Research On Private Equity Fund Investment Strategy Of The Biopharmaceutical Industry

As a new industry, biopharmaceutical industry has been added into12th five-year plan.With the development of the transition of China’s economy, the status of new economy willobtain a considerable ascension in China’s economy field. Biopharmaceutical industry hasbeen target of risk capital. With the characteristics of high-tech, high-risk and high-profit,huge profits would be made if investment was successful.Based on investor and private equity fund and started from the analysis ofbiopharmaceutical industry, this paper analyses the development potential and investment riskin biopharmaceutical industry in China. Besides, this paper carries out an empirical researchon biopharmaceutical industry plate and elaborates the extra profits gained from theinvestment in biopharmaceutical industry quantitatively by using Fama-French three factormodel. According to the research on all elements in Fama-French three factor model, areference is made for private equity fund to select target enterprise.This paper analyses the typical cases in both quantitative and qualitative ways. In thecase of Shuang Lu Pharm and Chongqing Beer, the importance of product diversity andcontinuous investment in research is highlighted. By analyzing Sharpe Ratio and Jensen index,a conclusion is made that Shuang Lu Pharm owns more stable profits and lower risk. In thecase that Goldman Sachs invested Hepalink Pharmaceutical successfully, this paper analysesthe feasibility of portfolio in biopharmaceutical industry and function of decentralizinginvestment risks. By using Markowitz portfolio selection theory, we find that portfolio of thismultinational industry chain could lower investment risks dramatically, which offers areference of private equity fund strategically.This paper analyses the typical cases in both quantitative and qualitative ways. In thecase of Shuang Lu Pharm and Chongqing Beer, the importance of product diversity andcontinuous investment in research is highlighted. By analyzing Sharpe Ratio and Jensen index,that Shuang Lu Pharm is more stable in the growth in Sharpe Ratio and less in incomevariance than that of Chongqing Beer leads to the conclusion that Shuang Lu Pharm ownsmore stable profits and lower risk. In the case that Goldman Sachs invested HepalinkPharmaceutical successfully, this paper analyses the feasibility of portfolio inbiopharmaceutical industry and function of decentralizing investment risks. By using Markowitz portfolio selection theory, we find that portfolio of this multinational industrychain could lower investment risks dramatically, which offers a reference of private equityfund strategically.At last, a summary is made to elaborate how private equity uses biopharmaceuticalenterprise strategically.