Deals and Financings

BGI Tech is planning a $400 million IPO in Hong Kong late in 2014 (see story). BGI Tech is a division of Shenzhen’s huge genomic sequencing company BGI. The Tech division, which is responsible for a majority of the parent company's income, provides contract sequencing and bioinformatics services to pharmas, agricultural and environmental companies. The IPO has been rumored since last September. Even though the offering has not yet been officially confirmed, details are starting to emerge.

Bayer AG (XETRA: BAYN) will acquire Dihon Pharmaceutical Group of China, a privately held company that makes OTC and TCM products (see story). Bayer said Dihon had revenues of $168 million in 2013. Analysts estimated Bayer may have paid as much as $680 million for its latest acquisition, though the purchase price was not disclosed. Dihon is located in southwest China’s Yunnan province.

Shanghai Shyndec Pharma (SHA: 600420) will acquire the 30% stake in Sinopharm Rongsheng it doesn’t already own for $48.8 million (see story). Before the transaction, Rongsheng was already contributing almost half of Shyndec’s profits. The closing of the transaction will raise Shyndec’s profits by 20%. Both companies are part of China’s state-owned pharmaceutical giant Sinopharm.

Shanxi Taxus Pharmaceutical will pay $5 million to acquire an 80%-90% stake in a California therapeutics company (see story). Taxus has not disclosed the name of the acquisition target. However, Taxus says the target is developing regenerative products and a diabetes treatment. Taxus grows yew trees, from which it produces the chemotherapy paclitaxel, a treatment for breast and ovarian cancer.

Essex Medipharma (HK: 1061), a subsidiary of Essex Bio-Technology, signed an agreement with Pfizer (NYSE: PFE) to be the exclusive importer and distributor for two types of Pfizer eye drops in China (see story). Xalatan® and Xalacom® eye drops both treat the high intraocular fluid pressure associated with glaucoma. The products will be a natural fit for Essex, which also makes therapeutics for the eye.

Government and Regulatory

China has introduced new M&A review procedures that will shorten approval times for most transactions to 30 days (see story). The Ministry of Commerce estimates that up to 60% of all M&A events will qualify for this new fast-track decision. The major determinant for fast-track approval is market share: the proposed tie-up cannot create a company with a commanding position in its market. If the resulting market share is large, MOFCOM will require as long as 180 days to render an opinion.

Industry Insights

China's pharmaceutical output in 2013 rose 18% to $355.4 billion, while profits were up 17.6% at $36 billion, according to the figures published by the National Development and Reform Commission (see story). TCM preparations did especially well, said the agency. On the other hand, the agency blamed weak economies in the US and Europe for keeping China’s drug industry from doing even better.

Disclosure: none.