The year-end inventory of the pharmaceutical industry enthusiasm in the emerging markets in 2010 enclosure

According to common sense, on the 6th of January, after the biggest 3 super mergers in history in the pharmaceutical industry in 2009, the momentum of mergers and acquisitions will generally weaken and slow down. However, the actual situation is that the M&A boom did not show signs of slowing in 2010, and the places where it took place are increasingly turning to emerging markets.

With the slowdown in pharmaceutical sales growth in major markets in the United States, Europe, and Japan, some large pharmaceutical companies have followed emerging markets, and Eastern Europe, Russia, South America, the Middle East, and Asia have all become important contests for large pharmaceutical companies. CEOs are very optimistic about the huge business opportunities through mergers and acquisitions quickly into emerging markets.

In the past 12 months, the largest transaction amount in cross-border mergers and acquisitions transactions was initiated by Abbott. The most frequently traded transaction was GSK, followed by Sanofi-Aventis.

The first three quarters of the five major transactions

In the first three quarters of 2010, the top five deals in emerging markets were initiated by Abbott, GlaxoSmithKline, and Novartis. The acquired parties involved China, India, Argentina, Brazil, and South Korea.

The largest amount of trading was initiated at Abbott, which acquired the branded generics division of Indian pharmaceutical company Piramal Medical Group for $3.72 billion.

GlaxoSmithKline’s most “hyperactive” accounted for 3 seats in the top five deals. The most "just right" deal is GSK. One year before denosumab won the FDA approval for listing, GlaxoSmithKline took the lead and won the pharmaceutical sales rights in China, Brazil and India.

In November 2009, Novartis announced the acquisition of Zhejiang Tianyuan Biotechnology Co., Ltd., a local private vaccine company in China, for US$125 million. It has been unsuccessful until now and it has been followed by the industry for a full year.

NO1: Abbott acquires the generic pharmaceutical division of India's Piramal Medical Group

Transaction amount: 3.7 billion US dollars

In May 2010, Abbott announced that it had acquired the branded generics division of Indian pharmaceutical company Piramal Medical Group for US$3.72 billion. Abbott has made a down payment of US$2.22 billion and will pay an additional US$400 million each year between 2011 and 2014.

Although the largest pharmaceutical company in India’s sales force was previously favored by Sanofi-Aventis and Pfizer, Abbott’s quickest and most powerful approach was Abbott.

India is one of the fastest growing pharmaceutical markets in the world. The pharmaceutical industry’s sales are expected to reach 8 billion U.S. dollars by 2015, which is double the 2010 figure. The purchase of Piramal will enable Abbott to capture a 7% share of the Indian pharmaceutical market and own the country’s largest sales force in the industry.

NO2: GSK Purchases Argentine Phoenix Laboratories

Transaction amount: 253 million U.S. dollars

NO3: GlaxoSmithKline and Amgen Announce Agreement on Sale of Osteoporosis Drugs in Emerging Markets

Transaction amount: 120 million US dollars

NO4: GSK acquires South Korea's Dong-A Pharmaceutical

Transaction amount: 114 million US dollars

GlaxoSmithKline has the highest frequency of transactions, and it relied on the Korean and Argentinean markets in May and June last year.

In May of this year, GlaxoSmithKline purchased a 9.9% stake in Dong-A Pharmaceutical, Korea's largest drug and non-prescription drug supplier.

The Korean pharmaceutical market is the 13th largest pharmaceutical market in the world, with a compound growth rate of 13.9% from 2006 to 2008. Prior to this equity participation, GlaxoSmithKline’s pharmaceutical sales in South Korea were only US$338 million, ranking fifth in the country.

In June 2010, GlaxoSmithKline acquired Argentine pharmaceutical company Laboratorios Phoenix for US$253 million. Through this acquisition, GlaxoSmithKline will obtain a variety of generic drugs products, covering the cardiovascular, gastrointestinal, metabolic and urinary fields, access to a pharmaceutical factory and a well-trained first-line sales force. The merger of GlaxoSmithKline Argentina and Phoenix will become the third largest pharmaceutical manufacturer in Argentina.

