Fosun Pharma looks to upend pharmaceuticals with overseas M&A

June 17, 2015 11:50 AM

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Shanghai Fosun Pharmaceutical Group Co. plans to use acquisitions to expand overseas, and spend 5 billion yuan ($805 million) developing drugs in the next five years.

Drugmakers like Fosun need to have “good marketing and sales abilities, R&D capabilities and be good at conducting mergers and acquisitions” if they’re to consolidate China’s fragmented pharmaceutical industry, Chairman Chen Qiyu said in an interview in Shanghai.

Fosun is seeking to upend a market in which thousands of small manufacturers compete over low-cost generic drugs while foreign companies dominate on innovation. The Shanghai-based company has been the most active buyer in China’s healthcare industry, making 17 deals worth $1.6 billion since 2010, beating state-backed giants such as Sinopharm Group Co., according to data compiled by Bloomberg.

Chen hopes to increase Fosun’s overseas revenue to as much as 40 percent of the total from 12 percent now within five years via acquisitions, he said. The company will form teams to invest in business opportunities in mobile health technology, such as online consultation, to meet the need for general physicians in China, and mobile health devices.

Last month, Fosun Pharma joined three other investors in the purchase of Ambrx Inc., an American biotech firm. The company didn’t disclose the size of the deal.

“So far there haven’t been any big movements,” on overseas M&A, said Yongzheng Yan, an analyst with Capital Securities Corp. “I think in the future it will acquire some overseas distributors to expand its overseas sales abilities.”

Fosun Pharma invests heavily in biosimilars and small molecule chemical drugs.

“We want to be able to build a high-level, low-cost, large-scale research and development capacity,” Chen said. “In the next stage there can be an opportunity for Chinese companies to influence the global drug innovation structure.”

Fosun aims to spend a fifth or even only a 10th the amount that European and American companies typically pay to develop a drug, said Chen. Besides China’s low labor cost, Chen said Fosun’s business model also helps.

Instead of hiring scientists to work in laboratories like most companies do, Fosun cooperates with teams of scientists and makes them shareholders of Fosun Pharma’s R&D subsidiaries. Such arrangements are intended to motivate scientists to control costs and bring new drug to the market as soon as possible.

With four such subsidiaries, Fosun Pharma wants to develop drugs including new compounds, biosimilars and complex generics.

The company’s biotech arm, named Shanghai Henlius Biotech Co., focuses on developing biosimilars to treat cancer and autoimmune diseases. Scientists led by its chief executive officer, Scott Liu, own about 20 percent of the company.

Shanghai Henlius expects to receive clinical trial approval in the end of June or July for its biosimilar version of Roche Holding AG’s best-selling cancer drug Herceptin, and plans to launch the drug in 2018, according to Liu.

Another biosimilar in Shanghai Henlius’s pipeline that mimics Rituxan, another cancer treatment made by Roche, has entered human trials and could be launched as soon as early 2018, said Liu, who oversaw late-phase trials and approvals of two biologics while working at Bristol-Myers Squibb Co. and Amgen Inc.

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