quality of the subject matter is excellent enough or whether it is a valuation Whether the level is reasonable enough has become the second or even the third factor.

As a result, the more impetuous mood in the project is becoming restless.

"Recently, we have encountered some problems in some projects we have invested in. Enterprises think that they meet the listing requirements, and are likely to be listed next year, so the valuation is much higher than before. " Recently, a senior investor said at an industry conference that the secondary valuation of the primary market has become a very common phenomenon in the industry. Because of the withdrawal of favorable policies such as the registration system, enterprises have seen the possibility of faster IPO, and the price of financing has also begun to rise. "This is a very terrible problem."

However, not all projects can fully enjoy the opportunities brought by the rapid outbreak of pharmaceutical capital market. Facts have proved that in the rapidly changing market environment, once there is an adverse signal, not all enterprises have the opportunity to go to the end with capital.

For example, recently, a fixed increase plan that had been negotiated half a year ago was suddenly announced to be terminated, which made kailitai, the leading company of orthopedic track, into a hot discussion.

According to the previously announced fixed increase plan, Kelly should have privately issued 375 million shares and 21 million shares to Temasek Fulton investment and Hillhead capital respectively at a price of 18.73 yuan per share. If the transaction is completed, klystal will obtain more than RMB 1 billion in cash through fixed increase, while Temasek Fulton investment and Hillard capital will enter into the company as strategic investors and exercise their rights in the listed company as shareholders.

However, on November 20, kailitai announced that the fixed increase agreement was terminated after negotiation because "in view of the changes in the current capital market environment and other reasons, in order to safeguard the interests of the majority of investors".

Over the past six months, it is true that the fortune of the company has not been good. However, on the other hand, the industry believes that the second batch of high-value medical consumables to be carried out soon is the big killing move to destroy the fixed increase agreement.

Just four days after the termination announcement of the fixed increase, a red headed document of the National Medical Insurance Bureau named "notice on developing the rapid data collection and price monitoring of the second batch of centralized procurement of high-value medical consumables" was circulated in the circle of friends. The date of signing the document was November 20, 2020.

As for Kelly, I don't know whether the termination of the fixed increase is really as stated in the announcement, "it will not have a substantial impact on the company's production and operation activities." After all, when signing the agreement on the introduction of strategic investors at that time, we had made it very clear what we would do with the resources of temasefoton investment and Hillhead capital.

1、 There are opportunities in the secondary market

However, two key investment institutions have not stopped their investment layout in the field of health care.

As always, Hillhouse capital will focus on its more familiar secondary market. On the day of announcing the termination of the fixed increase plan, the share price of pioneer technology, a leading player in Hong Kong stock market of aortic covered stent, soared by 24.58%, and continued to rise sharply in the following two days, with a cumulative rise of nearly 35% in three days. On the 24th, Xianjian technology released a news release saying: "it was learned that hillhood capital and Delphi capital recently transferred all equity of Xianjian technology held by Central Huijin Investment Co., Ltd. on the trading day through block trading. After the completion of the transaction, Hillard capital and Delphi capital respectively hold 6.06% and 6.00% shares of Xianjian technology, becoming an important strategic partner of Xianjian technology. "

Temasek is looking to the primary market. On the 18th, deshengji pharmaceutical, a global biotechnology company in China, announced that it had successfully completed a round of financing of US $200 million. In addition to Temasek, there are also a number of well-known investment institutions in the industry, such as Boyu capital, Jingwei China, Sequoia China, and yaomingkant venture capital fund.

Although the name of the company is still a little strange in the industry, Chen Zhijian, co-founder, chairman and CEO of deshengji Pharmaceutical Co., Ltd., is well-known in the industry. He has successively held global senior management positions in top scientific research institutes such as NIH, Eli Lilly, GSK, Johnson & Johnson, AstraZeneca and other top scientific research institutes, as well as in many multinational companies. His last position was senior vice president of global drug development of AstraZeneca and President of China's new drug development department.

Capital markets are like this. It seems that one subject has been missed, but there will always be another. Some media even calculated that the total amount of financing of medical enterprises in the primary market in the first three quarters of 2020 is nearly 200 billion yuan.

It is worth noting that this is only the amount of financing in the primary market. Considering the various positions in the secondary market, the magnitude of the medical investment market is obviously huge.

Be patient capital

However, in all cases, it seems that there are fewer and fewer people who can really be patient. More and more capital begin to take the simple investment quantity as the indicator of work completion degree, and take the amount of investment as the direct performance of investment performance. Investors began to lose patience, the specific performance is: if they invest in a company, if they can IPO the next day, they are not willing to wait for the third day.

In fact, reviewing the successful investment cases in the medical and health industry, in the final analysis, are those investment cases in which investors can truly accompany the growth and upgrading of enterprises.

In the aspect of long-term investment, Sequoia represents the growth of Chinese enterprises. In 2020, a company named new industrial biology was listed on the Shenzhen Stock Exchange, and its market value soon climbed to 60 billion yuan. At this time, people found that Sequoia Capital entered and continued to hold as the largest institutional shareholder ten years ago. According to industry estimates, Sequoia's return in this case is more than 10 billion yuan.

Qiming venture capital invested in the plum pharmaceutical industry is also an example. In 2010, Qiming venture capital made its first investment in the field of biomedicine. After holding it for 10 years, it has been accompanying the listing of Ganli pharmaceutical industry in 2020, and has become its largest institutional investor.

So a lot of the time, adhering to the "long-term doctrine" does not conflict with the return on investment. Only very few people have been able to stick to long-term doctrine. According to the incomplete statistics of market open information, it can be found that as of September 2020, there are not many cases in which the return of a single investment transaction in the market is more than 1 billion yuan. From the number of cases, Qiming venture capital, Sequoia Capital China fund, Boyu capital, Hillhouse capital and other investment institutions are the largest number of such projects. For the vast majority of investment institutions, the return on investment in health care may need to be more patient.