• 11 July 2011
  • News
  • By Narayan Kulkarni

Alliances and M&As: Drive the Industry

BioSpectrum takes stock of the mergers & acquisitions and alliances that are driving the Asia Pacific life science industry and have been instrumental in the growth of the industry

Life sciences industry in the year 2010 recorded a positive trend in mergers and acquisitions (M&A) in the Asia Pacific region against 2009 in terms of both value, as well as the number of deals that took place. In 2009, the APAC region witnessed 94 deals valued at $6.5 billion. Loss of patent protections and shortfall in pipeline to replace the lost sales, combined with the general decline in return on R&D and sales and marketing, has left global pharma and other life science companies searching for alternative methods of delivering returns to shareholders. All these factors pushed the global companies to look for deals with the companies from the emerging markets in the APAC region. As against 94 deals in 2009, the year 2010 witnessed an increase in the number of deals to 166 valued at $19.33 billion with an average deal size of $490 million as against the average size of $260 million deal in 2009.

The trend of increasing no. of M&As was witnessed in global pharma and biotechnology market with Novartis/Nestle Group leading the acquisition table by acquiring Alcon, a leading eye care group company for $28.3 billion. The next to follow on the table was France's Sanofi-Aventis' acquisition of Genzyme. Sanofi-Aventis has publicly disclosed its $18.5 billion, $69-per-share cash offer for Genzyme in a bid to rouse shareholders after failing to engage the US biotechnology company in merger talks. In February, in a definitive agreement, Merck KGaA acquired all outstanding shares of common stock of Millipore for $107 per share in cash, or a total transaction value, including net debt, of approximately $7.2 billion. The trend of acquiring stake or complete acquisition continued in 2010 globally and at regional markets.

Top deals in 2010
Looking at the potential opportunities and growth of the market in APAC region, many global companies such as Abbott Labs, Cephalon, GlaxoSmithKline, Cardinal Health, Novartis Pharma have made significant investments in the region by acquiring stakes or completely acquiring the companies from the region. Of the top 20 inbound deals that happened during 2010, 13 companies were acquired by the US companies, three by United Kingdom, one each by Netherlands, Italy, South Africa and Switzerland. Australian companies are the most preferred companies by the bidders with seven companies being acquired in 2010, followed by five each from India and China and three from South Korea. Pharmaceutical segment leads the table with 10 acquisitions followed by seven in medical technology deals and remaining three deals happened in the biotechnology space. The total value of inbound deals of the top 20 companies stood at $10.69 billion.

The year 2010 witnessed a rise in the number of mergers and acquisitions to 166, valued at $19.33 billion, with an average deal size of $490 million as against the average deal-size of $260 million in 2009. The APAC region witnessed 94 deals valued at $6.5 billion in 2009
Acquisition of Pirmal Healthcare Solutions of India by Abbott leads the table of inbound deals in 2010, as the latter acquired the former at $3.72 billion. The next to follow the list of table was the acquisition of Healthcare Scope of Australia by Carlyle Group and TPG, both from the US, at $2.35 billion. Another leading deal which was witnessed during the year was the acquisition of Sigma Pharmaceuticals of Australia by South African company called Aspen Pharmacare at $806 million. Similarly, Cardinal Health, a leading contract manufacturing company, again from the US, acquired Zuelling Pharma China at $470 million. Mesoblast, a regenerative medicine company from Australia sold 19.99 percent of its stake to Cephalon from the US for $220 million.

Besides inbound deals, the APAC region witnessed outbound deals as well. Though the size of the deals were small but companies mainly from India (nine), Australia (five) and two each from China and Hong Kong and one each from Singapore and South Korea completed deals worth $1.03 billion with companies in US (10) and Canada (five) and one each in Belgium, France, Bulgaria and United Kingdom.

