Government News
Multinational pharmaceutical companies in China have dramatically changed their investment models from acquisitions to local partnerships 2022-08-13
Recently, AstraZeneca, CICC Capital and Wuxi Guolian Group officially announced the intention of strategic cooperation, and the three parties plan to cooperate to raise funds with a total scale of 5 billion yuan. This is also the second phase of AstraZeneca CICC Healthcare Industry Fund.
AstraZeneca CICC Global Healthcare Industry Fund was established at the end of 2020. It is a market-oriented private equity fund in healthcare industry jointly initiated by AstraZeneca and CICC Capital. After completing 2.2 billon-yuan first-phase fundraising in March 2021, the fund has so far invested in 10 innovative healthcare companies including Abbisko Therapeutics, Zhizhong Medical, Deepwise, Etern Therapeutics, and Cellular Biomedicine Group.
The investment strategies of multinational pharmaceutical companies in China have undergone tremendous changes over the past decade, from only acquisitions to early-stage investment in local pharmaceutical companies in various forms.
In 1980, when the first foreign-funded pharmaceutical company, Japan’s Otsuka Pharmaceutical Co., Ltd., settled down in China, Yangtze River Pharmaceutical, which is now an industry giant, was still an unknown small factory in a town. Lianyungang Pharmaceutical Factory, predecessor of Hengrui Pharmaceutical, was still a small state-owned pharmaceutical factory. At that time, investing in factories was the first option for multinational pharmaceutical companies when entering China, and building standardized and large-scale production lines became the top choice for each company.
At the turn of the century, multinational pharmaceutical companies began to invest and build R&D centers in China on a large scale. In 1997, Danish pharmaceutical company Novo Nordisk set up a R&D center in Beijing, becoming the first multinational biopharmaceutical company to have a R&D center in China. In 2001, when China joined the World Trade Organization, more multinational pharmaceutical companies began to set up offices in the country, set up investment companies and continued to build factories. After January 2002, more than 10 giants including AstraZeneca, Roche, Takeda, Pfizer, GlaxoSmithKline, and AbbVie have successively set up R&D centers in China.
In 2000, Pfizer paid US$90 billion overseas to secure the largest acquisition in the history of the pharmaceutical industry, thus acquiring atorvastatin (trade name: Lipitor) and becoming the No.1 pharmaceutical company in terms of revenue. A wave of mergers and acquisitions in the Chinese pharmaceutical industry also followed.
In July 2008, Bayer acquired Topsun Science Technology’s paracetamol and pseudomephene tablets II (trade name: Baijiahei) for 1.072 billion yuan, opening the door for multinational pharmaceutical companies to invest in and acquire Chinese pharmaceutical companies and medicines. In the following 10 years, foreign companies continued mergers and acquisitions. Among them, Sanofi spent about 3.5 billion yuan to purchase the local pharmaceutical company BMP Sunstone Corp, which became the largest M&A deal in the domestic pharmaceutical industry at that time. The target company owned a well-known domestic health brand at that time.
In addition to investing in the acquisition of competitive products, during the same period, the joint-venture model between foreign companies and local companies emerged, while local pharmaceutical companies also began to rise. In September 2012, Simcere and MSD established a joint venture, with MSD holding 51% and Simcere 49%. Pfizer and Hisun Pharmaceutical also established a joint venture company called Hisun-Pfizer in the same year.
However, many partnerships didn’t lead to happy endings. In 2015, the joint venture between Simcere and MSD stopped operation. In 2017, Pfizer chose to withdraw from Hisun-Pfizer. Similar cases happed between Sanofi and Minsheng Pharmaceuticals, Amgen and Betta Pharmaceuticals, Santen Pharmaceutical and Kerui Pharmaceuticals, GSK and Neptunus Biotechnology.
With the emergence of healthcare start-ups, foreign pharmaceutical companies have also begun to test the waters to invest in Chinese innovative pharmaceutical companies. Eli Lilly’s Lilly Asia Ventures (LAV) invested in CanSino in August 2013, while Lilly’s investment in Innovent was a benchmark event at that time, setting a record for foreign pharmaceutical companies investing in an innovative pharmaceutical company in China. Since then, similar cooperation between BeiGene and Amgen, Pfizer and CStone, Sanofi and Innovent (on August 4 this year) has been popular.
Subsequently, with dramatic changes in policies, domestic innovative drugs boomed and centralized procurement was delivered. In addition to competition to their mature products, multinational pharmaceutical companies also face challenges on new products in terms of potential price reduction under NRDL negotiations and quick actions by competitors. In order to maintain their advantages and seek new growth drivers, in addition to divesting non-core businesses, multinational pharmaceutical companies are also continuing to seek new breakthroughs.
In January 2019, only two months after the blockbuster cardiovascular drug rosuvastatin (trade name: Crestor) was excluded from the “4+7 Pilot Procurement Program”, AstraZeneca announced that it would acquire the exclusive promotion rights of Xuezhikang in mainland China from Luye Pharma, marking a multinational pharmaceutical company starting to sell Chinese patent medicines and demonstrating its broader vision.
Regarding the changes in the investment trend of multinational pharmaceutical companies in China, Leon Wang, Executive Vice President, International and President of AstraZeneca China, sad in his speech at the 5th AstraZeneca Ecosystem Annual Meeting that because China was one of the largest consumer markets, most multinational companies previously regarded China as an important market to sell products. Also due to the robust supply chain capabilities in China, they set up manufacturing bases in China, so many medicines for the global markets were made in China. In this process, a new trend has emerged. With the improvement of China’s independent innovation capabilities, technological breakthroughs, and rising talents, it has been gradually transforming from a market and a manufacturing base to the source of innovation; and investment has also been following this trend. Previously, multinational pharmaceutical companies invested to set up factories and representative offices. In recent years, they have gradually established global R&D centers and international life science innovation parks and industrial parks. These have become new investment directions.
The author is Huang hua.
Source: Jiemian News
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