China Cross-border Partnerships in Biotechnology and Pharmaceuticals

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China cross-border partnerships in the biotech and pharmaceutical industries.

China is expected to be a major value driver of the global pharma market, accounting for a quarter of global value growth to 2015. Learn more about this fast growing market in China and how underlying fundamentals, public and private investments and strong government directives present significant opportunity for cross-border partnerships in these industries.

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China Cross-border Partnerships in Biotechnology and Pharmaceuticals

  1. 1. Auckland Bangkok Beijing BostonCross-border Partnering in Biotechnology: Chicago LondonCommercial Partnerships, Investment Landscape Los Angeles Melbourneand Beyond Milan MumbaiJune 18, 2012 Munich New Delhi New York Paris San Francisco Shanghai Singapore SydneyL.E.K. Consulting Limited, Floor 34, CITIC Square, 1168 Nanjing Road West, Shanghai 200041, China TokyoT: 86.21.6122.3900 F: 86.21.6122.3988 www.lek.com Wroclaw
  2. 2. L.E.K. Consulting is a leading global strategy firm with a strong focuson life sciencesGlobal Capability  20 offices worldwide, including 2 in China  Founded in 1983 in London  900+ consulting professionals; 100+ partners  Advised 20% of largest 200 companies globally  Highly differentiated from peer consultancies in analytically driven decision-makingLife Science Experience & Expertise Leading advisor to life sciences companies around the world with over 2,300 engagements; advised 4 of the top 5 global biotech companies, 9 of the top 10 global pharmas Commercial support to bio/pharma product brands worth over US$30B in total annual revenue; more than US$115B in transactions in life sciences Awarded Healthcare Sector Adviser of the Year 2010 by Acquisitions Monthly and Consultant of the Year at the 2011 Health Investor Awards On the ground capabilities and experiences in China; over 50 projects in 2011 in China life sciences and medical devices CONFIDENTIAL 1
  3. 3. DRAFTChina is expected to be a major value driver of the global pharmamarket, accounting for a quarter of global value growth to 2015Pharmaceutical market growth rate bymajor country (2010-15F) Russia U.K. Canada Germany France Italy U.S. Turkey Spain China Japan India Korea 2010-15 CAGR ≥20% 10-20% 7-10% Brazil 3-6% ≤3%Note: * Constant US$Source: IMS, L.E.K. analysis CONFIDENTIAL 2
  4. 4. This fast growing market is driven by underlying fundamentals, publicand private investments and strong government directives Aging population, continuing urbanization and increasing affordability represent strong underlying market growth drivers Chinese government actively encourages innovation and concentration in pharmaceutical industry and aims an overall market growth of 20% p.a. in the 12th Five Year Plan (2011-15) - biotechnology has been designated 1 of the 7 strategic emerging industries which will garner favorable financial incentives and policies - invest RMB40b (US$6.3b) on key innovative drug development, aiming to develop 30 innovative drugs with domestic IP in 5 years and 4-5 more each year in the future - pharmaceutical industry is expected to be more concentrated with over 500 domestic companies with revenue of RMB10b (US$1.5b) each and top 100 companies accounting for over 50% of the market - over 80 finished drugs receiving GMP certificates from US/EU/Japan/WHO; 5 companies reaching ranks of top 100 global pharmas by 2020 Improving primary care coverage through the health reform drives market in lower tier cities and counties, as well as generic drug consumption; strong growth in specialty drug market, particularly biologic drugs, with emerging opportunity of biosimilar drugs. CONFIDENTIAL 3
  5. 5. Cross-border M&A activities in healthcare have been increasing activein the last three years, worth over US$1.5b in value Corporate healthcare inbound* Corporate healthcare outbound* M&A M&A Number of deals Number of deals 15 14 15 Additional investment to existing entities 12 New deals 6 10 4 10 5 5 4 4 5 4 1 3 8 8 1 2 2 2 2 2 1 1 1 4 1 3 2 2 1 0 0 2005 06 07 08 09 10 11 2005 06 07 08 09 10 11Note: * Excludes the M&A deals that only involves PE/ VC investmentSource: China Ventures, L.E.K. analysis CONFIDENTIAL 4
  6. 6. Besides M&A, cross-border partnerships can take many forms, with arange of control optionsPartnership types Partnership considerations  Regulatory requirement Acquisition  Market entry timeline Joint venture (JV)Increasing control (controlling stake)  Investment constraint Joint venture (JV)  Long-term strategy (minority stake)  Short-term tactics Co-development  Product portfolio  Number of impacted markets Co-promotion  Steps of the value chain Licensing  Risk control … and others Distribution agreement CONFIDENTIAL 5
  7. 7. China cross-border partnerships can take many formsExamples of cross-border commercial partnerships  GSK was preparing for commercial market access in urology in preparation GSK acquired for its first urological product launch in China Nanjing Meirui in  Meirui had existing urology products and relationships with urologists 2010  A part in Pfizer’s global generics push; both parties injected products into the Pfizer formed a portfolio for China and global markets JV with Hisun in 2012  Provides a different platform for Pfizer to approach the mostly generics China market  Provides a global platform and new business to Hisun as the majority stakeholder Dong-A (Korea)  Luye is responsible for all the operations including manufacture, R&D in licensed DPP-IV China, sales and marketing drug to Luye in  Dong-A’s partner has existing diabetes portfolio and can register and 2012 commercialize the product more successfully than Dong-A, with no experience in the marketWuxi PharmaTech  Strengthen service capability in biotechnology and medical equipment, aacquired AppTec supplement to Wuxi’s expertise in small molecules (US) in 2009  Access of AppTec’s clients in US CONFIDENTIAL 6
  8. 8. A partner in China does not necessarily need to be Chinese, and may not be a traditional pharmaceutical company Examples of partners in China Sales and Research Development Manufacturing Distribution marketingChinese Fosun Pharmaceutical (复星药业) Wuxi Apptec (无锡药明康德) Asymchem (凯莱英) CMS (康哲药业) Shanghai Pharma (上海医药)International Bayer Pharmaceuticals Quintiles Lonza Cardinal Health CONFIDENTIAL 7
  9. 9. Considerations with a Chinese partner may differ than a typicalwestern company Consideration/ needs of Consideration/ needs of international partners local partners IP protection Technology transfer Jump start in China Access to global market Potential conflicts Maximize profit Maximize scale Western-style management “Chinese way” Successful partnership Shared objective CONFIDENTIAL 8
  10. 10. Some questions to consider in China cross-border partnerships Does one need a local partner in China? What are the expectations of Chinese parties / Western parties? What are the surprised? What are the expectations on funding – from government, the companies involved, financial partners? Are Chinese deals different than Western deals? How? How to sustain the partnership and achieve long term success? How does one get started? CONFIDENTIAL 9
  11. 11. DRAFTHelen ChenL.E.K. Consultingh.chen@lek.com(8621) 61223900 (t)(8621) 61223988 (f)lek.com CONFIDENTIAL 10

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