Novo Nordisk A/S (NYSE: NVO), the Danish pharma that specializes in diabetes drugs, does not want to grow in China through M&A. It plans to continue its emphasis on developing its own innovative drugs. To that end, Novo Nordisk has previously announced investments in its Beijing R&D center and Tianjin manufacturing plant, while it is also working to increase diabetes education in China.
"A few multinational companies made acquisitions (in China) to get entry into the generic medication and (over-the-counter) business,” said Ronald Frank Christie, senior vice-president of Novo Nordisk and president of Novo Nordisk (China) Pharmaceuticals Co., in a China Daily interview (see story). "Novo Nordisk is another kind of company. We want to concentrate on innovative new drugs."
Mr. Christie’s formulation of the alternatives does not seem to include M&A with an innovative pharma, though he is correct in implying that big pharma companies usually strike merger deals with generic drug companies. On the other hand, they do often form partnerships with young biopharmas that have innovative technology, something that he did not address.
Like most big pharma, Novo Nordisk is working on improving its performance in emerging markets, especially China. The company recently reported that its China sales were up 13% in the first nine months of 2011 (local currency). Its major revenue source is sales of synthetic insulin products (NovoRapid®, NovoMix®, Levemir®). However, Q3 revenues dropped 3% because of the mandatory price reductions that China instituted on September 1, 2011.
Novo Nordisk said it has a commanding 63% market share of China’s total insulin market and a 68% share of the synthetic insulin market. China sales in Q3 were $208 million. In addition, Novo Nordisk recently received SFDA approval for Victoza®, an oral GLP-1 therapy for type 2 diabetes.
One year ago, Novo Nordisk committed up to $100 million to expand its Beijing R&D center (see story). As much as $40 million of that will go to build new labs for diabetes research. The company also said it will add 200 new jobs by 2015. The Beijing center will become the company’s largest R&D facility outside of its native Denmark.
In November 2008, Novo Nordisk announced a $400 million China project: a large insulin manufacturing facility in Tianjin (see story). The new facility will serve the company’s China needs and also ship product to the rest of the world. The facility is expected to become operational in 2012.
According to the Ministry of Health, nearly 100 million of China’s inhabitants have diabetes. China’s diabetes drug market is expected to grow to more than $2.8 billion by 2015 from $642 million in 2009.