Biotech Values

[DewDiligence]

AZN Buys Guangdong BeiKang Pharmaceutical for Undisclosed Price

[The impetus for the deal is branded generics.]

http://www.reuters.com/article/2011/12/08/astrazeneca-china-idUSL5E7N64D820111208

›Thu Dec 8, 2011 2:00am EST
By Ben Hirschler

LONDON, Dec 8 (Reuters) - AstraZeneca is stepping up its drive into emerging markets by buying a Chinese maker of generic injectable antibiotics.

The move highlights the growing importance of markets like China for international drugmakers, even as healthcare reforms in the country lead to some slowing in recent rapid growth in demand for medicines.

Britain's second biggest drugmaker said on Thursday it was buying privately owned Guangdong BeiKang Pharmaceutical for an undisclosed sum under a deal set to close in the first quarter of 2012.

The Chinese firm's five injectable treatments will be marketed using the AstraZeneca brand, once they are manufactured to its global standards, which AstraZeneca expects to take until mid-2013.

So-called branded generics -- off-patent drugs that command a premium to those made by local suppliers, because the Western drugmaker's name is a proxy for quality -- are a hot area for many global pharmaceutical manufacturers.

Companies like GlaxoSmithKline, Sanofi and Pfizer have all made a big push into the field.

AstraZeneca, by contrast, has been somewhat more cautious.

The Chinese deal is only its second such acquisition, following the purchase of the generics portfolio of Rontag in Argentina in 2010, although it also struck licensing and supply deals last year with Indian generic drugmakers Torrent Pharmaceuticals and Aurobindo Pharma.

Overall, AstraZeneca expects emerging markets to account for 25 percent of its global sales by 2014, up from 17 percent in the third quarter, though branded generic medicines are expected make up only 10 to 15 percent of that total.

CHINA IS KEY

For AstraZeneca, China is the most important single driver, according to Mark Mallon, head of the its Asia-Pacific region.

Thanks to early entry into the market, back in 1993, AstraZeneca is already the second biggest foreign drug company in China, after Pfizer, with turnover of more than $1 billion in 2010, and the company recently announced a $200 million investment in a new manufacturing facility in Taizhou.

"The Chinese market has seen a slowdown this year ... but we will deliver double-digit growth," Mallon said in a telephone interview.

"As we look forward in China, we continue to see it as a very strong growth market. Can I tell you whether it is going to be 20 or 18 or 21 percent? That's hard to forecast. But from a strategic standpoint, this remains the biggest growth opportunity that we have."

His views echo those of Novo Nordisk Chief Executive Lars Sorensen who said on Monday that its annual Chinese sales growth was set to bounce back to around 15 percent after a one-off fall for his company in the third quarter.

Those kind of growth rates contrast with the fall in sales that AstraZeneca is facing in key Western markets as many of its top-selling medicines lose patent protection, prompting the company to retrench. It announced a reduction of 1,150 positions in its U.S. sales force on Wednesday.‹