Jointown Group, China's largest privately owned pharmaceutical distributor and the country's third largest pharmaceutical distributor by sales, revealed recently that it will invest CNY 300 million (US$40 million) to build five state-of-the-art distribution centers in Beijing, Chongqing, Shenyang, Nanchang and Guangzhou in order to boost its national distribution and logistical capabilities. It also acquired a 51% stake in the pharmaceutical distributor Shandong Yaoshan Pharmaceutical Ltd. for RMB CNY 30.6 million (US$4.06 million) to consolidate its presence in Shandong province.

The major investments by the group were made following a US$60 million fund injection from a consortium of seven institutional investors. The private company suffered from financial restraints for fast expansion before that, since it was hard for it to secure bank support being a private enterprise. 

According to Liu Zhaonian, general manager of Jointown Group, he is happy with the constitution of the new investors which included both strategic investors including Japan's Itochu Ltd. and Toho Pharma, and financial investors including ABM Amro, DEG, AI fund and two other funds from Hong Kong. Itochu is reported to be seeking an entry point into China's pharmaceutical distribution sector for a long time.

In addition to funding support, Jointown also hopes to draw experience and management expertise from strategic investors like Itochu in order to improve its management systems and cost structures against the backdrop of an increasingly competitive and low-profit margin distribution industry in China. Achievements in this area will be vital to the future success of the company.

The new shareholders of Jointown, who acquired 29.63% of the company through their US$60 million fund injection, will also help facilitate Jointown's future IPO plan. But the company said it is not yet sure whether it will launch its IPO in China or overseas and declined to comment on its IPO time and other details.

However, experts say it is most likely that Jointown Group will go IPO overseas through setting up an overseas holding company which will become publicly traded.