Good News on Listing | Frost & Sullivan Assists Nature's Way Pharmaceuticals Inc. to Successfully Go Public in the US (NASDAQ: UPC)

Natures Medicine Co., Ltd. (hereinafter referred to as 'Natures Medicine') successfully went public on March 23, 2021, issuing 5 million common shares at a maximum offering price of $7 per share, raising approximately $35 million. Frost & Sullivan (Frost & Sullivan, hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for Natures' listing, and we hereby extend our warmest congratulations on its successful listing.

During the process of listing in the US this time, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing the writing of relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), helping the company communicate with investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the US Securities and Exchange Commission.

According to data from the National Bureau of Statistics, by the end of 2018, the population aged 65 and above in China reached 170 million, accounting for 11.9% of the total population. With the improvement in life expectancy of Chinese people and the impact of the 'one-child policy' from the 1980s to the 2010s, the population is rapidly aging. From 2014 to 2018, the compound annual growth rate of the population aged 65 and above was about 4.9%. Due to population aging and the increase in chronic diseases such as arthritis, asthma, and diabetes, the demand for healthcare products and services has also grown rapidly. According to Frost & Sullivan's forecast, by the end of 2023, the population aged 65 and above in China will reach 210 million, accounting for 14.7% of the total population.

Traditional Chinese Medicine (TCM) has been widely accepted in China for the treatment of various wounds and diseases. The herbs used include herbal medicines, herbal raw materials, herbal preparations, and finished products. Depending on the complexity of processing and product type, the TCM market includes four sub-markets: Chinese herbal medicines, decoction pieces of traditional Chinese medicine, patent medicines, and dietary supplements of traditional Chinese medicine.

● Chinese herbal medicine:Chinese herbal medicines represent unprocessed or incompletely processed products, usually referring to the medicinal parts of plants, animals, and minerals that can be used to produce decoctions and patent medicines.

● Chinese herbal decoction piecesTraditional Chinese medicine decoction pieces are made by further processing traditional Chinese herbal medicines according to the theories and methods of traditional Chinese medicine, including depilation, slicing, chopping, boiling, steaming, frying, etc., into decoction or powder form. In recent years, modern manufacturing processes for traditional Chinese medicine decoction pieces have continuously developed, including extraction, concentration, ultra-concentration, etc.

● Chinese patent medicine:Chinese patent medicines refer to proprietary products made solely from Chinese herbal medicines and/or materials derived from herbs, animals, or minerals. They are formulated into final dosage forms for the purpose of diagnosing, treating, preventing, or alleviating diseases or symptoms.

● Traditional Chinese Medicine Dietary Supplements:Traditional Chinese medicine dietary supplements are health products made from Chinese herbal medicines used for disease prevention. Compared to other categories of traditional Chinese medicines, dietary supplements typically choose more mild herbs for production.

From 2014 to 2018, stimulated by favorable government policies, including the expansion of the 'Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance Drug List (2017 Edition)', and the growing market demand for Chinese patent medicines, the market scale of Chinese patent medicines increased from 580.7 billion yuan in 2014 to 630.9 billion yuan in 2018, with a compound annual growth rate of about 2.1%. In 2017, the Chinese patent medicine market slightly declined mainly due to tightened policies and regulations and the liquidation of some Chinese patent medicine manufacturing enterprises.

With the continuous aging population and increasing awareness of healthcare, it is expected that the market scale of Chinese patent medicines will grow at a compound annual rate of about 6.0% over the next five years, increasing from 668.8 billion yuan in 2019 to 844.3 billion yuan by the end of 2023.

With the improvement of people's awareness of healthcare and living standards in China, the Chinese traditional Chinese medicine dietary supplement industry has rapidly grown from 609 billion yuan in 2014 to 866 billion yuan in 2018, with a compound annual growth rate of about 9.2%. Looking ahead, with increased spending on health products and services, the market scale of traditional Chinese medicine dietary supplements calculated by revenue is expected to grow at a compound annual rate of about 9.6%, from 937 billion yuan in 2019 to 1351 billion yuan by the end of 2023.

