Buying a 51 per cent stake in Shanghai-based Jinhe Bio-Technology gives Zhongxi Sunve a foothold in the market for oncology APIs (active pharmaceutical ingredients). Having agreed the deal Zhongxi Sunve will shift its focus to other takeover targets and expects to make more acquisitions ‘soon’.
“We will continue to…capitalise on opportunities presented by the industry consolidation to seek potential acquisitions in order to enhance our investment value”, LU Mingfang, chairman of Shanghai Pharmaceuticals, the parent company of Zhongxi Sunve, said.
Zhongxi Sunve lists APIs for cardiovascular, diabetes and other diseases in its portfolio and is now investing in Jinhe Bio-Technology to strengthen its presence in oncology. Jinhe Bio-Technology manufactures irinotecan, podophyllotoxin, docetaxel and paclitaxel APIs in China.
Shanghai Pharmaceuticals plans to add capabilities having bought the stake. “The investment mainly covers the construction of new plants that meet China's good manufacturing practice and US Food and Drug Administration requirements”, Shanghai Pharmaceuticals said in a press statement.
In September Shanghai Pharmaceuticals expanded its antibiotic business through the acquisition of Shanghai New Asiatic Pharmaceutical. Shanghai Pharmaceuticals made another acquisition, of CITIC Pharmaceutical, in April. A 2011 interim company report called for acceleration of takeover activity.
Shanghai Pharmaceuticals also has a memorandum of understanding with Pfizer for the “registration, commercialisation and distribution of an innovative drug” developed by the big pharma. The deal was made in the first half of 2011 and Shanghai Pharmaceuticals hopes its scope will expand in time.
China-based Shanghai Pharmaceuticals listed on the Hong Kong stock exchange in May 2011, raising HK$16bn ($2bn), but since then its share price has halved. Shares in Shanghai Pharmaceuticals closed up very slightly following news of the investment in Jinhe Bio-Technology.
Over the first half of 2011 Shanghai Pharmaceuticals’ drug manufacturing business achieved sales of RMB4.2bn, a double-digit year-on-year increase, but operating margins slipped. Margins will face further pressure as expected increases to manufacturing costs take effect.
“Manufacturing costs will surge substantially under pressure from eco-friendly measures, rollout of new GMP and the increase in raw material prices, transportation costs and salaries”, the company said in its 2011 interim statement .