GP (HK) Acquires 80% Equity of Huachen BioTech, Accelerating the Globalization Development of Amino Acid Industry

GP (HK) Acquires 80% Equity of Huachen BioTech, Accelerating the Globalization Development of Amino Acid Industry

(October 18,2021 - Hong Kong) China Grand Pharmaceutical and Healthcare Holdings Limited (“GP (HK)” or the “Company”, together with its subsidiaries, the “Group”, stock code: 00512) is pleased to announce that Hubei Grand Life Science & Technology Co., Ltd. (“Grand Life Technology”), a subsidiary of the Group, has recently entered into an equity acquisition agreement (the “Acquisition Agreement”) with Hebei Huayang Biological Technology Co., Ltd., pursuant to which the Grand Life Technology will acquire 80% equity interests of Cangzhou Huachen BioTech Co., Ltd.* (滄州華晨生物科技有限公司, “Huachen BioTech”) with RMB107.2 million after the relevant conditions as agreed in the Acquisition Agreement are fulfilled.

Under the guidance of the business philosophy of “new technology, high quality, industry chain, and internationalization”, the Group enhances the strategic plan in the field of amino acids, continue to promote the innovation, upgrading and iteration of biological manufacturing technology. Based on therapeutic amino acids, it will gradually extend to nutritional amino acids, and at the same time, expand to health-related raw materials and terminal preparations to achieve full coverage in the field of big health. The Group adopts the strategy of “global expansion and dual-cycle operation”, and has formed a new pattern of domestic and international cycles that synergize with each other.

Located in Cangzhou National Chemical Industry Zone* (滄州國家級化工園區), Huachen BioTech is a company engaged in the research and development, manufacture, sales and technical services of amino acid products. Its main products are glycine and its derivatives. The company now has an annual production capacity of 30,000 tons for industrial-grade glycine, and the food-grade glycine production workshop is in preparation.

As one of the 20 amino acids that constitute protein, glycine is widely used in food, medicine, animal and plant health and other fields. It is the main component of the cell culture medium in the production of vaccines, antibody protein drugs and other biomedicine. It is also the necessary raw material for the synthesis of drugs such as vitamin B6, and the main component of parenteral amino acid nutritional drugs and nutritional formula foods for special medical purposes. In addition, glycine is also used in the cosmetics field as a buffering agent and skin conditioning agent, which can enhance the skin conditioning ability. With the gradual development of infant milk powder, special medical diet, pet food and other industries, the demand for food-grade glycine, as food additives, will further increase. According to data from the Huajing Research Institute, the global glycine market was about RMB5.5 billion in 2020, and the total market size is expected to reach RMB7.1 billion by 2026.

The Group has been deeply engaged in amino acid industry for many years, and has developed into one of the world’s leading companies with scaled production of fine amino acid products through biological manufacturing. The Group is committed to serve the biotechnology and the big health industry by manufacturing high-quality amino acid products. It has won multiple honors including the National Specialization and Special New Enterprise* (國家專精特新企業), the Provincial Invisible Champion Enterprise* (省級隱形冠軍企業), and the National Intellectual Property Advanced Enterprise* (國家級知識產權優勢企業), etc. The Group owns over 20 kinds of amino acids and derivative products including taurine, cysteine series, arginine series and tyrosine series, which can be widely used in multiple life fields such as medicine, healthcare products, food additives and animal and plant protection, etc. The core products have all passed the pharmaceutical/food system certification of multiple countries and regions including the European Union, the United States, Japan, Southeast Asia, and China, etc. The Group’s production capacity of taurine, the core product of the Group’s amino acid business, currently ranks the second in the world, and the production capacity of cysteine series ranks the first in the world.

After years of cultivation and precipitation by the R&D team, the Group has established full-scope technical advantages in several processes including the creation of industrial strains and the control of the fermentation process, etc., based on technologies such as synthetic biology, metabolic engineering, and fermentation engineering. It has constructed a fermentation production process with strain genetic modification as the core, and an enzymatic production process with enzyme catalysis as the core. It applies biological manufacturing technology to replace the traditional chemical synthesis processes. The production technology is advanced, and some production techniques have filled up the domestic gap. It greatly reduces the emission of carbon dioxide during the production process. The Group has a number of scaled production lines with safety and environmental protection systems, and realize the demand for low-carbon and environmentally friendly production, thereby in line with the development concept of carbon peak, carbon neutral, energy saving, emission reduction and green environmental protection in China, and shows benefits of both economy and environment. The Group has planned 200 acres of land in Xiantao, Hubei Province for the expansion of production capacity expansion for amino acids, and it is expected to commence production in 2023.

The Group has a core technical team led by the talents of the Hundred Talents Program in Hubei Province* (湖北省百人計劃) in the field of biology and healthcare, and has established long-term cooperative relations with Wuhan University, China National Research Institute of Food & Fermentation Industry, Wuhan Institute of Biotechnology and other scientific research institutions. Through independent R&D, external cooperation and other channels, the Group has formed an innovative model that combining production, study and research, and a technological innovation talents echelon. It now has more than 90 technical R&D personnel, including 8 doctors, with professional backgrounds in interdisciplinary fields such as microbiology, applied chemistry, biochemical engineering, pharmacy, and food science. The Group attaches great importance to the accumulation of independent intellectual property rights, and has established a complete intellectual property protection system, with more than 70 invention patents in related to amino acids.

Based on technological breakthroughs and cost advantages, the Group has been serving high-quality customers at home and abroad, including Fortune 500 companies, for a long time. It has established long-term and stable cooperative relations in the upstream and downstream of the industrial chain. The Group sold its products to more than 60 countries and regions around the world, and overseas business accounts for more than 60%. The market share of some amino acids reached the world’s leading level. The Group’s self-developed healthcare product citrulline taurine, which can effectively improve the exercise endurance, has obtained patents from mainstream countries in the world, including China and the United States, and has obtained the approval of the United States for healthcare products. This has been launched in the United States in 2021.

The Board of China Grand Pharmaceutical and Healthcare Holdings Limited, commented, “The acquisition of Huachen BioTech is expected to bring new business growth to the Group’s amino acid business. It is also an important step for the Group to move towards a diversified amino acid strategy based on fine amino acids. While enriching products cluster, it will further extend the amino acid industry chain. In the future, the Group’s goal is to build Huachen BioTech into the world’s best food-grade glycine manufacturer. The Group will continue to establish a deep industrialization and scaled strategic plan in the upstream amino acid raw materials and downstream terminal health food and pharmaceutical preparations, and deeply participate in global high-end market competition, to gradually build the amino acids business to be one of the Group’s pillar industries, thereby lay the foundation for the establishment of the Group’s amino acid business’s leading position, and commit to bring greater health benefit to humanity.”