● Increased disposable income and improved healthcare awareness:Under the influence of supportive economic policies promulgated by the Chinese government, China has maintained stable economic growth over the past five years despite an uncertain global economic environment. With economic development and increased disposable income, Chinese consumers are paying more attention to improving living standards and spending on healthcare products and services. According to data from the International Monetary Fund (IMF), China's per capita annual disposable income has grown at a compound annual rate of about 9.0%, reaching 28,000 yuan by the end of 2018. In addition, with healthcare reform and the implementation of the 13th Five-Year Plan, per capita healthcare expenditure reached 1,766.9 yuan in 2018, with a compound annual growth rate of about 12.0% from 2014 to 2018. This has supported the steady development of the Chinese patent medicine market.

● Population aging and rising prevalence of chronic diseases:According to data from the National Bureau of Statistics of China, between 2014 and 2018, China's population was rapidly aging, with the population aged 65 and above growing at a compound annual rate of about 4.9%. Elderly people usually have weaker immune systems and are more susceptible to illness. Additionally, due to the prevalence of chronic diseases among the elderly, there is a greater demand for healthcare among people aged 65 and above. Since traditional Chinese medicine (TCM) is generally considered to help protect and improve people's health, Chinese consumers tend to choose TCM products and services to maintain health, prevent and treat diseases, which has brought continuous market demand to the TCM market. Over the next five years, it is estimated that the aging population will account for 14.7% of China's total population, continuing to drive the development of China's Chinese patent medicine market.

● Favorable government policies and regulations:In February 2017, the Ministry of Human Resources and Social Security issued a new version of the 'Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance Drug List (2017 Edition)', which included more types of drugs within the scope of insurance and reimbursement. The total number of covered drugs in the 'Drug List' reached 2,535, of which 1,238 are Chinese patent medicines. Compared with the old version, the total number of Chinese patent medicines increased by 25.4%, accounting for 48.8% of the total products in the list. It is expected that the insurance and reimbursement provided by the Chinese government will encourage market demand and consumption of Chinese patent medicines. In addition, the 'Outline of the Development Strategy for Traditional Chinese Medicine (2016-2030)' sets development goals with the aim of enabling every citizen to enjoy high-quality traditional Chinese medicine services by the end of 2020. At the same time, the 'Outline of the 13th Five-Year Plan for National Economic and Social Development of the People's Republic of China' also emphasizes the status of traditional Chinese medicine and regards it as a strategic focus of China.

● The outbreak of the COVID-19 pandemic:In December 2019, the COVID-19 pandemic broke out and rapidly spread worldwide in 2020. According to official data, as of April 4, 2020, the outbreak of COVID-19 had caused 81,669 infections and 3,329 deaths in China. Common symptoms of COVID-19 include fever, cough, and shortness of breath. As of April 2020, there were no specific antiviral treatments for COVID-19 or methods to cure infections, and in clinical practice, treatment methods that focus on alleviating symptoms are usually chosen. In addition to conventional treatment, the Wuhan Health Commission and the National Health Commission also recommended the use of traditional Chinese medicine as a supplement to conventional treatment. Moreover, since Chinese consumers usually prefer traditional Chinese medicine products to maintain health and prevent diseases, it is expected that the Chinese patent medicine market will show strong growth in 2020 and beyond.

● Development of overseas markets:The National Development and Reform Commission of China and the National Administration of Traditional Chinese Medicine jointly issued the 'Traditional Chinese Medicine & 'Belt and Road' Development Plan (2016 - 2020). According to this plan, 30 overseas traditional Chinese medicine centers and 50 company bases will be established in foreign countries, which will strongly support the development of Chinese patent medicines overseas. Therefore, overseas expansion and development are expected to become another trend in the Chinese patent medicine market over the next five years.

