Fresenius Kabi expands manufacturing in Indonesia with JV

Southeast Asia is becoming a more popular place for drugmakers, and Germany's Fresenius Kabi has decided to expand there with a plant in Indonesia to make intravenous drugs. To achieve that, it has bought controlling interest in Indonesian drugmaker PT Ethica Industri Farmasi (EIP) from PT Soho Global Healthcare.

"Entering the joint venture brings us valuable local manufacturing capabilities and a strong market presence to provide patients and healthcare professionals in Indonesia with immediate access to high quality, affordable drugs," said Mats Henriksson, chairman of the Fresenius Kabi management board. "At the same time, we will establish a strong hub for further expanding our business in the Southeast Asian region. Our partner has many years of experience and a very good reputation serving the Indonesian healthcare market."

The companies did not disclose a price on the deal, which is expected to close in the third quarter of this year. A source told The Wall Street Journal it was worth about $200 million for the 51% share.

Soho CEO Marcus Pitt told the Jakarta Globe that the joint venture will build a $60 million facility in Cikarang, West Java, to produce intravenous drugs. He said the plant is expected to be ready for startup in 2015. The plan calls for investing another $40 million in two more facilities to make antibiotics. The JV expects to employ 1,000 people, he told reporters. Fresenius said the plant will manufacture IV generic drugs and infusion solutions and make Fresenius Kabi the market leader in IV generics in Indonesia.

The JV will tap into a growing market as the Indonesian government launches universal health coverage next year. Citing government and IMS statistics, Fresenius Kabi said about 245 million people are expected to have health coverage by 2019, and the Indonesian drug market is expected to double to €7.1 billion by 2018.

Other drugmakers see good reason to be in Indonesia. Merck ($MRK) opened a $21 million, 4,900-square-meter packaging facility in Pandaan, Pasuruan, East Java, last fall to produce packaging for a list of drugs including oncology and diabetes treatments. About a quarter of its production will be for the Indonesian market and the rest will be exported.

- here's the announcement
- read the Jakarta Globe story
- see more from The Wall Street Journal (sub. req.)