Seeking bargains in the pharmaceutical industry, Sequoia China acquires Bayer's cash cow

Sequoia Capital China has made another move.

According to multiple sources, German pharmaceutical giant Bayer Group has agreed to sell the business and assets related to its antibiotic drug Avelox (moxifloxacin) to Sequoia Capital China. The two parties have signed a Share Purchase Agreement (SPA), and the transaction scale is expected to be between 160 million euros and 260 million euros, approximately between 1.32 billion yuan and 2.15 billion yuan.

Previously, Sequoia Capital China has been active in the M&A field. Not only did it acquire the controlling stake of the international famous audio brand Marshall at the beginning of the year, but it also appeared on the potential lists of multiple large - scale M&A projects. In the biomedical field, Sequoia Capital China also fired the first shot in the operation of "Chinese funds leading NewCo" in China this year.

An investment professional told me that M&A funds have been booming this year. Whether it's Bayer Group selling part of its business or the change of ownership of companies like Marshall, it all reflects Sequoia Capital China's enthusiasm in making moves as well as the changes in the diversity of the investment industry, with "M&A" being one of the investment strategies.

"Especially in some fields, the traditional VC investment method can no longer achieve much. Investment institutions must seek change," said this investor.

Sequoia Capital China's latest move: Acquiring Bayer's ace asset

According to the disclosure, the asset business that Bayer Group is selling this time is an important product of Bayer. In 1999, Bayer developed the broad - spectrum antibiotic Avelox, which passed the FDA approval and was launched in the United States. In 2002, Bayer's moxifloxacin tablets, Avelox (Bai Fule), were approved for marketing in China.

Subsequently, this original research drug was quickly approved in multiple countries around the world and became a star product of Bayer. In 2010, the global sales of Avelox reached 497 million euros, and the sales reached a peak in 2012.

In China, after Avelox was included in the national medical insurance catalog, it quickly dominated the Chinese market with its convenient once - a - day medication plan and broad - spectrum antibacterial advantages. However, affected by the centralized procurement policy, the market share of Avelox's original research drug has gradually been squeezed by generic drugs.

Data shows that although there are 22 domestic enterprises such as Hainan Aike Pharmaceutical, Chia Tai Tianqing, and China Resources Double Crane producing generic drugs of this drug in China, Bayer's original research brand still accounted for 40% of the Chinese market in 2021, demonstrating strong brand recognition.

Sequoia Capital China's move to pay up to 2.1 billion yuan means that it sees market opportunities in meeting the huge clinical demand.

An investor deeply involved in the biomedical field told me that although innovative drugs have emerged this year and the narrative of "in China, for Global" has been frequently mentioned by investors, it doesn't mean that there are no opportunities for original research drugs outside the patent period.

"As long as there is market demand, even original research drugs after the patent period still have huge room, plus they have price advantages," said this investor. In his view, Sequoia Capital China's move reflects its investment acumen and strategic foresight.

He said that in China, the development of the pharmaceutical market is not a single - track approach. On the one hand, domestic innovative drugs can accelerate their entry into the overseas market through the BD (licensing cooperation) model to find new space. On the other hand, high - quality overseas drugs, whether innovative drugs or mature products, can also have broad prospects for implementation as long as they meet the real needs of the Chinese market.

As for why they are targeting "original research drugs", this investment professional said, "Mature products like Avelox that have been proven by the market can quickly generate stable cash flow once the channels are opened up. This is much faster and the risks are more controllable than starting and operating an innovative pharmaceutical company (NewCo) from scratch."

"To some extent, Sequoia Capital China's investment in original research drugs is a further development and utilization of existing assets, reflecting the diversification of investment in the biomedical industry and betting on different stages," said this investor. In essence, it is the full - cycle coverage of investment strategies.

Not only in the mature stage, Sequoia Capital China also launched a NewCo this year

Although this investment is a mature - stage M&A, looking at the entire track, in the biomedical field, Sequoia Capital China also made the first deal of "Chinese funds leading NewCo" this year.

At the beginning of August this year, Lepu Medical Technology (02157.HK) reached a deal with a down payment of 10 million US dollars, and its stock price rose for three consecutive trading days. Few people noticed that behind this, Excalipoint Therapeutics In, which signed the down - payment deal with Lepu Medical, is a consortium of Chinese investment institutions led by Sequoia Capital China.

The consortium consists of seven institutions, including Sequoia Capital China, YuanSheng Ventures, Apricot Grove Capital, Matrix Partners China, Kairong Capital, Mifang Health Fund, and Hony Capital. These institutions jointly invested 41 million US dollars in Excalipoint to support its clinical trials.

This investment is regarded in the industry as a "new" investment method in the biomedical field, that is, investment institutions specifically raise or establish a fund to acquire non - core pipelines of pharmaceutical companies and then sell them to foreign and domestic buyers.

The latest example is that WuXi AppTec sold its clinical CRO business, Kantar Hongyi and Jinshi Pharmaceutical, to Hillhouse Capital for 2.8 billion yuan to further focus on its core CRDMO business. Earlier, Haisong Capital also acquired non - oncology assets from Jacobio Pharmaceuticals Group Limited (1167.HK). The former acquired 80% of the equity of Beijing Jacobio RuiKang Pharmaceutical Technology Co., Ltd. ("Jacobio RuiKang") with a down payment of 125 million yuan and a milestone payment of 75 million yuan.

