Business Club December 7th China's pharmaceutical market has great potential, but it is relatively decentralized. In order to win the initiative in product sales, many foreign companies have adopted a step-by-step strategy. That is, in addition to continuing to consolidate sites in first-tier cities, including Beijing, Shanghai, and Guangzhou, which account for about 21% of the country's pharmaceutical market, it has continued to increase its expansion efforts in second-tier cities.
In recent years, foreign companies, especially multinational companies, have launched various forms of investment actions in the Chinese medicine field, and the expansion trend has become increasingly apparent. The main way to gain market dominance is to attract the most attention from mergers and acquisitions, and the number and scale have increased year by year. Features are:
M&A production companies gain cost advantages
At present, many multinational pharmaceutical companies in order to obtain economies of scale in the production of non-patented drugs, reduce costs, and continue to merge and reorganize, its main goal is the large-scale production enterprises in China.
In November 2004, the Dutch DSM Group expressed its desire to establish a joint venture with North China Pharmaceuticals to produce penicillin, investing US$164 million and a world-class production line worth US$84 million. For DSM, Huayou has both low production costs and resource advantages, and strong production capabilities. It can use Huayou's cost advantage to produce high-quality, low-cost APIs for its raw materials. The influence of the Chinese market has entered China's high-end market for vitamins and antibiotics. As this case is not finally approved, it will be the largest M&A case for multinational companies in China.
In September 2005, Malaysian pharmaceutical company Puma acquired a 40% stake in Wuxi Huayuan Changfu Pharmaceutical with US$ 5.69 million. In the same year, the Japanese antibiotic company, Meiji Seika Co., Ltd. invested 3 billion yen to jointly produce medical raw materials and raw materials for animal antibiotics. In October 2007, Bayer acquired 3 OTC brand drugs such as “White Plus Black†from Dongsheng Technology for RMB 1.072 billion. Tung Shing Technology OTC business accounted for more than 80% of its main revenue, this acquisition is actually taking away most of the country. In November 2008, Smiths Medical, the largest medical machinery manufacturer in the United Kingdom, acquired Zhejiang University Medical Instrument Co., Ltd., thus occupying the largest share of the domestic medical syringe pump market.
Speed ​​up access to second and third-tier cities
Although China's pharmaceutical market has great potential but is relatively decentralized, in order to win the initiative in the field of pharmaceutical product sales, many foreign companies have adopted a step-by-step strategy. That is, in addition to continuing to consolidate sites in first-tier cities, including Beijing, Shanghai, and Guangzhou, which account for about 21% of the national pharmaceutical market, the expansion of second-tier cities, which account for about 37% of market share, continues to increase.
In the first- and second-tier cities, large and medium-sized hospitals up to 500 beds and down to 300- and-small-medium-sized hospitals can often see the presence of foreign pharmaceutical representatives, and the sales force continues to expand. At present, foreign companies have closely targeted their communities to focus on development and launched targeted sales training. In the third-tier cities that account for about 16% of the national pharmaceutical market, most foreign companies do not directly send sales representatives to the hospitals because they rely on the sales model of middlemen. Therefore, it has been impossible to control the sales channels of hospitals for a long time. As a result, foreign companies have adjusted their marketing models and sent sales representatives directly. This trend is particularly evident in third-tier cities in the more affluent regions.
According to China's WTO commitments, the pharmaceutical circulation sector is fully open to the outside world on December 11, 2004, and foreign companies can engage in all business activities including procurement, warehousing, transportation, retail and after-sales services in China. For foreign companies, through the leading companies in the M&A market segmentation, they can avoid barriers to entry, save access costs, and further fully occupy marketing channels.
