China Biotech Week In Review: GSK Looking To Complete 'Smaller' Acquisition Targets

Includes: GSK, SCLN
by: ChinaBio Today

Deals and Transactions

Guizhou Bailing Group Pharmaceutical [SHE: 002424] will acquire Zhengxin Pharmaceutical for 28 million RMB ($4.4 million). Zhengxin owns two patents for Miao ethnic medicines, which is Bailing’s specialty. The Zhengxin acquisition is the third company with Miao products that Bailing has bought this year. Bailing is building a larger portfolio of Miao ethnic TCMs to gain a market leading position in the sector.

SciClone Pharma (NSDQ: SCLN) announced a share repurchase program of up to $20 million over the next 24 months (see story). SciClone, headquartered in California, commercializes and markets Western drugs in China. In addition to boosting the company’s stock price, the repurchase program will partially offset the 8.3 million shares that may be offered by the previous owners of NovaMed, which SciClone acquired in April of this year. Despite its solid financial performance, SciClone's stock price remains low.

Big Pharma in China

GlaxoSmithKline (NYSE: GSK) is looking to complete “smaller” acquisition targets in India in the $500 million to $2 billion range, according to the company’s CEO Andrew Witty (see story). He characterized these transactions as bolt-on additions rather than transformative ones. GSK does not need a large acquisition, he said, because the company already has a well-established presence in India with a recognizable brand name. His comments would seem to apply equally to China, where GSK has been involved in several "smaller" M&A transactions.

Industry Insights

The pharmaceutical business is very important to India, and India is very successful at exporting pharma products to other countries. But India is worried China may grow to dominate India’s own pharma market, taking over business that India wants to keep for itself (see story). Last year, China exported $3.3 billion of APIs to India, while India sent just $500 million of APIs to China. India's Commerce Ministry thinks the government should intervene.

China's doctors and patients love antibiotics. Although the country’s consumption of pharma products remains low, its antibiotic use is disproportionately high. Unfortunately, there is a price for heavy use of antibiotics: the PRC has high levels of drug-resistant infections, especially in tuberculosis and urinary tract infections. In an attempt to stop this trend, China's government is trying to curb overuse of antibiotics, which is having a negative effect on the stock prices of pharmas that make these products.

Disclosure: None.