Chinese Pharma Giants Spark M&A Flurry to Expand Revenue, Product Range
Wang Yue
/SOURCE : Yicai
Chinese Pharma Giants Spark M&A Flurry to Expand Revenue, Product Range

(Yicai Global) May 28 -- Possessing variety of premium drugs with sizeable market share in a company's portfolio drives large-scale pharmaceutical mergers and acquisitions as China's local pharma firms enthusiastically seek M&As to increase their earnings and expand product range.

"Chinese pharmaceutical industry is becoming mature," Lin Jianghan, trading partner of a healthcare and pharma firm, told Yicai Global. "I would not be surprised if there are 10 or even 20 large scale mergers in the following one or two years. Major premium medicine varieties will play an increasingly important role in the M&As because of drug consistency evaluation."

Shanghai Pharmaceuticals Holding, better known as Shanghai Pharma, invested USD144 million to acquire 100 percent shares of Swiss firm Takeda Chromo Beteiligungs, and therefore indirectly hold about 26 percent shares of Guangdong Tianpu Biochemical Pharmaceutical, it said in a statement on May 21. After the transaction, equity of Tianpu held by Shanghai Pharma will rise from about 41 percent to just over 67 percent, which amounts to controlling shareholding.

On May 21, Hainan Haiyao, another pharma company, announced a restructuring plan, which included buying 100 percent shares of Haikou Kelly Pharmaceutical for CNY 2.1 billion (USD328 million).

China Resources Pharmaceutical Group said on May 18 it will buy an equity in Jiangzhong Pharmaceutical by way of issuance of common stock for cash or asset to gain a majority holding.

Rationale

Companies with high quality variety products are popular targets for mergers and acquisition of pharma giants, Lin believes. For example, Jiangzhong Pharma, which China Resources plans to acquire, possesses a rich variety of premium medicines.

Among Jiangzhong Pharma's highly popular medicines within its product range are Jiangzhong Compound Grass Coral Lozenges, Jiangzhong Jianwei Xiaoshi tablets, and Jiangzhong Liangshang. The market share of Jianwei Xiaoshi tablets has reached 70 percent, ranking first in the sector. China Resources will not only obtain major premium medicine varieties, but also further enhance regional advantages in marketing, said an insider.

Similarly, behind Shanghai Pharma's another acquisition plan for Techpool is the latter's two core products, Techpool Luo An and Kai Li Kang, with an annual sales volume of over CNY1 billion and CNY300 million respectively.

Targeting companies with varied products and larger market share for M&As is not something specific to China's domestic pharma companies only, said Sun Chao, a partner of PricewaterhouseCoopers's strategy and medical business. Overseas companies use the same rationale as well, eyeing firms with premium drugs varieties.

"Foreign pharma companies have products at their hands, but sometimes these products are not in key areas," said Sun. "For them, marketing also requires resources. The cost of developing channels in the Chinese market is not small. Domestic pharma firms have the ability to sell drugs in China."

Editor: Mevlut Katik

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Keywords: Mergers & Acquisitions , Pharmaceutical Industry , Premium Medicine , Drug