In December 2004, Meihua Medical of the United States took a one-million-dollar equity stake in the acquisition of Beijing Wanwei Pharmaceutical and became the first wholly foreign-owned company to enter China's pharmaceutical distribution field. In July 2005, the United States Bausch & Lomb invested 200 million U.S. dollars to acquire a 55% stake in Shandong Zhengda Furuida Pharmaceutical. This acquisition of Bausch & Lomb recombined the marketing network of Shandong Zhengda with its strong ophthalmic brand, which greatly accelerated the expansion of Bausch & Lomb in the Chinese ophthalmic market. In April 2005, Japan’s Sumitomo Corporation, Sumitomo Corporation (China) and Henan Tianfang Pharmaceutical signed the “Share Purchase Agreementâ€. The Japanese party can use Tianfang Pharmaceutical’s huge sales channel to directly enter the distribution of drugs in Henan, a populous province. field. In 2008, GM Group acquired Tianfang Pharmaceutical and Sumitomo Corporation decided to withdraw. In January 2007, Alliance Boots, one of the UK's largest pharmaceutical distribution and retail companies, announced that it will form a joint venture with China's third largest pharmaceutical wholesale company, Guangzhou Pharmaceutical Co., Ltd., which will have a 50% stake in Boyz. Come to its marketing network in China quickly spread out. In May 2007, Shanghai Pharmaceuticals Co., Ltd. also established a joint venture with Japan's largest hospital drug distributor, Qian Qian Co., Ltd., and Japan owns a 50% stake in the company. In October 2008, EQT Asia, a subsidiary of Sweden's Yinrida Group, the largest industrial holding company in Northern Europe, invested more than US$80 million in shares of the Hunan people and entered the pharmaceutical retail terminal.
Targeting Biomedicine to Capture R&D Advantages
At present, although a few developed countries have an absolute share in the global biopharmaceutical market, with the continuous subdivision of biotechnology R&D, even large multinational biopharmaceutical companies can hardly complete all their R&D work alone. China's biopharmaceutical industry started late, but it has first-rate scientific research personnel and achievements, rich disease resources, low clinical trial costs, and efficient logistics and distribution networks.
In recent years, foreign-funded enterprises have shifted the focus of mergers and acquisitions to emerging biopharmaceutical companies with outstanding research and development capabilities, promising product market development prospects, and strong sustainable development capabilities. In July 2003, Baxter invested US$15 million in a joint venture with Xi'an Libang Pharmaceutical to produce the intravenous anesthetic agent commonly used in China. Baxter is a world-renowned medical product and service company, and the self-developed bis-propofol injection from Libang Pharmaceutical has been included in the national "Eighth Five-Year Plan" and "Ninth Five-Year Plan" research projects. Mergers and acquisitions can enable the United States to use the existing advantages of Xi'an Libang, reduce the research and development costs of new products, improve product lines, and create conditions for entering China's bio-pharmaceutical market.
Set up research and development center to realize the advantages of grafting
In recent years, multinational corporations such as Roche, AstraZeneca, GSK, Lilly, and Bayer have set up R&D centers in China to bring their R&D strengths to fruition with China's talent and clinical trials.
At present, the main characteristics of multinational corporation R&D institutions are the gradual transition from non-core technology development to core technology development. Second, R&D institutions are mainly concentrated in areas where Beijing, Shanghai, Tianjin, and Wuxi have relatively concentrated scientific research forces. Third, most of them are mainly non-independent legal persons. Most multinational companies tend to set up non-corporate R&D institutions in China to facilitate management and control and facilitate the commercialization of R&D results as soon as possible. Fourth, the technology spillover effect is not yet obvious. Foreign-funded R&D personnel are relatively stable. A small amount of personnel flow is also limited to foreign-funded enterprises. Patent protection is strict, and their scientific research results rarely flow to domestic companies.