According to IMS data, Argentina is the eighth largest emerging market in the world, with an annual sales volume of approximately US$3 billion and an annual growth rate of 22%. Phoenix Labs' sales in 2009 were US$110 million. Prior to its acquisition by GlaxoSmithKline, the company ranked No. 11 among pharmaceutical manufacturers in the country.

The most traded time is still GlaxoSmithKline. One year before denosumab won the FDA approval for listing, GlaxoSmithKline took the lead and won the pharmaceutical sales rights in China, Brazil and India. This is the largest three countries in emerging markets. In addition, GSK acquired marketing rights in South Korea and other places. At the same time, Amgen and GlaxoSmithKline also agreed to share the commercialization of denosumab in Europe, Australia, New Zealand and Mexico. GlaxoSmithKline, on the other hand, pays Anjin $120 million plus sales commission. Analysts estimate that the drug will eventually reach $2 billion in annual sales.

The denosumab, a new drug developed by Amgen, the world's largest biotechnology company, to treat osteoporosis in postmenopausal women is favored by Wall Street analysts and is considered to be a heavy drug in the future. After the drug was approved by the FDA in June of this year for the treatment of osteoporosis in postmenopausal women, the indications were added and approved by the FDA to reduce the fracture risk of patients with breast, prostate, and other cancers.

NO5: Novartis acquires Zhejiang Tianyuan Bio

Transaction amount: 1 billion yuan

In November 2009, Novartis announced the acquisition of Zhejiang Tianyuan Biotechnology Company, a local private vaccine company, for US$125 million. When this decision was announced, Novartis CEO Daniel Vasella once mentioned that China will become Novartis's third largest pharmaceutical market in the world, and Novartis will invest US$1.5 billion in China to strengthen R&D and business development. However, to date, this transaction has still not been approved by the Ministry of Commerce. It is worth mentioning that before Novartis signed an agreement to purchase Tianyuan Biotech, it was in a critical moment when the bird flu outbreak was serious, the production of vaccine facilities was short, and Novartis' own investment site had not yet passed the FDA certification.

Tianyuan Bio's main business is vaccine development, production and sales. Since 2006, its sales have grown rapidly. In 2008, it has exceeded US$25 million. Novartis is obviously taking a fancy to the position and resources of this vaccine company in China. It hopes to leverage Novartis's advantages in the development, manufacturing, technology, and sales network of new vaccine products to build a leading vaccine company in the Chinese market.

The degree of competition in the Chinese vaccine market is not as intense as chemical generic drugs. In this area, Chinese companies have the strength and scale to be basically acquired by Sinopharm Group, and the rest are generally private enterprises. As long as it has a certain scale and sales channels, it may be acquired by foreign investors.

The fourth quarter of the Chinese market broke out

If you do not consider the wave of hot mergers and acquisitions that have risen again in the fourth quarter of last year, the above five M&A deals may not be controversial. However, in the fourth quarter, the renminbi continued to appreciate and raise interest rates, prompting multinational pharmaceutical companies to increase their purchases and speed up Chinese pharmaceutical companies.

On October 28, Sanofi-Aventis announced the acquisition of Meihua Solar Stone Group, a Chinese pharmaceutical manufacturer and distributor listed on the Nasdaq, for US$520 million (approximately RMB 3.473 billion). This is the largest amount of foreign capital acquisition of Chinese pharmaceutical companies.

Sanofi Avant took an extraordinary shot this time and was determined to win it. He took the two brands of OTC drugs in the hands of this Chinese pharmaceutical company. Meihua Sunstone has annual sales of less than US$200 million and the profit is not high, but Sanofi-Aventis has taken a look at the company’s OTC brand and its established distribution channels – this is for Sanofi Anwan It is crucial to expand its drug marketing to third- and fourth-tier cities.

