Yuanming Capital Tianyuan: Investing in a large healthy enterprise with international genes Yuanming Capital Tianyuan: Investing in a large healthy enterprise with international genes
Author:Rongzhong FinanceDate:2021-01-20From:Rongzhong Finance

On January 13-14, 2021, the "Financing China 2021 (Tenth) Capital Annual Conference and Awards Ceremony" hosted by Financing China and co-organized by Financing China and Rongzhong Fund of Funds Research Institute will be held at Shanghai Luneng JW Marriott Marquis Hotel Grand opening. With the theme of "Ordinary Glory-Responsibility and Creation", this conference conducted a comprehensive perspective mining and problem discussion on the ecology of the equity investment industry!


It is worth noting that Tian Yuan, the founding partner of Yuanming Capital and the chairman of Maisheng Medical Group, attended the meeting and delivered a speech on the theme of "Investing in a Big Healthy Enterprise with International Genes".


Tian Yuan believes that under the influence of the new crown pneumonia, China's big health industry has become the most concerned area of the market, and it will also become the most abundant area of companies with a market value of 100 billion in the future. I hope everyone will have the opportunity to discover these companies and invest in them. These companies will bring new products and new services to our country's health industry.


The following is a transcript of the speech, compiled by Rongzhong Finance (ID: thecapital):


Today I will share with you three observations and reflections, and talk about some of my views on the investment in the big health industry.


  One of observation and thinking, the times are changing


When making investment, we must first pay attention to the changes of the times. We can see that there are three new trends in the development of the times:


First, the era of big water and big fish has arrived.


We can see from the statistics that the market has undergone very big changes in the past few years. The most important change occurred in the US Treasury bond market. From 1989 to 1993, during Bush's four-year tenure, the national debt of the United States increased from 2.6 trillion to 4 trillion, and only increased by 1.4 trillion during his tenure. However, from 2017 to 2020, during Trump's four-year tenure, the US Treasury debt has increased from 19 trillion to 27 trillion, an increase of 8 trillion during the tenure. The US's massive issuance of treasury bonds has a huge impact on the global market. On the one hand, we must see that the issuance of national debt is huge, and on the other hand, we must notice that the net interest expenditure of the US government’s national debt has declined! In the Bush era, the annual interest payment increased from 240.8 billion to 292.3 billion, and the annual interest on national debt fell from 9.2% to 7.25%; in the Trump era, the annual interest payment decreased from 500 billion to 170 billion. The important reason was the national debt. The annual interest rate dropped from 2.5% to 0.625%. The US government now has 27 trillion national debts, and the interest it needs to pay each year is less than 200 billion. The drop in interest rates so low will surely greatly strengthen the US government's motivation to issue large-scale national debt in the future. We can clearly see this irreversible trend from the data on changes in US federal government debt since World War II. In 1978, the US federal government debt accounted for only about 30% of GDP. By 2020, when the total debt is as high as 20 trillion, the above ratio has continued to climb to nearly 130%. The U.S. government's opening of the gate and releasing water in this way will definitely affect other Western countries. Therefore, there will inevitably be more national debt issuances in the future. This kind of "big water" will surely rush into the capital market, greatly pushing up the market value center, and prompting the capital market to produce more and more "big fish", that is, enterprises with a market value of more than 100 billion or even trillion.


Second, the retrograde era of the monetary cycle and economic cycle has arrived.


In the history of humankind since the existence of money, under normal circumstances, the total amount of money has increased with the growth of the economic scale. In the past era, economic growth and currency issuance increased. As a medium, money increases according to the needs of economic growth. This is a normal cycle. In recent years, a new trend has emerged, especially during the COVID-19 pandemic. The economic growth of the United States has shrunk and experienced negative growth, but the issuance of US federal treasury bonds has risen sharply. This is not just a trend in one country, but also in many European and American countries. Therefore, this marks the arrival of an era of retrograde monetary and economic cycles. There will be more currencies chasing fewer commodities, including more investment chasing limited stocks worth buying, which will give birth to a group of dazzling stock market star companies.


Third, the era of the "double cycle" of the Chinese economy has arrived.


Over the past four decades, China has gradually opened up to the outside world, integrated into the international cycle, and the entire economy has moved towards the international market. This is the mainstream trend. At present, facing major changes unseen in a century, China's economic development strategy has undergone major adjustments and is moving towards a "double cycle", that is, a new development pattern in which domestic and international double cycles are the mainstay and the domestic and international double cycles promote each other. The double cycle is neither inside without outside, nor with outside without inside. Taking the domestic cycle as the main body means opening up all links of domestic production, distribution, circulation, and consumption, giving full play to China's super-large-scale market advantages and meeting domestic demand as the starting point and end of economic development. However, domestic and international dual-recycling promotes each other, emphasizing the domestic economic cycle as the mainstay, and it is by no means "self-enclosed." The purpose of this is to make the domestic market better connect with the international market by giving full play to the potential of domestic demand, and to use the two international and domestic markets and two resources to achieve stronger and sustainable development. The advent of the dual cycle era will have a huge impact on the entire economic development and investment. How to position the enterprise and how to position the investment is a big problem. Only companies that adapt to the general trend of the dual cycle will have great value.