This means that currently, more and more pharmaceutical companies are choosing to sell their non - core pipelines to obtain funds to continue developing their core pipelines.

"Domestic biomedical funds have also realized that they need to get rid of the traditional VC investment model, directly control these non - core pipelines, and get involved in the operation of pipeline development themselves. Because as minority - equity shareholders, investors are now seeing increasing risks," said the above - mentioned biomedical field investor.

Regarding this, a person familiar with Sequoia Capital China's move to launch a NewCo said that making the first deal of "Chinese funds leading NewCo" was partly due to seeing the opportunities in it. "And this opportunity essentially lies in the overall value of the assets, such as market demand, project progress, and clinical efficiency."

The above - mentioned biomedical field investor also said that currently, the investment logic of innovative pharmaceutical companies has changed. It no longer simply relies on the IPO method, but instead, through continuous spin - off of pharmaceutical company assets, overseas licensing, etc., it seeks the most suitable buyers to get the corresponding funds to ensure the redevelopment of overseas and domestic rights and interests.

"Pharmaceutical companies are no longer holding onto their pipelines all the time. This may not only lead to poor pipeline R & D but also poor management of cash flow and other supply chains. Once the best licensing window is missed, the pipeline will depreciate, the transaction will cool down, and the cash cannot be recovered. This is a lose - lose situation for both investment institutions and pharmaceutical companies," said this investor.

Behind the booming M&A transactions this year, from innovative drugs to consumption

As a leading institution in the investment field, Sequoia Capital China's moves more or less represent a certain investment direction.

Actually, M&A transactions have quietly emerged this year. According to data from CVSource of CIC, in the first three quarters of this year, the number of M&A market transactions was at a high level. The number of Chinese enterprises announcing transactions in the first three quarters reached 1,158, 1,276, and 1,277 respectively.

Meanwhile, the transaction amount has also remained stable. Especially in terms of the completed transaction amount, it reached 5.4168 billion yuan in the first quarter, 3.1193 billion yuan in the second quarter, and 5.2222 billion yuan in the third quarter.

Among them, the number of private equity funds exiting through M&A in the third quarter reached 158, and both the number of exits and the recovered funds reached record highs, showing strong market performance.

Behind this is a true reflection of investment institutions "actively seeking change" to realize cash flow. A person from a leading investment institution said that since the IPO was temporarily suspended in 2023, investment institutions have experienced important turning points and challenges. Most institutions in the industry regard M&A exits as the mainstream way.

"In some quarters, the number of M&A exit cases even accounted for 40% of the total number of exits in that year. Many securities firm direct - investment companies have even turned to the M&A and restructuring field, achieving exits through equity transfer, management buy - outs, etc., to obtain liquidity," said this person.

Since this year, IR professionals have noticed that large or professional - field investment institutions in the market are all establishing M&A funds, with the scale generally around 1 billion yuan.

This IR professional said that M&A, as one of the active strategies, has been elevated to a very high level. "In the market, it is obvious that the players in M&A funds are not just the few well - known large PE firms. State - owned capital, listed companies, and securities - firm - affiliated funds are all getting involved."

Therefore, there have been multiple M&A events in the A - share market this year, including Hygon Information's 115.967 billion yuan absorption and merger of 100% of the equity of Sugon, the 55.297 billion yuan tender offer by a subsidiary of ENN Energy Holdings Limited for 65.89% of the equity of ENN Energy, and the intensive acquisitions of listed companies by local state - owned assets.

Data shows that from January to September 2025, there were a total of 43 cases of local state - owned assets acquiring the control rights of listed companies, with a total amount of 58.4 billion yuan, covering multiple industries such as auto parts, chemicals, environmental protection, and semiconductors. Jiangsu and Anhui were the main forces in M&A.

For PE funds, the gameplay is also constantly evolving. Previously, they always targeted consumer projects with good cash flow, making money from resource integration, valuation increase, and dividends. Now, some PE institutions are starting to cooperate with local state - owned assets. For example, recently, Dongyang state - owned assets acquired Delonghui Energy (000593) through the method of "mainly PE + supplemented by state - owned assets".

Returning to the event of Sequoia Capital China's acquisition of Bayer Group's antibiotic drug Avelox, although it is in the biomedical track, as a mature product, the clinical necessity determines the pricing confidence, and its cash - flow performance may not be worse than that of consumer companies. As long as the resources are well - integrated, the future asset selling price will also be very considerable.

In this regard, the above - mentioned biomedical field investor summarized: Whether it is VC investment or M&A transactions, the investment industry seems to be shifting from "chasing incremental assets" to "deeply cultivating existing assets". Even though data shows that investors' willingness to invest in start - up companies is gradually recovering, they will still have to return to the logic of "deeply cultivating existing assets" in a few years.

"Just like Sequoia Capital China leading the first deal of 'Chinese funds leading NewCo' this year, in essence, it is also a re - slicing of existing assets, a story of investment institutions cultivating them and then selling them to domestic or foreign buyers."

This article is from the WeChat official account "East 40th Street Capital" (ID: DsstCapital), author: Chen Mei, published by 36Kr with authorization.