Emerging trend of cross-border M & A in pharmaceutical industry

Source: China Securities Journal, February 18, 2016, M & A in the fields of pharmaceutical and biotechnology has been surging in recent years Pfizer's US $160 billion acquisition of Erjian has become the largest acquisition in the history of the pharmaceutical industry The acquisition of healthe care by green leaf medical group in China has also set a record for the amount of overseas acquisitions by Chinese pharmaceutical companies Bio medicine has become one of the three most active industries for foreign investment and M & A in China, except for oil and gas and consumer goods retail industry According to the information released by the Ministry of Commerce, China's actual foreign investment in 2014 was about 140 billion US dollars, of which biomedicine accounted for about 12% of the total market share According to the information released by China Council for the promotion of international trade, from 2009 to 2013, the total foreign direct investment of Chinese enterprises increased at an average annual rate of 17.5%, and exceeded US $100 billion for the first time in 2013 In terms of the number and amount of transactions of local enterprises in Shanghai, health care and services account for about 5-10% of the total At present, the global biomedical market is highly concentrated 50 According to the report of E.K., by 2016, nearly 60% of the total global expenditure in North America, major countries of the European Union and Japan and South Korea was spent on the pharmaceutical market But the market growth of developing countries is faster The five-year market compound growth rate of BRIC countries (up to 2016) is more than 10%, while the annual compound growth rate of the United States is about 3% in the same period, and the average annual compound growth rate of the five EU countries (Germany, France, Italy, Britain and the West) is about 1% 50 According to E.K., the U.S medical market focuses on lower threshold over-the-counter drugs, health and nutrition products, various medical equipment and devices, as well as laboratory and imaging equipment related to research and development In the United States and other developed markets, biomedical companies will continue to focus on wearable diagnostic devices, orphan drugs and bio similar drugs Medical technology is the investment focus of most private equity companies in the medical field The investment focus of Indian market mainly includes: specialized hospitals and specialized day care service centers, diagnosis and pathology laboratories, biomedical manufacturing, customized research and production services Specifically, India's pharmaceutical industry, especially generics, remains the most popular market for investors In recent years, medical service providers in India, such as medical logistics, have developed rapidly, and are also sought after by investors Three factors are the best choice to promote the concentration of Chinese pharmaceutical industry According to statistics, the number of pharmaceutical factories in China is 4516, five times of that in the United States, while the scale of Chinese pharmaceutical market is only one third of that in the United States The approvals of Chinese pharmaceutical companies are mainly generic 3 and 6 This fully shows that the low level homogenization competition of Chinese pharmaceutical enterprises is obvious In order to be bigger and stronger, Chinese pharmaceutical enterprises need to improve the industry concentration to reduce and avoid low-level homogeneous competition There is no doubt that the merger and acquisition of pharmaceutical enterprises is the most direct and convenient way to reduce the competition of homogeneous enterprises This is also the best choice for the pharmaceutical industry to improve the industry concentration in the future Merger and acquisition is the internal demand for the growth of group enterprises On the one hand, the restructuring and merger of group enterprises can give full play to the scale effect of enterprises, greatly improve the income and reduce the cost; on the other hand, it can promote the complementary advantages of internal resources, and improve the internal R & D and marketing capabilities of the group Mandatory standards and certification also promote restructuring and merger in the industry At this stage, many domestic small and medium-sized pharmaceutical enterprises have not passed the new version of GMP (issued in 2011, 3-year transition period), the US FDA and European COS and other compulsory certification standards, and are still growing in an irregular state Small and medium-sized pharmaceutical enterprises with poor profitability are unable to carry out process and workshop transformation to meet the requirements of such mandatory standards and certification, which provides an excellent opportunity for large pharmaceutical enterprises in the industry to acquire small and medium-sized enterprises.