Observation and thinking 2: Rise and fall behind


Among the top 20 pharmaceutical companies in China in 2015, only three companies have more than doubled their market value in 2020. The three companies are Hengrui Pharmaceuticals, Yunnan Baiyao and China Biopharmaceuticals. Among them, Yunnan Baiyao is a well-known Chinese medicine company, while Hengrui Medicine and China Biopharmaceuticals are companies that have successfully transformed.


In the past five years, new forces in medicine are emerging. This rise is a new cluster of companies with a market value of 100 billion yuan. These companies are all star companies in the current market, and they have become the most important representative companies sought after by the secondary market, including WuXi Biologics, Tigermed Pharmaceuticals, and Mindray Medical, all of which have a market value of more than 100 billion or even several in a short period of time. Hundreds of billions.


Chinese pharmaceutical companies have undergone a very big differentiation in the past five years. There are many reasons for this differentiation. I think the main reason is the internationalization of genes. In the process of the domestic economy shifting from an export-oriented economy to a dual-cycle era, whether a company has an international gene is particularly important. The most important thing is the company's international operation capability and international market capability.


For example, one of the most well-known companies in biopharmaceuticals is BeiGene, and its ability to operate internationally is very strong. It can do R&D in China and has a strong team in China, but it also has a strong team overseas. In particular, its ability to do BD and cooperation with major international companies and pharmaceutical companies is very strong, and its ability to do clinical trials abroad is very strong. Its main PD1 new drug for the treatment of tumors and Novartis recently had a $2 billion cooperation. BeiGene cooperates with a European company that has developed a new PD1 drug. This cooperation has further increased the value of the company.


Some other companies generally have a similar situation, which shows that these companies have very strong capabilities in the international market, so their market value has grown very strongly.


Another aspect of the international gene is the ability to internationalize the market. If we say that "double cycle" means that all is a domestic cycle, and the use of resources is limited to one country, in fact, it is far from enough. Therefore, the characteristics of these companies with relatively large growth in market value in the future are certain. There must be an international market.


In the medical device industry, the market value of Mindray Medical has reached 500 billion. Its capabilities in the entire international market are very strong. In addition to China, it has a very strong market competitive advantage in ventilators, X-rays and other operating room medical equipment. At the same time, it also has a very strong competitive advantage in the international market.


Therefore, the ability of this kind of internationalization and the ability of the international market is an important factor that determines whether a company has huge growth potential in the future. In the era of double economic cycles, the internationalization genes of enterprises are crucial.


Observation and thinking three: looking for future enterprises with a market value of 100 billion yuan


Five years ago, in the field of biomedicine, or in the field of pharmaceutical factories, there were no companies with a market value of 100 billion yuan. Five years ago, Hengrui's market value was less than 100 billion. In just a few years, the company's current market value has reached 500 billion to 600 billion. Many people regret that there was no Shigekura Hengrui Company 5 years ago.


As an investor now, his task is to find a dark horse in the future or a company with a market value of 100 billion in the future. This is what any investment institution wants to do. 

In the entire European and American markets, under the severe epidemic situation last year, the total investment of biomedical venture capital institutions increased by 47%, reaching a new high of 51 billion US dollars. In other words, more than 300 billion yuan of funds have entered this field. From the perspective of China, the total amount of venture capital in the medical and health sector has reached 12 billion US dollars, which is also a new high.


The epidemic is so serious, but in the entire health sector, venture capital funds are increasing substantially. This shows that under the global epidemic situation, investors have paid more attention to investment in the health sector.


Pay attention to outstanding companies with the potential of leading companies. Five years ago, before the fundamental reform of China's new drug review system, there were not too many companies that could reach a market value of hundreds of billions in the health sector. Even now, all investment institutions want to invest in outstanding companies with the potential of leading enterprises, because the obvious trend in the market is that resources are rapidly concentrating to leading enterprises.


Facing the future, in the big health field, we must look for the best companies and companies with high value-added potential. For investors, companies that want to invest can earn their investment back, and hope to withdraw when the market value rises. Therefore, the question that investors are concerned about is, is it possible for this company, this industry, and this track to continue to invest?


We increasingly see that companies with international capabilities and international genes can obtain human resources, technical resources, and markets from around the world, so that the company's value can grow rapidly.


Therefore, in the big health industry, there are a number of companies with great potential. Compared with the very bright companies in the market, although they are not large in scale, they have a lot of innovations in technology and have more products. May achieve import substitution, or have the ability to provide a new generation of products for the global market. These companies are the ones that investors should pay close attention to.


In China, under the huge impact of the new crown pneumonia, the big health industry is becoming an area of great concern to the market, and it will also become the most abundant area for companies with a market value of 100 billion in the future. I look forward to everyone having the opportunity to discover such companies and invest in them. I believe that these companies will continue to bring new products and new services to our country and meet people's needs for a better life, and change our lives.


thank you all!

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