● Expansion of E-commerce Channels:Since 2016, with the release of the 'Internet + Human Resources and Social Security' 2020 Action Plan by the Ministry of Human Resources and Social Security, e-commerce platforms have become a new retail channel for Chinese patent medicines. In the second half of 2017, the National Administration of Traditional Chinese Medicine also issued the 'Guiding Opinions on Promoting the Integrated Development of Traditional Chinese Medicine Health Services and the Internet', supporting online sales of traditional Chinese medicine products and services. With the support policies of the Chinese government and the increasing popularity of e-commerce, online expansion and sales channel integration will become new trends in the Chinese patent medicine market.

Frost & Sullivan integrates nearly 60 years of global consulting experience, serving the booming Chinese market with dedication for 23 years. With a global perspective, it helps clients accelerate their business growth, achieving industry-leading benchmarks in terms of growth, innovation, and technology. The large health industry is one of the core areas of focus for Frost & Sullivan. Over the past sixteen years, the Frost & Sullivan healthcare team has provided financing financial advisory, IPO industry advisory, strategic consulting, management consulting, and other services to hundreds of outstanding domestic and international biopharmaceuticals, medical devices, healthcare services, and internet healthcare companies. Successful listings include: Sino Biologics (6600.HK), Zhaoyan New Drugs (6127.HK), Novogene Health (6606.HK), ADAG.NASDAQ (Tianyan Pharmaceuticals), Bihang Medical (2170.HK), Jianbimiao Miao Miao (2161.HK), Minimally Invasive Cardiac Angioplasty (2160.HK), Ruili Medical Beauty (2135.HK), Jiake Sisi Pharmaceutical (1167.HK), Hepcon Pharma (2142.HK), JD Health (6618.HK), Deqi Pharma (6996.HK), Rongchang Biotech (9995.HK), WuXi AppTec (2126.HK), Simcere Pharmaceutical (2096.HK), Yunding Newray (1952.HK), Jiahe Biotech (6998.HK), Zai Ding Pharmaceutical (9688.HK), Ocumivir (1477.HK), Yongtai Biotech (6978.HK), Hapu Biotech (9989.HK), Kaisun Pharmaceutical (9939.HK), Peijia Medical (9996.HK), Kangfang Biotech (9926.HK), Novogene Jianhua (9969.HK), Tianjing Biotech (IMAB.NASDAQ), Kanglong Chemical (3759.HK), China Antibody (3681.HK), Dongyao Pharmaceutical (1875.HK), Yasheng Pharmaceutical (6855.HK), Fosun Pharma (2696.HK), Hansoh Pharmaceutical (3692.HK), Mabtech Pharmaceutical (2181.HK), Fangda Holdings (1521.HK), Via Biotech (1873.HK), CStone Pharmaceuticals (2616.HK), Junshi Biosciences (1877.HK), WuXi AppTec (2359.HK), Innovent Biologics (1801.HK), Hailun Medicine (2552.HK), BeiGene (6160.HK), Gilead Sciences (1672.HK), WuXi AppTec (2269.HK), China Resources Pharmaceutical (3320.HK), Janssen Scientific & Pharmaceutical (2633.HK), HCMN Pharmaceuticals (HCM.NASDAQ), Biotechnology (1548.HK), BBI Life Sciences (1035.HK), and others. In terms of the number of filings, the Frost & Sullivan healthcare team maintains an absolute leading position in Hong Kong healthcare IPOs, continuously occupying more than 90% of the market share from 2018 to 2020.

Since the listing of the first batch of companies on the Sci-tech Innovation Board (STAR Market) in July 2019, Frost & Sullivan reports have also been widely cited in the prospectuses of leading STAR Market-listed companies in the industry, including Huaxi Biotech (688363.SH), Junshi Biosciences (688180.SH), Zhejiang Genomics & Bioinformatics Co., Ltd. (688266.SH), BeiGene (688177.SH), and Shenzhou Cells (688520.SH). They are considered to be the most powerful, professional, and influential industry research institutions in the sector. We hope to work with enterprises to gain insights into industry trends, seize development opportunities, jointly promote innovation and upgrading in China's big health industry, and build a healthy future.