Within a few days, Sanofi-Aventis announced high-profile cooperation with Hangzhou Minsheng Pharmaceutical Co., Ltd. and established Sanofi Minsheng Health Pharmaceutical Co., Ltd. in Hangzhou. Foreign pharmaceutical giants spend so much money to joint ventures and support OTC and vitamin products, which was hard to imagine many years ago, because the profit rate of such products is not high compared with brand drugs, and large pharmaceutical companies usually do not touch.

In fact, controlling channels and acquiring local brands have already become shortcuts for big pharmaceutical companies. Two years ago, Bayer acquired the OTC products such as “White Plus Black” from Dongsheng Technology for RMB 1.072 billion. Sanofi-Aventis this time is more than 500 million US dollars is generous, but added two large pediatric and gynecological OTC brand products, but also control the third and fourth line cities sales channels. Sanofi-Aventis can fully use its domestic production facilities and its own brands to launch more products, resulting in better benefits and sales. Sanofi’s CEO even more unambiguously stated that one-third of its sales in the future Chinese pharmaceutical market will come from these channels.

In the fourth quarter, it wasn’t just Sanofi that was in the Chinese market. In early November, Nycoming of Switzerland bid $210 million to acquire 51.34% of shares in Guangdong Tianpu Biochemical Pharmaceutical Co., Ltd. Nycomed took control of this protein-based biopharmaceutical company with potential for international market development in China, and also provided marketing channels and business platforms for its own important products such as Pantoluck, Bingding and Love.

Tianpu Biochemical is a very unique company in China. Long term is the use of urine to purify and develop innovative protein drugs. The company's operating income in 2009 was 450 million yuan.

After the completion of this acquisition, it is expected that Nicco China and Tianpu will have a combined operating income of RMB 1.5 billion in 2011. After five years, it is expected to rank among the top 15 in the Chinese pharmaceutical market.

On December 7, GlaxoSmithKline announced that it will invest 70 million to 100 million U.S. dollars in the acquisition of Nanjing Meirui Pharmaceutical Company. Meirui is a joint venture established by Nanjing Pharmaceuticals in 1996 and Farmasia in Sweden and Far East Hooker in the United States. It mainly produces urinary drugs and allergies, with an annual growth rate of 27% last year. If the acquisition can be successfully completed, Nanjing Meirui's existing sales channels and medical resources will help Glaxo's urological drug "Purgetsutong" quickly increase sales in the Chinese market.

Multinational pharmaceutical companies return to India

In the past year, foreign pharmaceutical companies have been more active in pharmaceutical M&A deals in India than in China. Following the acquisition of Lan Boxi by Japan’s First Sanchi Holdings in the previous year, Abbott quickly took over last year and won the brand generic pharmaceuticals division of Piramal Medical Group, India’s largest and best-selling company, for US$3.7 billion. More co-operations between large pharmaceutical companies such as Merck and Pfizer and Indian pharmaceutical companies have been announced in succession, marking that foreign pharmaceutical companies are returning to the Indian pharmaceutical market and continue to favor development and M&A opportunities in India.

The Indian pharmaceutical market was dominated by multinational pharmaceutical companies in the 1970s, and 85% of the pharmaceutical market was owned by multinational companies. With the opening of India's drug approvals, India's generic pharmaceutical industry began to rise. After decades of hard work, Indian local pharmaceutical companies have not only dominated the Indian domestic market, but have also made significant inroads into the international market. They have driven their products into North America and Europe, and their prosperity has once been hailed by Indian nationals. Today, only 25% of India's markets are owned by multinational pharmaceutical companies.

However, in the next 3 to 4 years, at least 40% of the market will be occupied by foreign pharmaceutical companies. A substantial $ 3.7 billion acquisition by Abbott is enough to show the importance of multinationals to the Indian market. In the next 18 months, there will be at least two M&A transactions announced to the public. Some analysts believe that as cross-border mergers and acquisitions continue to heat up, more than 50% of India's pharmaceutical market will become a foreign site.

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