HONG KONG – Shares of China Resources Pharmaceutical Group Ltd. (HK:3320) sank in their trading debut on Oct. 28 after raising about $1.8 billion in Hong Kong, making it the largest IPO from a drugmaker in Asia this year.

The drugmaker priced its IPO at HK$9.10 a share, but shares dropped 3.8 percent to HK$8.75 before ending at HK$9.01 amid a generally declining stock market on Oct. 28. The benchmark Hang Send Index dipped 0.77 percent. The decrease was signaled in the grey market operated by Phillip Securities, where shares opened at HK$8.50 on Oct. 27, down 6.6 percent from the listing price. The stock was basically flat on Oct. 31, dropping somewhat but regaining lost ground during the morning trading session in Hong Kong.

"Fluctuation is normal and we believe that our company is capable of creating value for investors," said Wang Chuncheng, CEO and president, during a press conference after the launch. "There is much room for further growth of pharmaceutical industry in China facing the aging population, thus we will actively go for merge and acquisition to further expand our business."

Industry observers and investors pointed out that the company's strong M&A capability and sound layout in its domestic market are some key competitive strengths.

"In 2007, China Resources restructured and repositioned China Resources Sanjiu Medical & Pharmaceutical Co. Ltd., as its principal business platform for OTC drugs and Chinese medicines. Nowadays, Sanjiu is a market leader in China Ganmaoling granule market by revenue in 2015, accounting for more than 85 percent of total market," said Neil Wang, global partner and greater China president of Frost & Sullivan.

"Through this investment in China Resources Pharmaceutical Group, Fujifilm plans to further explore the expansion of health care business in China, including its high-quality pharmaceuticals and dietary supplements, regenerative medicine and medical devices," Fujifilm Corp., the largest institutional investor in the offering, said in a statement. Other institutional investors include Reckitt Benckiser Group plc, China Life Insurance Co., Guangdong Hengjian Investment Holding Co., Anbang Insurance Group, China Chengtong Holdings Group Ltd. and Anbang Insurance Group Co.

China Resources Pharma is a part of China Resources Holdings, a state-owned conglomerate with a wide distribution network across the world.

According to Statistical Analysis Report of the Pharmaceutical Circulation Industry in 2015 by the Ministry of Commerce, China Resources Pharma is the second largest drugmaker in the country, with a market share of 8.1 percent and trailing only Sino Pharma Group Co. Ltd.

The company has 26 manufacturing facilities that produce a range of chemical and biologic drugs and traditional Chinese medicines along with some nutritional and health products and covers a wide range of therapeutic areas and has a comprehensive distribution and logistics network.

"Benefiting from the Outline of the Chinese Medicine Development Strategy Plan, Chinese medicine has been put in an unprecedented important position in China pharmaceutical industry. Its Dong-E E-jiao series product which has established the leading market position has the potential to be second major driver for further leap of the company since it is also the sole manufacturer of compound E-Jiao syrup in China," said Wang with Frost & Sullivan.

In June, the company completely backed off the medical device space, a strategic effort to re-structure its business focus more on its main pillars, which is also seen as a preparation for its listing in Hong Kong. Industry observers believe that a restructuring is necessary for the conglomerate, but some said that the ax should not fall on its medical device business.

"It is not wise to leave the market now. If it is a company with a particular focus in a certain area, it is right not to dip its toes in the water of other areas," Wang said. "However, for China Resources, as a big conglomerate that would like to make health care one of its pillar business, none of the sectors including pharmaceuticals, medical services and devices should be out of its radar. Only with integration, can the group invigorate its whole health care business. Plus, we can all see the government now is favoring the device sector, particularly domestic device makers, with various benefit policies."

The Chinese medical device market, which is believed to be the second largest in the world following the U.S., was worth an estimated $41.6 billion last year, with annual compound growth of 28.4 percent through the past decade, according to the China Medical Device Industry Yearbook 2015.