In October 2008, Sanofi-Aventis began to expand its research and development organization in China and expand its R&D scale. Its R&D center in Beijing will become the company’s fourth largest R&D center in the world. Its business involves the development of pharmaceuticals and clinical Research, biostatistics and programming, clinical data management and registration, etc., and will strengthen cooperation with the Shanghai Institute of Life Sciences, Chinese Academy of Sciences. In early 2009, Bayer Schlenk invested 100 million euros in the establishment of a global R&D center in Beijing, making it the fourth largest R&D facility in the world for Bayer HealthCare. In August, Novartis's antihypertensive drug, Astin, was listed in China. Its main target was the primary medical market in China, and it invested more than US$250 million to establish a research and production base for APIs in Changshu, Jiangsu. In September, AstraZeneca Innovation Center was set up in Shanghai's Zhangjiang Hi-Tech Park and engaged in the research and development of innovative drugs, and stated that it will lock its annual business growth rate in China for 22% in the next 10 years. In October, the low-key German Boehringer Ingelheim announced that it would add 100 million euros, mainly for expanding production capacity and building new R&D centers.
Back into the traditional Chinese medicine market
Chinese medicine is China's most independent intellectual property pharmaceutical products. With the wide rise of alternative therapies in Europe and America and the unique role of botanicals in recent years, more and more foreign pharmaceutical companies are seeking new traditional pharmaceutical products with market selling points in China. Because Chinese government has strict restrictions on foreign investment in the field of traditional Chinese medicine, it is prohibited to engage in the processing of Chinese medicinal materials that are included in the national protection resources, the production of traditional Chinese medicine decoction pieces and processing techniques, and the production of secret products of proprietary Chinese medicines. Therefore, many multinational companies hope to adopt traditional Chinese medicines. The investment-based mergers and acquisitions of enterprises, in order to fight the "wielding the ball," the bypass way, access to scarce Chinese medicine resources, occupy the traditional Chinese medicine market share.
In May 2004, U.S. Oriental Biotechnology acquired a 100% stake in Heilongjiang Songhuajiang Pharmaceuticals, which mainly produces traditional Chinese medicine, for US$7.2 million. In March 2005, the United States Rihui Group invested US$15 million in Hualiang Pharmaceuticals to develop the “Northern Medicine†resources of Changbai Mountain in Jilin. Hualiang Pharmaceuticals, with its solid foundation, owns 2,040 mu of GAP planting base in the hinterland of Changbai Mountain. Mergers and acquisitions provide an advantageous platform for Rihui Group to enter the field. In July 2009, Sino-US SIG collaborated with Daintang Chinese Medicine Factory, a subsidiary of Tianjin Zhongxin Pharmaceuticals, in the sales of proprietary Chinese medicines. (
In recent years, foreign companies, especially multinational companies, have launched various forms of investment actions in the Chinese medicine field, and the expansion trend has become increasingly apparent. The main way to gain market dominance is to attract the most attention from mergers and acquisitions, and the number and scale have increased year by year. Features are:
M&A production companies gain cost advantages
At present, many multinational pharmaceutical companies in order to obtain economies of scale in the production of non-patented drugs, reduce costs, and continue to merge and reorganize, its main goal is the large-scale production enterprises in China.
In November 2004, the Dutch DSM Group expressed its desire to establish a joint venture with North China Pharmaceuticals to produce penicillin, investing US$164 million and a world-class production line worth US$84 million. For DSM, Huayou has both low production costs and resource advantages, and strong production capabilities. It can use Huayou's cost advantage to produce high-quality, low-cost APIs for its raw materials. The influence of the Chinese market has entered China's high-end market for vitamins and antibiotics. As this case is not finally approved, it will be the largest M&A case for multinational companies in China.
In September 2005, Malaysian pharmaceutical company Puma acquired a 40% stake in Wuxi Huayuan Changfu Pharmaceutical with US$ 5.69 million. In the same year, the Japanese antibiotic company, Meiji Seika Co., Ltd. invested 3 billion yen to jointly produce medical raw materials and raw materials for animal antibiotics. In October 2007, Bayer acquired 3 OTC brand drugs such as “White Plus Black†from Dongsheng Technology for RMB 1.072 billion. Tung Shing Technology OTC business accounted for more than 80% of its main revenue, this acquisition is actually taking away most of the country. In November 2008, Smiths Medical, the largest medical machinery manufacturer in the United Kingdom, acquired Zhejiang University Medical Instrument Co., Ltd., thus occupying the largest share of the domestic medical syringe pump market.
