AstraZeneca ($AZN) has made no secret of its intention to deepen its presence in China, despite the country's economic slowdown. And it's not above asking for local help to fulfill its objectives.
The UK-based pharma group has enlisted the aid of Shenyang-based biopharma company 3SBio to help kick-start two drugs for diabetes. The disease already afflicts almost one in 10 adults in China and is becoming increasingly common as the population adopts a westernized lifestyle.
AZ is signing over commercial rights in China to its GLP-1 agonist Byetta (exenatide) and long-acting version Bydureon for $50 million up front, with 3SBio in line for the same amount of milestone payments, provided it wins import approval for two Bydureon formulations. 3SBio plans to bring over AZ sales reps in China to help promote the meds.
The deal has raised some eyebrows as diabetes and other metabolic disorders are one of AZ's core areas of focus--alongside cardiovascular, cancer, respiratory, and immunology and inflammation. The company says it is determined to build on its prominent position as a supplier of medicines to emerging markets.
Moreover, 3SBio is not recognized as a major player in the diabetes market at the moment; it focuses mainly on biosimilars. It does, however, sell an Actos (rosiglitazone) generic acquired along with Wansheng Pharma last year, as well as a traditional Chinese medicine-based product called Qiming Keli.
AstraZeneca will continue to manufacture and supply the drugs and has reserved the right to cancel the deal if sales targets aren't met. Sales clearly have not been massive under AZ's oversight, with the two drugs making less than $15 million in China last year, a tiny fraction of their global sales of $896 million.
The Chinese company is viewing the deal as a way to accelerate its standing in diabetes, and says it will offer AZ sales reps the chance to swap over to its own sales force and continue to work on Byetta and Bydureon.
Handing over commercial rights to Byetta and Bydureon will allow AZ to focus its resources in other areas in China, particularly its fast-growing respiratory franchise. The U.K. drugmaker also has a couple of big product registration projects coming up in the country, including marketing applications for lung cancer drug Tagrisso (osimertinib) and roxadustat, a treatment for anemia partnered with FibroGen.
Overall, AZ's Chinese sales rose 11% in the first half of the year, with much of that growth coming from its respiratory drugs like inhaled corticosteroid Pulmicort (budesonide), helped by the extension of the company's network of nebulizer centers.
The company is certainly not showing any signs of retreating from its aspirations in China. Toward the end of last year, it forged a strategic alliance with Chinese biologics firm WuXi AppTec to produce biologic drugs in the country, earmarked $50 million for a new manufacturing facility and set up a new pharmaceutical development hub to sit alongside units in the U.K. and Sweden.
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