Lonza and Fosun Chinese biopharm generic JV will "protect customer IP"
This article was originally published in Scrip
With Chinese pharma companies keen to seek further growth for their generic portfolios amid upcoming major patent expiries, and also facing pressure to improve the quality of their products, one solution is to team up with a reputable international contract manufacturer.
Shanghai Fosun Pharmaceutical, a major producer of finished drugs, has done just that, entering into an agreement to set up an equally owned joint venture in China with the Lonza Group, a leading global contract supplier of drug active pharmaceutical ingredients and intermediates.
At a press conference on the deal, Fosun's executive vice-director Ding Lei said that the JV is expected to "capture new growth opportunities" and focus on the "forefront of international biopharmaceutical technology." It will be located in Shanghai's Zhangjiang High-Tech Park with an initial total investment of Yuan100 million ($15.5 million).
Neither company released details of the specific products to be manufactured by the new venture, but Fosun pointed to the $160 billion worth of big-selling drugs going off-patent globally over the next few years. "This expiration will bring great opportunities to pharmaceutical enterprises in China," it predicted.
Lonza will work with Fosun for the manufacture of products in three main areas - oncology and infectious and cardiovascular diseases - said Harry Boot, a member of the Swiss group's management committee. The tie-up will provide both an entry into the Chinese generics market and an opportunity to move closer to patients, he said. "Together with Fosun Pharma, we will provide safe, effective, high-quality and affordable drugs for Chinese patients."
Mr Boot also made it clear, however, that intellectual property lines will be fully respected. Lonza serves a range of multinationals including GlaxoSmithKline and Daiichi Sankyo, companies which may be pleased to hear his reassurance that "[Lonza] will continue protecting the intellectual property of our existing customers when creating value for the Chinese generic drug market."
Fosun told Scrip that it would assist in the marketing of products manufactured by the venture, with these to be destined only for the Chinese market initially. Lonza already has a number of other production and R&D sites in China, including in Guangzhou and Nanjing, and has expertise ranging from small molecules through to biologics.
mutual JV benefits
Several other Sino-Western joint ventures have been announced in recent months, notably between MSD (Merck & Co) and Nanjing-based Simcere Pharmaceutical, and between Pfizer and Taizhou's Hisun Pharmaceutical. These will focus mainly on the marketing of branded original and generic drugs and feature co-operation across a broad range of business activities (scripintelligence.com 25 July 2011).
Generic drugs currently account for over 90% of China's prescription market, presenting an attractive opportunity for both domestic and foreign pharma companies. But while Chinese firms may have the ability to manufacture generics, the quality and efficacy of these may not always be comparable with the original drug, especially in areas such as cardiovascular medicines, said Xu Liyan, a Beijing-based analyst with the Samsung Economic Research Institute.
"Chinese companies have realised that copying the ingredients does not necessarily mean you can make the same drug," she noted, adding that the problems usually lie in quality control and process technology. "With the JVs, Chinese companies are eager to improve quality under the help of their foreign partners," Ms Xu said.
For foreign companies, setting up a JV with an established local Chinese generics company is also a way of tapping into capabilities and a market where there are relatively few attractive acquisition prospects. This is a different situation to India where multinationals have made big deals to buy local pharma firms with well developed global businesses or portfolios of specific products.
"For example, Pfizer's original plan was to acquire a Chinese generics manufacturer, but it failed to find an ideal candidate," Ms Xu said.
Although foreign companies can access the Chinese market relatively quickly through JVs, they should be prepared to share some knowledge as well. "Chinese pharma companies are craving for technologies and they definitely don't want to miss the opportunity," she added.