2014.05.08 Costone Capital Views:
Zhejiang Conba paid 994.5 million yuan to purchase a 51 percent share of Guizhou Bate after 4 months' stock suspension. It is one of the largest domestic M&A cases in the pharmaceutical industry, and it is also the largest domestic M&A case in the venture capital industry during April.
This investment is led by CoStone Capital, which subscribed 50 million shares of Conba at 12 yuan per share, of a total 600 million yuan. Yanli Chen, the partner of CoStone Capital, said the firm is investing in Conba because CoStone bullish on the pharmaceutical industry in China, and the fundamentals and future growth space of Conba as a pharmaceutical firm meet the investment criteria of CoStone.
In terms of the investment plan, Chen stated that "pharmaceutical industry in China has strong potential room for growth. Its development also coincides with China's aging population structure, urbanization, and medical system reform. Moreover, the pharmaceutical industry is not affected by the economic recession, and its future development is promising."
CoStone Capital has a rich investment experience and profound investment layout in the medical industry. Chen shared a case of CoStone, "we invested in a pharmaceutical company just beginning to grow up a decade ago. At that time, 10 million yuan's investment created a gross profit of 300 million yuan. We own all the shares, which have reached about 500 million yuan according to the current market valuation, with a return of 50 times. If it goes public successfully, the return could hit 100 times high. "When talking about the secret of investment, Chen admitted that CoStone chooses the portfolio cautiously and has his own valuation method.
Differentiated from other financial institutions highlighting the R&D ability of medicine enterprises, Chen believes the success of enterprises relies on the R&D ability and the comprehensive ability, especially for developing a new drug with a high R&D cost. If the cost goes up, the selling price will also lift high, which means the drug needs more promotions to attract more customers. For pharmaceutical companies that only have three to five years' growth phase, the economic benefit is highly uncertain if the investment company over-pursuit the R&D skills, which finally increases the investment risk. In China, pharmaceutical enterprises producing generic drugs with good R&D ability and sales channel can also obtain a good market, so pharmaceutical enterprises are suggested to avoid pursuing being "lofty."
The article is published on CoStone News, please refer to original context: http://stonevc.com/NewsStd_508.html
Over the past year, the bull market returned, with technology leading the way.
As I said back in October 2024, the rally that began on September 24 was not merely a rebound, but a reversal. Since then, China's capital markets have undergone a broad revaluation, moving from undervaluation toward fair value.
The Shanghai Composite Index reached its highest level in a decade. The "Yi-Zhong-Tian" trio—Eoptolink, Zhongji Innolight and TFC Communication, three prominent Chinese optical communications stocks—saw their share prices multiply severalfold in a single year. Cambricon's market capitalization briefly exceeded RMB 600 billion. Elsewhere in the technology sector, triple-digit price-to-earnings ratios and valuations exceeding RMB 10 billion became commonplace.
Some investors were greedy; others, fearful. Still others asked me: Are technology stocks in a valuation bubble?
My answer is that what we are witnessing is the hunger and anxiety of an era, reflected in the capital markets. Once you understand this, the current fervor for technology investing is no longer difficult to explain.
Investment has nothing to do with macroeconomics, but everything to do with geopolitics.
China-US relations will shape the investment landscape for decades to come. Geopolitics has played a major role in shaping the hunger and anxiety of our times, fundamentally reshaping the way we invest.
What, then, lies at the heart of China's hunger and anxiety?
The Fourth Industrial Revolution is already underway, yet China has not fully overcome the technological shortcomings left by the Third. There is no time to lose.
This is why some people wonder: Why do Chinese computing chip companies command such high valuations when their technologies still lag so far behind NVIDIA's? Why does NVIDIA trade at just 50 times earnings, while a company hailed as "China's answer to NVIDIA" commands a multiple of 300?
To me, this gets the logic exactly backward.
It is precisely because these companies cannot catch up with NVIDIA in the near term that they command a higher strategic premium. The wider the technological gap, the greater the strategic value.
The further something lies beyond our reach, the stronger our hunger. The harder it is to catch up, the deeper our anxiety. If China were to achieve a complete breakthrough in computing chips one day, valuations might actually come down.
Where can one find China's most spectacular natural landscapes?
Much of the answer, I believe, lies in and around the Hengduan Mountains: the Meili Snow Mountains, Jade Dragon Snow Mountain, Mount Gongga, Mount Siguniang, Jiuzhaigou, and many others. Vast differences in elevation and deep fault lines have given rise to landscapes of extraordinary grandeur.
Hard-tech investing follows a similar logic.
Technological gaps, discontinuities in capabilities, and missing links in industrial systems: a leap in difficulty brings a leap in valuation, and a successful breakthrough can, in turn, bring a leap in returns.
This logic extends well beyond computing chips. It is equally evident in memory semiconductors, commercial spaceflight, and other sectors where China still faces substantial technological gaps with other countries.
It was precisely this conviction that led CoStone Capital, starting in 2016, to decisively focus its investments on three areas: hard tech, emerging industries, and life sciences and healthcare. In this context, "hard tech" refers specifically to important industries in which China faces a technological gap with the United States.
Thanks to this forward-looking strategy, CoStone Capital established an early presence across the full value chains of key sectors, including semiconductors, artificial intelligence, and robotics.
Looking ahead, the frontiers of technological progress and industrial upgrading are boundless. Nor can the gaps in hard technology be closed overnight. The twin windows of opportunity presented by technological innovation and the development of homegrown alternatives to foreign technologies have only just begun to open.
The road ahead is long, but the future holds immense promise.
As an investment firm, CoStone Capital will continue to invest where the hunger and anxiety of each era run deepest, move forward with the tensions that shape our times, and extend our reach toward the most challenging—and most important—frontiers.
Spring 2026