A Snapshot: Asia-West Alliances in 2010
Company (Asia) Company (West) Alliance
WuXi AppTec, China Qiagen, Netherlands Biomarker service
New Summit Biopharma, China PacGen Biopharmaceuticals, Canada Research and development
Jubilant Biosys, India DiscoveRx, US Co-marketing agreement
Morningside Asia Venture, China Can-Fite BioPharma, Israel Clinical drug development
Ranbaxy Laboratories, India Pfenex, US Biosimilar therapeutic development
Intas Pharmaceuticals, India Amarillo Biosciences, US Clinical Trial
Glenmark Pharmaceuticals, India Sanofi-Aventis, France Development and commercialization
Biocon, India Optimer Pharmaceuticals, US Manufacturing and supply agreement
WisTa Laboratories, Singapore Bayer Schering Pharma, Germany Research and development
Temasek Life Science Ventures Singapore Emergent BioSolutions, US Development, manufacturing and commercialization
Biocon, India Pfizer, US Drug marketing
Zhejiang Jingxin Pharmaceutical China Evotec, Germany License and marketing collaboration
Simcere Pharma, China Bristol-Myers Squibb, US Drug development
Takeda Pharmaceutical, Japan Metabolex, US Research collaboration
Source:Grant Thornton India

Sonic Healthcare from Australia is leading the table by acquiring MedHold from Belgium at $317 million. It also acquired US-based CBL Path at $124 million. Mesoblast from Australia acquired 67 percent stake in Angioblast Systems of US at $164 million in May 2010. Harbin Pharmaceutical Group from China acquired swine vaccine business of US-based Pfizer at $50 million. Similarly, India-based Dr Reddy's Labs acquired oral penicillin facility in the US from GlaxoSmithKline at an undisclosed price. Pirmal Healthcare which has sold its formulation business to Abbott, acquired BioSyntech of Canada at $19 million to strengthen its biotechnology activities. Similarly, Hong Kong-based Yalin Han acquired 62 percent stake in a Canadian company, Dragon Pharmaceuticals, at $39 million.

This indicates that it is not only the big multinationals from the matured markets such as the US, Europe that are looking at M&A deals in emrging markets, even companies in emerging markets such as India, Australia, China and South Korea are keen on acquiring companies or stakes in developed markets to establish their presence in the developed markets.

Besides, inbound and outbound deals, the APAC region also witnessed domestic deals as well. During 2010, the top 20 domestic deals stood at $10.76 billion. China, India and South Korean companies were keen on acquiring companies in the region to have controlling stake or to enter the other marekts by having stakes in other companies.

While Asian drug-makers looked overseas to expand their market presence, foreign multinationals continued to invest in Asia by acquiring domestic pharmaceutical manufacturers. In May 2010, US pharma major Abbott Laboratories acquired Indian-based Piramal Healthcare's generics business for $3.7 billion.

Global pharma companies' desire to focus on alliances and partnerships with biotech companies will continue to be driven by the fact that more than $70 billion worth of drugs will be going off patent by 2015. Drug major Pfizer signed a global marketing alliance with India's Biocon for $350 million to market insulin and in December 2010, Sanofi-Aventis reached an $60 million in-licensing deal with Shanghai Institutes for Biological Sciences (SIBS) to develop an anti-angiogenesis cancer drug.

The year 2010 witnessed an increase in the number of deals from the first quarter till the last quarter except the third quarter during which the number of deals dropped. The second quarter of 2010 witnessed 41deals with a total valuation of $7.7 billion. While in 2009, third quarter witnessed 24 deals with a total valuation of $3 billion with an average highest deal size of $125 million.

As witnessed in 2009, pharmaceuticals continued to lead the number of deals in 2010 with 76 followed by medical technologies with 68 deals and biotechnology with 22 deals. Biotech witnessed highest average deal size with $93 million per deal in 2009, whereas in 2010, medical technologies segment witnessed highest average deal size with $135 million followed by pharmaceuticals with $118 million per deal and biotechnology with $55 million per deal. The above facts show that multinationals are now focusing on growing healthcare market in the APAC region by acquiring companies in medical devices space.

Top alliances
Though there is a drop in the number of deals in the first quarter of 2011 at 33 (valued at $1.88 billion) against 2010 of the same quarter at 36 deals valued at ($2.42 billion), it was still on higher side as compared to the first quarter of 2009 at 16 deals valued at $412 million.

If mergers and acquisitions are a hot trend in the life science industry, joint alliances are an increasing trend across Asia and the world. Alliances are setting the right tone for successful innovation, new drug research and meta-clinical trials.

