Spring Shopping: Ping An Bets On Shionogi, TCMs In Coronavirus Aftermath
Executive Summary
China insurance giant snatches up stakes in Japanese pharma and a traditional Chinese medicines maker with a $465m spending spree.
As the global battle against coronavirus marches on, China's Ping An Insurance is betting that integrated health solutions and traditional Chinese medicines will see strong growth in a post-outbreak world.
This view has prompted China's largest insurer to invest a combined CNY33bn, or around $465m to build stakes in two drug manufacturers, one being Japan's Shionogi & Co. Ltd., a firm with strength in antivirals, pain and CNS drugs, and the other Shengshi Baicao, a traditional Chinese medicine (TCM) maker.
Announced on 30 March, the investment in Shionogi is Ping An’s largest to date in an innovative pharma firm, and indicates the increasing importance of providing integrated healthcare solutions rather than just pills, the Chinese group emphasized. Ping An will acquire 2% of Shionogi's outstanding shares, or 6,356,000 shares, for JPY53.5bn (CNY2.11bn) in cash.
The two companies will then form a CNS-focused joint venture to be 51% held by Shionogi and based in Hong Kong, under an agreement to be executed by the end of July. Ping An has also obtained exclusive ex-Japan Asian rights to two Shionogi products.
Data, AI And RWE
“In a fast changing world, it’s hard for a pharma firm to continue business as usual as a separate existence in its current form," noted Shionogi CEO Isao Teshirogi in a press briefing on the new partnership. “We must leverage our strength to set up a platform with partners with unique strengths that can complement each other.”
Ping An, although known as the largest collectively-owned insurance company in China, has attracted more attention for its fast growing presence in healthcare. Its signature physician portal, Ping An Doctor, attracts 280 million users with 650,000 daily exchanges, and its offline clinics are popping up in major cities.
Combining with its commercial health insurance offering, Ping An is aiming to become a comprehensive healthcare solution provider, tapping into big data to generate date-driven solutions and services.
The group's digital solutions and online-to-offline seamless integration attracted Shionogi to choose it as a partner, said the Japanese company. There are three main aspects to the new alliance: new drug discovery and development based on big data; use of artificial intelligence technology to optimize manufacturing and quality control; and online-to-offline marketing, sales and distribution of products.
Ping An’s strength in digital health, retail clinics and online commercial tools will help Shionogi to grow beyond its traditional overseas strongholds of the US and Europe, stressed Teshirogi. Further expansion in China and the rest of Asia present the biggest growth opportunity in the next decade, he noted.
Shionogi also sees a potential reduction in clinical trials costs and time frames using data from Ping An, using real world evidence to tackle intractable diseases and rare conditions.
TCM Venture Acquisition
On the heels of the Shionogi partnership, Ping An has also acquired Shengshi Baicao for CNY1.2bn, making it the newest addition to the insurer’s ambitions in traditional medicines.
Ping An has already formed a joint venture with Japan's largest kampo (traditional medicine) maker Tsumura & Co., and the JV is now buying the domestic TCM manufacturer. The acquisition will secure ingredient supplies in China and consolidate raw material sourcing and ensure quality.
Shengshi grows its own Chinese herbal medicines and has been a long-term raw material supplier to Tsumura. Chairman Li Gang will remain the head of the new joint venture and continue to oversee its operations.
TCMs is one area expected to see large growth amid the coronavirus outbreak, as China has put such treatments front and center for COVID-19 patients, despite lingering doubts and questions about lack of clinical evidence.