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China Grand Pharmaceutical and Healthcare Holdings Limited 遠大醫藥健康控股有限公司* (Incorporated in Bermuda with limited liability) (Stock Code: 00512)
VOLUNTARY ANNOUNCEMENT
SUBSCRIPTION OF SHARES OF A MEDICAL DEVICES COMPANY IN CANADA
This announcement is made by the board of directors (the “Board”) of China Grand Pharmaceutical and Healthcare Holdings Limited (the “Company”, together with its subsidiaries, the "Group") on a voluntary basis..
Reference is made to the announcement of the Company dated 13 November 2017 (the “Announcement”) in respect of the formation of the Joint Venture which is principally engaged in the investment and managing the business of innovative cerebro-cardiovascular medical devices. Terms defined in the Announcement shall have the same meanings when used herein unless the context requires otherwise.
The Board is pleased to announce that on 15 November 2017 (after trading hours), the Joint Venture entered into a share subscription agreement (the “Subscription Agreement”) with Conavi Medical Inc. (the “Target Company”) and an exclusive distribution agreement with Target Company in related to its products (the “Distribution Agreement”). Pursuant to the Subscription Agreement, the Joint Venture will subscribe in aggregate 1,043,115 preferred shares of the Target Company (the “Preferred Shares”) at a total consideration of approximately US$7.5 million. The Joint Venture is entitled to receive dividend for the Preferred Shares, and/or require the Target Company to redeem the Preferred Shares. Furthermore, within the period of 90 days following 30 September 2020, the Joint Venture has the right to convert part or all of the Preferred Shares into ordinary shares of the Target Company. If the Joint Venture decides to fully convert the Preferred Shares and on the basis that the Target Company will not further issue additional ordinary shares, it may represent approximately 15% equity interests out of the enlarged capital of the Target Company.
Target Company is incorporated in Canada, and is a medical device company with innovative cardiovascular and intravascular imaging technology. It was derived from Sunnybrook Health Science Centre, an academic hospital and medical science research institution of University of Toronto. The existing products of the Target Company including 3D intracardiac echocardiography (3D-ICE) and intravascular ultrasound/optical coherence tomography (IVUS/OCT). A few products have already obtained sales license in Canada and United States of America, and already commenced commercial sales in the North America Market.
- 1 - Pursuant to the Distribution Agreement, the Joint Venture obtains the twenty years exclusive distribution rights for the products of Target Company such “Foresight ICE” series and “Novasight Hybrid” series in the PRC mainland, Hong Kong, Macau and Taiwan regions (the “Distribution Regions”), and is responsible for the clinical trials and registration work of the related products in the Distribution Regions. These two products series have already obtained a few patents, and already obtained or are applying the sales approval by the Food and Drug Administration of United States of America and medical device license of Health Canada.
Cardiovascular imaging technology is an important basis and reference for the diagnosis of cardiovascular diseases. The technology upgrade of publically recognized high-tech cardiovascular and intravascular imaging technology would continuously optimize the standard of diagnosis of cardiovascular diseases and promote this segment to a more advanced level.
As stated in the report of Reportlinker database (https://www.reportlinker.com/p05169947), the global market of diagnostic and guided interventional cardiology products, including the technology such as intracardiac echocardiography (ICE), intravascular ultrasound (IVUS), optical coherence tomography (OCT), will continuously maintain steady growth. It is expected to expand at a compound annual growth rate (CAGR) of approximately 6.4% during 2016 to 2021, and the global market sales quantity will increase from approximately US$3.5 billion in 2016 to approximately US$4.8 billion in 2021. According to analytical research made by Global Industry Analysts, Inc. (http://www.strategyr.com/mcp-6938.asp) to the global intravascular ultrasound devices market, the IVUS market will maintain a CAGR of approximately over 6%, and it may reach approximately US$660 million in 2020. With the push from the economic and human factors, the IVUS market will develop in a rapid way as supported by the approximately 11% CAGR in the Asia-Pacific area.
The products innovated by the Target Company such as cardiovascular and intracaval imaging terminals, consumable catheters and imaging analysis software already arrived international standard, in which one of its products 3D-ICE had been identified as one of the most innovative new technologies in cardiology during the 2016 TCT (Transcatheter Cardiovascular Therapeutics) in the United States of America. This product can be applied in many fields such as electrophysiology, left atrial appendage occlusion, structural heart disease, heart valve disease and macrovascular disease. The recent experimental results of IVUS/OCT, another product of the Target Company, also showed significant improvement in the actual intravascular imaging collection and analysis. As compared with 3D-ICE, this product will be more widely applicable to coronary interventional segment, and is expecting to achieve breakthrough from the traditional coronary angiography so as the limitation of the existing intravascular imaging diagnosis, and to provide new standard of diagnostic assessment.
The granted distribution rights of the cerebro-cardiovascular diagnostic devices and the existing drug-eluting balloons products of the Group share the same markets and customers, and based on the existing team and resources they could generate a “diagnosis + therapeutic” product combination and bring synergy effect, which in turn enhance the operation efficiency and results of the Group and thus provide fruitful returns to investors.
The Group invested and introduced the drug-eluting balloons products of Cardionovum GmbH from Germany since 2015, and such series of products applied in the interventional treatment of coronary artery disease, peripheral arterial disease and haemodialysis induced stenosis. According to a report published by Transparency Market Research (http://www.transparencymarketresearch.com), it is expected in 2019 the market of the stents
- 2 - products applied in coronary intervention will reach approximately US$8.2 billion. In the PRC medical market, there were approximately 666,000 cases applied interventional surgery treatment, in which approximately 30% cases could apply coronary artery drug-elution balloon, with a market size of approximately RMB2.5 billion. Furthermore, according to a forecast result announced by EBSCOhost Connection (http://connection.ebscohost.com), the global market size of interventional treatment of peripheral arteriosclerotic disease (PAD) may reach approximately US$7.4 billion by 2018. In the PRC there are over 3 million patients suffering from PAD every year, and the market size in the future is expected to be over RMB3.0 billion. In the PRC there are also approximately 320,000 patients suffering from hemodialysis disease, and the potential market is approximately RMB2.0 to 2.5 billion. The products introduced by the Group are currently under-the-act of registration in the PRC, and it is expected to gradually complete the registration and commence commercial sales since 2018. Among which there is a medical device product applied to the treatment for hemodialysis fistula, and it is the first high-pressure drug-elution balloon product for such treatment aspect around the world and expected to be the first one in the PRC.
The Group always insists to follow the strategy of obtaining more product kinds and more advanced products through research and development and also merge and acquisition. It is aimed to develop and solid the leading position in the PRC market of cerebro-cardiovascular field and ENT field with focus in the ophthalmology. The Group has already maintained a fast growth results for a few years and obtained attention from international investors, and we may put efforts in building up a reputation in the Hong Kong capital market.
In view of the aforesaid reasons, the Directors are of the view that the subscription of Preferred Shares and obtaining the exclusive distribution rights of the products of the Target Company are in the interests of the Company and the Shareholders as a whole.
By Order of the Board China Grand Pharmaceutical and Healthcare Holdings Limited Liu Chengwei Chairman
Hong Kong, 15 November 2017
As at the date of this announcement, the Board comprises four executive directors, namely Mr Liu Chengwei, Mr Hu Bo, Dr Shao Yan and Dr Niu Zhanqi and three independent non- executive directors, namely Ms So Tosi Wan, Winnie, Mr Lo Kai Lawrence and Dr Pei Geng.
* For identification purposes only
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