Many Asian companies are joining hands, thereby giving a strong support to the pan-Asian life science industry. For instance, Sinovac Biotech from China formed an alliance with Parenteral Biotech of India to expand its presence in the Indian market and 3SBio from China joined hands with Shanghai-based Ascentage Pharma to research, develop and commercialize their best-in-class targeted cancer therapeutics. Similarly, QRxPharma from Australia entered into alliance with China's Aoxing to develop MoxDuoIV, for acute treatment of moderate to severe pain. In another deal between Asian firms, 3SBio joined hands with Taiwan-based Panacor Bioscience to develop and commercialize Nephoxil for the treatment of hyperphosphatemia in China and Optomagic of South Korea entered into drug discovery collaboration with Shenogen Pharma of China.

According to Grant Thornton's report on biotech alliances in Asia during the year 2010, there were 322 global alliances between a biotech company and a pharmaceutical company, of which 93 involved atleast one Asian country. In another example, around 270 alliances were made between two biotech companies, 37 of whom involved at least one Asian country.

Top 20 Asia-Asia deals in Life Sciences in Asia Pacific excluding Japan (Jan-Dec 2010)
Announcement Date Target Company Target Geography Sector Bidder Company Bidder Geography Seller Company Seller Geography Deal Value ($m)
27/05/2010 Parkway
(77.66% Stake)
Singapore Medical Khazanah Nasional Malaysia -
- 2861
01/07/2010* - - - - - - - -
Lapsed on 26/07/2010 Parkway
(74.73% Stake)
Singapore Medical Fortis Healthcare India - - 2626
11/03/2010 Parkway
(23.9% Stake)
Singapore Medical Fortis Healthcare India TPG Capital LP USA 685
26/03/2010 Hanmi Pharmaceutical (pharma division) South Korea Medical Pharma Hanmi Pharmaceutical (Shareholders) South Korea Hanmi Pharmaceutical South Korea 543
27/09/2010 Jiangzhong Pharmaceutical (27.14% Stake) China Medical Pharma Dalian Infinna Group China Jiangxi SASAC China 461
29/10/2010 Thomson Medical Centre Singapore Medical Peter Lim (Private Investor) Singapore - - 379
25/11/2010 Dupromise China Medical Pharma Sihuan Pharmaceutical China JSAB Investment China 361
15/12/2010 China Health System
(65.24% Stake)
China Medical Pharma Shanghai Pharmaceuticals China Biomedical Sciences Investment Fund; BioVeda Capital; Lilly Asian Ventures; New Enterprise Associates; Northern Light Venture Capital; and Sagamore Bioventures LLC Singapore; Singapore; China; USA; Hong Kong; USA 350
02/08/2010 Aevum
(84.1% Stake)
Australia Medical Stockland Corporation Australia - - 331
15/12/2010 Health Network Plc Thailand Medical Bangkok Dusit Medical Services PCL Thailand - - 328
14/12/2010 Medison
(43.5% Stake)
South Korea Medical Samsung Electronics South Korea Consus Asset Management South Korea 236
03/09/2010 Hanmi Pharmaceutical (34.94% Stake) South Korea Medical Pharma Hanmi Holdings South Korea - - 228
15/12/2010 Shanghai New Asiatic Pharmaceutical; and Shanghai New Pioneer Huakang Pharmaceuticals China; China Medical Pharma Shanghai Pharmaceuticals China Shanghai Pharmaceutical (Group) China 223
11/10/2010 Biosensors Interventional Technologies (29.47% Stake) Singapore Biotech Hony Capital China Yoh-Chie Lu (Private Investor) Singapore 217
08/10/2010 Quality HealthCare Services Limited; and Quality HealthCare Medical Services Hong Kong; Hong Kong Medical Fortis Healthcare India Allied Overseas Hong Kong 196
11/06/2010 Pharmaniaga Malaysia Medical Pharma Boustead Malaysia UEM Group Malaysia 184
02/11/2010 Essential Healthcare Trust (12 hospital and medical properties) Australia Medical Vital Healthcare Property Trust New Zealand Essential Healthcare Trust Australia 164
08/04/2010 McKesson Asia Pacific Australia Medical Medibank Australia McKesson Corporation USA 130
28/07/2010 Shanxi Astro Wood Bio Engineering Development China Biotech China Agrotech Hong Kong Wu Shaoning (Private Investor); and Xue Zhixin (Private Investor) China; China 129
14/07/2010 Piramal Diagnostic Services India Medical Super Religare Laboratories India Piramal Healthcare India 128
Source: mergermarket