Speed ​​up access to second and third-tier cities
Although China's pharmaceutical market has great potential but is relatively decentralized, in order to win the initiative in the field of pharmaceutical product sales, many foreign companies have adopted a step-by-step strategy. That is, in addition to continuing to consolidate sites in first-tier cities, including Beijing, Shanghai, and Guangzhou, which account for about 21% of the national pharmaceutical market, the expansion of second-tier cities, which account for about 37% of market share, continues to increase.
In the first- and second-tier cities, large and medium-sized hospitals up to 500 beds and down to 300- and-small-medium-sized hospitals can often see the presence of foreign pharmaceutical representatives, and the sales force continues to expand. At present, foreign companies have closely targeted their communities to focus on development and launched targeted sales training. In the third-tier cities that account for about 16% of the national pharmaceutical market, most foreign companies do not directly send sales representatives to the hospitals because they rely on the sales model of middlemen. Therefore, it has been impossible to control the sales channels of hospitals for a long time. As a result, foreign companies have adjusted their marketing models and sent sales representatives directly. This trend is particularly evident in third-tier cities in the more affluent regions.
According to China's WTO commitments, the pharmaceutical circulation sector is fully open to the outside world on December 11, 2004, and foreign companies can engage in all business activities including procurement, warehousing, transportation, retail and after-sales services in China. For foreign companies, through the leading companies in the M&A market segmentation, they can avoid barriers to entry, save access costs, and further fully occupy marketing channels.
In December 2004, Meihua Medical of the United States took a one-million-dollar equity stake in the acquisition of Beijing Wanwei Pharmaceutical and became the first wholly foreign-owned company to enter China's pharmaceutical distribution field. In July 2005, the United States Bausch & Lomb invested 200 million U.S. dollars to acquire a 55% stake in Shandong Zhengda Furuida Pharmaceutical. This acquisition of Bausch & Lomb recombined the marketing network of Shandong Zhengda with its strong ophthalmic brand, which greatly accelerated the expansion of Bausch & Lomb in the Chinese ophthalmic market. In April 2005, Japan’s Sumitomo Corporation, Sumitomo Corporation (China) and Henan Tianfang Pharmaceutical signed the “Share Purchase Agreementâ€. The Japanese party can use Tianfang Pharmaceutical’s huge sales channel to directly enter the distribution of drugs in Henan, a populous province. field. In 2008, GM Group acquired Tianfang Pharmaceutical and Sumitomo Corporation decided to withdraw. In January 2007, Alliance Boots, one of the UK's largest pharmaceutical distribution and retail companies, announced that it will form a joint venture with China's third largest pharmaceutical wholesale company, Guangzhou Pharmaceutical Co., Ltd., which will have a 50% stake in Boyz. Come to its marketing network in China quickly spread out. In May 2007, Shanghai Pharmaceuticals Co., Ltd. also established a joint venture with Japan's largest hospital drug distributor, Qian Qian Co., Ltd., and Japan owns a 50% stake in the company. In October 2008, EQT Asia, a subsidiary of Sweden's Yinrida Group, the largest industrial holding company in Northern Europe, invested more than US$80 million in shares of the Hunan people and entered the pharmaceutical retail terminal.
Targeting Biomedicine to Capture R&D Advantages
At present, although a few developed countries have an absolute share in the global biopharmaceutical market, with the continuous subdivision of biotechnology R&D, even large multinational biopharmaceutical companies can hardly complete all their R&D work alone. China's biopharmaceutical industry started late, but it has first-rate scientific research personnel and achievements, rich disease resources, low clinical trial costs, and efficient logistics and distribution networks.
In recent years, foreign-funded enterprises have shifted the focus of mergers and acquisitions to emerging biopharmaceutical companies with outstanding research and development capabilities, promising product market development prospects, and strong sustainable development capabilities. In July 2003, Baxter invested US$15 million in a joint venture with Xi'an Libang Pharmaceutical to produce the intravenous anesthetic agent commonly used in China. Baxter is a world-renowned medical product and service company, and the self-developed bis-propofol injection from Libang Pharmaceutical has been included in the national "Eighth Five-Year Plan" and "Ninth Five-Year Plan" research projects. Mergers and acquisitions can enable the United States to use the existing advantages of Xi'an Libang, reduce the research and development costs of new products, improve product lines, and create conditions for entering China's bio-pharmaceutical market.
