Going West: Chinese Life Science Companies · the export rate. recent actions: •establish supporting fund for quality system upgrading and incentive award for the qualified enterprises

Songjie Liu, DVFA Life Science Conference, Ffm, 05/17/2011

Going West:Chinese Life Science Companies

Dr. Songjie Liu, Berlin GCTex ‐ German Chinese Technology Exchange

(www.gctex.de)


Overview

I.Introduction: GCTex

II.Going West: Motivation and approaches for Chinese Companies

III.Political and Financial Support by Chinese Government

IV.Chinese Pharmaceutical Industry and their Internationalization Strategies.V. Activities of “Going West” of Chinese healthcare industries

‐ Export‐ FDI‐ IPO overseas‐ M&A and Joint Venture

VI. Chinese Bio‐Pharmaceutical Industry and its internationalization strategies


GCTex – German Chinese Technology Exchange

• located in Berlin, cooperates with German business partners with expertise of

healthcare industry and life science.

• established broad partnership with Chinese companies, financial institutions,

market research agencies and industrial associations as well as various

government agencies (SFDA, CCPIT, CCIC etc.)

• delivers business opportunities as projects, such as licensing, investment,

distribution, contract manufacture services, technology transfer, Co‐R&D and

market expansion for Chinese and European companies

• offers consulting services for project Implementation.


selected aspects ‐ hierarchical !

• Market expansion as principle motive behind

internationalization – often also to fill existing capacities.

• Acquisition of strategic assets, e.g. access to (patented)

technologies, brands …

• Broadening of financial basis by attracting non-Chinese

capital

”Going West“: Motivation for Chinese Companies


•Trading as major way to participate in international competition and cooperation.

The establishment of trade representative offices, subsidiaries, trading companies

and R&D centers

•Equity Investment into international firms.

•Acquisition of foreign companies (both full control or minority‐stake)

•IPO in the United States, Britain, Canada, Singapore to attract overseas capitals.

•As Service Providers: CRO and CMO

•Alliances with Western companies in fields of business R & D, manufacturing,

licensing and marketing.

”Going West“: Main Approaches


The government supports healthcare industry consolidation and increase

the export rate.

recent actions:

•establish supporting fund for quality system upgrading and incentive

award for the qualified enterprises encourage domestic enterprises to

actively expand in high regulated markets.

•set up a special fund to encourage export of patented and highly needed

drugs.

•support on the pricing in domestic market sale and tender process.

•Tax incentive to encourage export .

Political and financial Support by Chinese Gouvernement


‐ The largest Pharma companies are actively preparing for a string of

applications such as cGMP, ADNA in the hope of securing foreign

partners and opening effective channels for access to the international

market through contract formation, technology transfer, OEM

processing and so on.

‐ All top five companies annual revenue reached more than 10 billion

Yuan. They are:

Internationalization Strategy of the China Pharmaceutical Industry


Company Rank Owner Listed in

Yangtze River 1 Private ‐

Hayao 2 State SH

Xiuzheng 3 private ‐

Huabei 4 State SH

Shiyao 5 State HK

Source: Ministry of Industry and information Technology P.R.China

Internationalization Strategy of the China Pharmaceutical Industry


Company Rank ScoreStock Symbol Listed in

Hengrui 1 600276 SH 45.6

Yunnanbaiyao 2 538 SZ 43.87

Huadongmedicine 3 963 SZ 43.41

Mindray 4 MR NY 43.2

Livzon 4 513 SZ 43.2

The Top 5 Most Competitive Firms in China 2010(healthcare industry)

Source: China Pharmaceutical Enterprise Management Association, Medicine Manager Journal


Activities of ”Going West” of Chinese Life Science Companies

‐ Export

‐ FDI

‐ stock market present overseas

‐ M&A and JV


Western Medicine (WM) Exports of Chinese Pharmaceutical Companies

Rank Country Export Sales (US$ mln)

+/‐ (%) Share (%)

1 USA 2,813 ‐7.39 14.652 India 2,330 +9.25 12.133 Germany 1,243 ‐5.51 6.474 Japan 1,233 ‐6.75 6.425 South Korea 932 +5.02 4.856 The Netherlands 797 ‐13.08 4.157 Brazil 560 ‐8.15 2.928 Italy 553 ‐1.74 2.889 Belgium 472 +1.76 2.4610 Spain 453 ‐15.71 2.36

Total 11,386 ‐ 59.29

Top Ten Export Markets for WM in 2009

source: China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCIEMHP)


Category Import Export

Import Value (US$ mln)

+/‐(%)

Share(%) Export Value (US$

mln)

+/‐(%)

Share(%)

APIs 7,713 +23.46 56.75 16,559 ‐4.53 86.23

WM formulations 4,858 +22.19 35.75 1,198 +7.76 6.24

Biochemicals 1,019 +31.84 7.50 1,446 +60.22 7.53

Total 13,590 +23.59 100.00 19,203 ‐0.80 100.00

Product Categories (Im – and Export) of WM in 2009

source: China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCIEMHP)

Western Medicine (WM) Exports of Chinese Pharmaceutical Companies


Chinese Companies on the International Stock Market

•Stock market valuation of Chinese industrial companies (i.e. excl. financial sector) is 75.2 billion USD

•Of this, 11.5% belongs to medical healthcare industry

•Of this, medical devices account for 57% and pharmaceuticals for 41%.

•Trading places: 50% in USA, 22% in Hong Kong, Singapore 18%, UK 7%.

Source: UBS, 2009


Region Deals of chin. foreign Investment

Asia 27

North America 32

Oceania 15

EU + Russia 12

Africa 9

South America 4

source: PwC china report 2010

Chinese FDI


M&A Deal in Chinese Medical Branche

/ PWC

Top10 deals in 2008


•JV in USA 2008 : Technology from USA Biotech company; Investment of > $15 Mio. The JV operates in China and USA.

•JV with an European pharmaceutical Company on biological medicines, 2008 formed a JV with a European pharmaceutical company on Biological medicines. The JV is based on CN company’s IP and manufacturing capability, and the European company’s international sales network.

•Equity investment into a US generic drug company, 2009 CN Company purchased 10% of share of a US generic drug company for > US$ 5millions. CN Company’s capital and industrial resources greatly helped the UScompany to accelerate its growth. Now both parties are discussing more collaboration.

•JV with a US team to develop and to manufacture monoclonal antibodies, 2009 CN Company formed a JV with a US based team to develop and to manufactureantibody drugs. CN Company has committed an investment of $30 millions

•Equity purchase of two US public listed companies through secondary market, 2008-2010

CN Company spend >US$40 million to purchase the stock of two US publiclisted companies through secondary market and became their largest shareholder.

International Investment Activities out of China:Examples from of our Clients


Chinese M&A Market (total deals)


Chinese M&A Market (internal only)


Chinese M&A Market (with international participation)


Chinese M&A Market (broken down according to industry sector)


Biologicals

•More than 60 Chinese biomedical companies have applied biological drug development in SFDA, with < 50 companies qualified so far and grated a permit for “gene drug” production. Strongly funded by Chinese government.

•Most of the companies are still in small scale but with highly qualified personal trained in the west and international ambition (see turtle=海龟).

•The landscape of this branch is crowed with companies with same products and less number of innovative products.

•They are international oriented with high potential and with strategy of building up alliance and engagement globally (overseas IPO, M&A ).


谢谢


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Going West: Chinese Life Science Companies · the export rate. recent actions: •establish supporting fund for quality system upgrading and incentive award for the qualified enterprises