Multiple facets
Asian companies are on an expanding spree. They are enlarging their market circumference, creating impact beyond geographical boundaries, and some are on the drive to bring innovative drugs or technology to the market. The strategy is to create a robust revenue back-up and beat the market competition and this is involving alliances not only between the Asian companies but also between Asia and leading global companies. There are multiple forms in which the alliances are taking place.

Drug Discovery-PPD, a leading global CRO established a joint venture with China's Taijitu Biologics in the area of the discovery of novel biotherapeutics. Similarly, Bayer HealthCare and Regeneron, a drug discovery company, collaborated with the Singapore Eye Research Institute (SERI) for investigating the efficacy and safety of VEGF Trap Eye in patients with choroidal neovascularisation (CNV) of the retina as a result of pathologic myopia.

Market Reach-In March this year, Shanghai Pharmaceutical and Pfizer entered into a memorandum of understanding for the companies to jointly pursue potential business opportunities in China. The companies are exploring a potential cooperation for the registration, commercialization and distribution of an innovative Pfizer product in China.

A Snapshot: Asia-Asia Alliances in 2010
Company (Asia) Company (Asia) Alliance
Optomagic, South Korea Shenogen Pharma, China Drug discovery collaboration
3SBio, China Panacor Bioscience, Taiwan Drug development and commercializing
Orexo and Kyowa Hakko Kirin, Japan Hisamitsu Pharmaceutical, Japan Drug distribution
QRxPharma, Australia Aoxing Pharmaceutical, China Drug development and commercializing
3SBio, China Ascentage Pharma, China Research, development, commercialization
Sinovac Biotech, China Parenteral Biotech, India Supply and distribution
Solasia Pharma, Japan Kyowa Hakko Kirin, Japan License and supply agreement
Eisai, Japan Apollo Hospitals, India Public Private Partnership
BioWa, Japan Agensys, Japan License agreement
Millennium Pharmaceuticals, Japan Janssen Pharmaceutical, Japan Marketing
Source: Grant Thornton India

Expanding Clinical Research-Leveraging clinical trial opportunities in South East Asia and Europe, CRO Ecron Acunova formed a joint venture with Thailand-based Jamjuree Innovations, a subsidiary of Chulalongkorn University Intellectual Property Foundation. This strengthens their capability to beat the rising competition among CROs in South East Asia. Similarly, Takeda Pharmaceuticals, the largest pharmaceutical company in Japan, entered into a strategic partnership with Covance and Quintiles, two of the world's largest full-service CROs.

Infrastructure Sharing-Another reason for the pharmaceutical and biotechnology companies to enter into strategic alliance is the sharing of infrastructure that saves the cost of building facilities of its own. For example, global pharmaceutical giant Bristol-Myers Squibb and China based WuXi PharmaTech entered into a strategic partnership to conduct stability studies of new chemical entities to support global marketing applications. Under the agreement, WuXi is building, equipping and operating a dedicated, fully CGMP-compliant 25,000-square-foot analytical testing facility in Shanghai that would be used to store and test stability samples and to perform other services for Bristol-Myers Squibb.

Similarly Bristol-Myers Squibb has entered into a strategic alliance with Syngene International, a subsidiary of Indian biotechnology major, Biocon, to set up a fully dedicated R&D facility for Bristol-Myers Squibb in Biocon Park, Bangalore.

Alliance for a cause-Besides drug discovery targets and clinical research, pharmaceutical companies in Asia are also joining hands on humanitarian ground. Eisai, a Japan-based healthcare group's Indian subsidiary, signed a public-private partnership agreement with Apollo Hospitals and HelpAge in India, aimed at improving access to medicines in India. Alliances like this encourage industry players to be proactive in improving access to medicines worldwide through partnerships with governments, international organizations, and other private sector companies.

- Narayan Kulkarni & Amrita Tejasvi

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