Set up research and development center to realize the advantages of grafting
In recent years, multinational corporations such as Roche, AstraZeneca, GSK, Lilly, and Bayer have set up R&D centers in China to bring their R&D strengths to fruition with China's talent and clinical trials.
At present, the main characteristics of multinational corporation R&D institutions are the gradual transition from non-core technology development to core technology development. Second, R&D institutions are mainly concentrated in areas where Beijing, Shanghai, Tianjin, and Wuxi have relatively concentrated scientific research forces. Third, most of them are mainly non-independent legal persons. Most multinational companies tend to set up non-corporate R&D institutions in China to facilitate management and control and facilitate the commercialization of R&D results as soon as possible. Fourth, the technology spillover effect is not yet obvious. Foreign-funded R&D personnel are relatively stable. A small amount of personnel flow is also limited to foreign-funded enterprises. Patent protection is strict, and their scientific research results rarely flow to domestic companies.
In October 2008, Sanofi-Aventis began to expand its research and development organization in China and expand its R&D scale. Its R&D center in Beijing will become the company’s fourth largest R&D center in the world. Its business involves the development of pharmaceuticals and clinical Research, biostatistics and programming, clinical data management and registration, etc., and will strengthen cooperation with the Shanghai Institute of Life Sciences, Chinese Academy of Sciences. In early 2009, Bayer Schlenk invested 100 million euros in the establishment of a global R&D center in Beijing, making it the fourth largest R&D facility in the world for Bayer HealthCare. In August, Novartis's antihypertensive drug, Astin, was listed in China. Its main target was the primary medical market in China, and it invested more than US$250 million to establish a research and production base for APIs in Changshu, Jiangsu. In September, AstraZeneca Innovation Center was set up in Shanghai's Zhangjiang Hi-Tech Park and engaged in the research and development of innovative drugs, and stated that it will lock its annual business growth rate in China for 22% in the next 10 years. In October, the low-key German Boehringer Ingelheim announced that it would add 100 million euros, mainly for expanding production capacity and building new R&D centers.
Back into the traditional Chinese medicine market
Chinese medicine is China's most independent intellectual property pharmaceutical products. With the wide rise of alternative therapies in Europe and America and the unique role of botanicals in recent years, more and more foreign pharmaceutical companies are seeking new traditional pharmaceutical products with market selling points in China. Because Chinese government has strict restrictions on foreign investment in the field of traditional Chinese medicine, it is prohibited to engage in the processing of Chinese medicinal materials that are included in the national protection resources, the production of traditional Chinese medicine decoction pieces and processing techniques, and the production of secret products of proprietary Chinese medicines. Therefore, many multinational companies hope to adopt traditional Chinese medicines. The investment-based mergers and acquisitions of enterprises, in order to fight the "wielding the ball," the bypass way, access to scarce Chinese medicine resources, occupy the traditional Chinese medicine market share.
In May 2004, U.S. Oriental Biotechnology acquired a 100% stake in Heilongjiang Songhuajiang Pharmaceuticals, which mainly produces traditional Chinese medicine, for US$7.2 million. In March 2005, the United States Rihui Group invested US$15 million in Hualiang Pharmaceuticals to develop the “Northern Medicine†resources of Changbai Mountain in Jilin. Hualiang Pharmaceuticals, with its solid foundation, owns 2,040 mu of GAP planting base in the hinterland of Changbai Mountain. Mergers and acquisitions provide an advantageous platform for Rihui Group to enter the field. In July 2009, Sino-US SIG collaborated with Daintang Chinese Medicine Factory, a subsidiary of Tianjin Zhongxin Pharmaceuticals, in the sales of proprietary Chinese medicines. (
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