Shares of China Biologic Products (NASDAQ: CBPO) rose nearly 26% today after CITIC Capital Holdings made an all-cash offer to purchase the company for $110 per share, as reported by Reuters. The Chinese investment firm currently owns 5.1% of the Chinese biologics manufacturer that specializes in the production of plasma-based biopharma products.
The price tag values the company at $3.65 billion, which would be close to the all-time high achieved briefly in early 2016. A lot has happened since then. China Biologic Products grew full-year revenue and adjusted net income attributable to the company 25% and 21%, respectively, from 2015 to 2017. The latter excludes a one-time $40.3 million charge related to U.S. corporate tax reform.
As of 12:01 p.m. EDT, the stock had settled to a 21.8% gain.
Image source: Getty Images.
Although China Biologic Products is listed on a U.S. exchange, the business is primarily focused on the Chinese market. The company is a top-five producer of plasma products -- used to treat diseases, injuries, and recovery from surgery -- in its home country, which is the second-largest market for such products after the United States.
However, the Chinese plasma market is still dominated by the use of older technology (human albumin), which the U.S. last used predominantly in the early 1970s before turning to more advanced products (immunoglobulin for intravenous injection, or IVIG). China Biologic Products has played along with the market dynamics to date, but is actively attempting to modernize China's plasma market. The strategy has largely worked, as demonstrated by the company's growth rate in the last decade, but there's a long way to go.
The vast difference between technologies used in more mature plasma products markets such as the U.S. and fledgling markets such as China explain why China Biologic Products wasn't a takeover target for an American pharmaceutical company. That said, shareholders aren't complaining after today's huge rise that added nearly $600 million in market cap. There's still some room for shares to rise to meet the specified acquisition price of $110 per share, and investors might expect the stock to creep toward that figure as more clarity is provided on the closing of the deal. Right now, nothing is final.
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