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The Week in Review: Are WuXi PharmaTech and ShangPharma Takeover Targets?
Deals and Transactions
WuXi PharmaTech (NYSE: WX) and ShangPharma (NYSE: SHP) are both attractive M&A targets, according to a Bloomberg News article (see story). Both China CROs have higher profit margins than their US peers, and both are growing faster than US CROs. Nevertheless, their PE ratios are lower, making them value propositions for their US competitors. To gain perspective on the situation, Bloomberg quoted Greg Scott, ChinaBio®’s CEO, who said China’s CRO industry is healthy, with demand growing steadily. Both companies have the “ability to deliver a cost advantage while maintaining very high quality,” he added.
Cardinal Health (NYSE: CAH), the US-based drug distributor, plans to make $90 million in China acquisitions to bolster its geographic coverage in mainland China (see story). In addition, Cardinal said it is expanding its China product offerings to include medical products, lab equipment and other supplies. Cardinal bought a distribution foothold the PRC market in late 2010 by paying $470 million for Zuellig Pharma China, a company that specialized in distributing imported drugs in China.
Tianjin Tasly Pharma (SHA: 600535) and SemBioSys Genetics (TSX: SBS) of Canada have received business licenses for their Tianjin-based JV, which is based on SemBioSys’ seed-based oilbody and genetic expression technology (see story). Ultimately, the JV expects to use the technology to produce insulin for China and the rest of world. In the near-term, it will develop modernized TCM products and nutraceuticals. After that, the JV will turn its focus toward animal food additives.
Transgene (Euronext: TNG) announced two new China-related initiatives: with three European institutions, Transgene formed a scientific cooperation program that includes Fudan University Shanghai Cancer Center; it also established a Shanghai subsidiary with a staff of five to perform academic and early-stage projects (see story). Transgene, a French biopharma, positioned the moves as a way of taking advantage of China’s impressive research activity as well as the country’s market for pharmaceuticals.
Government and Regulatory
To promote the research and registration of innovative therapeutics in Beijing, the Beijing FDA has issued a new set of guidelines for fast-track status, effective February 12, 2012 (see story). The new set of rules mandate a review time of just 15 working days, down from 30 working days under the previous guidelines. Also, seven categories of drugs now qualify for fast-track status in Beijing, against four categories of eligible candidates in the national-level SFDA.
Big Pharma in China
Steve Yang, AstraZeneca’s (NYSE: AZN) high profile VP and Head of R&D for Asian and Emerging Markets, is setting an ambitious goal for the company’s China R&D operation: “We will try to innovate and transform how we do R&D,” said Yang in a McKinsey Quarterly interview (see story). Because innovative pharma development is still new in China, “we are starting with a clean slate,” he added. “But that could be an opportunity,” given that established ways of doing drug R&D are not institutionalized, leaving China free to map its own path.
AstraZeneca also announced another 7,300 layoffs, bringing its total to over 21,000 over the past few years. The latest round will affect staff counts in the US and Europe (see story). Among other things, the cutbacks mean closing the company’s in-house neuroscience R&D facilities, eliminating 2,200 staff and leaving AstraZeneca with a virtual program in that disease area. At the same time, AstraZeneca is building a $200 million plant in Taizhou; it has bought a generic drug company in China; and it recently signed a $140 million oncology drug partnership with Hutchison MediPharma.
Frontage Laboratories announced its US facility has finished a Phase I dose-escalation trial of a botanical drug for a China client (see story). The test will be used to support a request for FDA approval of the drug. One year ago, Frontage announced a $50 million strategic collaboration with Yabao Pharma of Beijing. The two companies planned to develop sustained release delivery for more than 20 drug products for use in the US and Europe. This drug being tested may be part of that deal.
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