Contention-laden records of the Ministry of Economy indicating the disputable acquisition of Paion AG by Chinese investors
Takeover of German Pharmaceutical Hope, Paion AG, by Chinese Investor:
A twist unfolded a year ago when the rising star in the German pharmaceutical scene, Paion AG, filed for bankruptcy. The lucky winner of the distressed assets? A Chinese conglomerate - Humanwell Healthcare Group - that snatched up the promising patents at a low price. Many small shareholders were left high and dry, as their investments evaporated in the insolvency, while profits from Paion's patented medicines headed east instead.
The takeover by Humanwell stirred little attention initially, but it's one piece in a growing puzzle of Chinese investments in Germany. The latest controversial case involved the Chinese shipping conglomerate Cosco at the Hamburg port. Both incidents - Paion in Aachen and the port in Hamburg - centered on crucial sectors such as logistics and pharma, Chinese investors, and the appraisal process overseen by the Ministry of Economics, which ultimately gave its approval.
However, the approval was met with controversy, as observers and experts feared Chinese influence. For the first time, comprehensive documents from the Ministry of Economics have come to light, revealing the concerns known to the ministry, the information the parties involved had to provide, and the factors that led to the deal's approval.
Paion's Downfall and Humanwell's Acquisition
Almost a year ago, in September 2023, Paion was still considered the next big hope in the German pharmaceutical world. The company had invested heavily in researching a promising drug, Remimazolam, a fast-acting anesthetic, with expectations of generating billions in revenue and saving lives. But just a few days after planning to issue new shares for expansion and research, on October 26, 2023, Paion announced its unexpected bankruptcy. The company faced liquidity issues and had to be sold urgently by an insolvency administrator. Humanwell Healthcare, a long-term Chinese partner that already held Remimazolam distribution licenses in China since 2012, bought Paion for around 12 million euros, a seemingly low price for such a promising pharmaceutical company. Yet, the deal carried a condition - the approval of the Federal Ministry for Economic Affairs and Climate Action (BMWK).
Grave concerns about the impending sale to Humanwell Healthcare arose among numerous shareholders. They contacted the BMWK, fearing potential dependency on China and the sell-off of vital drug patents at the expense of the German shareholders of Paion AG. Despite these concerns, the Ministry of Economics ultimately gave its approval, based on the available documents.
Investment Review
On December 22, 2023, Paion's insolvency administrator and Humanwell Healthcare agreed to the acquisition of Paion's essential assets, subsidiary Paion Germany, and shares in the British subsidiary Paion UK. The deal was subject to approval by the BMWK. On January 3, 2024, the BMWK informed the parties that they must apply for a certificate of no objection for the Humanwell deal. If the sale had posed a threat to Germany's security, the BMWK could have vetoed it, as it did with a VW subsidiary whose turbine technology could have been used in Chinese warships.
From January 10, 2024, a lawyer representing the takeover company assured the BMWK that they would apply for the certificate of no objection, emphasizing that none of Paion's active ingredients were on the list of critically important active ingredients of the Federal Institute for Drugs and Medical Devices (BfArM). This was a crucial point, as active ingredients on this list would have prompted the ministry to take a closer look at the sale. However, since Paion had no such substances, the sale to Humanwell was deemed harmless, according to the lawyer.
Yet, this raised questions. Why was the promising anesthetic Remimazolam not on the list? Retail investors had been wondering for a while. They suspected that Germany had underestimated the true significance of Remimazolam. If Remimazolam had officially received a high additional benefit, it would likely have ended up on the BfArM list, making the sale to China much more difficult.
Weeks later, the decision was made: "The Federal Ministry of Economics and Climate Protection issues the certificate of no objection," it stated in a letter from the ministry to the acquisition lawyer. A spokesperson for the BMWK stressed at the time: "The benchmark for the review process is possible negative impacts of foreign direct investments on public order or security."
Paion's Current Status
On March 4, 2024 - shortly after the BMWK's approval - Paion and Humanwell Healthcare announced the acquisition's successful completion. Most jobs were secured, and business operations continued. In a semi-annual report from July 2024, Humanwell stated that the acquisition ultimately cost 13 million euros. The official purchase date was June 23, 2024. On its website, Humanwell described the deal as "strategic expansion into Europe."
However, there were losses in the deal. The small investors of the original Paion AG: "Existing shareholders will not receive compensation for the loss of their shares," Paion announced in August 2024. The reason given was the insolvency administrator's plan to debt-free the company. Investors were particularly upset about the sudden insolvency. Legal proceedings still continue in connection with the insolvency application of Paion AG. The outcomes might yet ensure that shareholders receive some form of compensation for their loss.
- In the midst of confusion, shareholders question the acquisition of Paion AG by Chinese conglomerate Humanwell Healthcare, as the promising pharmaceutical company declared bankruptcy just a few days after planning to issue new shares.
- The concern among small shareholders is the potential dependency on China and the sell-off of vital drug patents, particularly with the patented medicine Remimazolam, a fast-acting anesthetic.
- Despite these concerns, the Federal Ministry for Economic Affairs and Climate Action (BMWK) gave its approval for the deal, as the active ingredients in Remimazolam were not on the critical list, a factor that the acquisition lawyer emphasized.
- The successful completion of the acquisition between Paion and Humanwell Healthcare was announced in March 2024, with most jobs secured and business operations continuing. However, existing shareholders were left without compensation for their lost shares.
- The acquisition has raised questions, such as why Remimazolam was not on the critical list, with some suspecting that Germany may have underestimated its true significance.
- The business expansion into Europe by Humanwell, following the acquisition, is cited as a strategic move in the ever-evolving landscape of industry, finance, technology, politics, and general-news, where Chinese investments in Germany continue to stir controversy.
