Indonesia's Indofarma combines its manufacturing expertise with Kimia's supply chain strength

Indonesia is one of those emerging markets that has pressured outside companies to produce locally and companies like Pfizer ($PFE), Merck ($MRK) and Fresenius Kabi have all built or expanded plants there in recent years. But the government, which controls some of the players, is taking steps to improve efficiency in the domestic market, pushing for a merger that ties the manufacturing expertise of one company to the supply chain strength of another.

Kimia Farma this week said it would merge with competitor Indofarma as part of a plan by the government to consolidate and strengthen the sector. Adrianus Bias Prasuryo, a senior analyst at Ciptadana Securities, told Reuters that Indofarma has a stronger manufacturing operation, while Kimia brings a broader distribution network to the table. Together they will make a more "robust" company, the analyst said.

Kimia Farma CEO Rusdi Rosman

The Indonesian government controls a 90% stake in Kimia Farma and more than 80% in Indofarma, Reuters reports. Kimia Farma CEO Rusdi Rosman told the news service it has not been decided whether the transaction will be for cash or shares.

Pfizer early this year slated $4 million to expand a small plant it has in Pasar Rebo, East Jakarta, so that production could reach about 300 million pills a year, up from about 170 million. It exports about 20% of the production to other countries, including South Korea, Hong Kong, Thailand and Vietnam.

GlaxoSmithKline ($GSK) sold a plant in Bogor this year as part of a deal to sell an eye drop brand to PT Pharma Healthcare for a combined £7 million ($11.6 million). That was all part of a larger plan to get full control of its consumer health unit there. GSK agreed to pay about £24.6 million ($40 million) to Sarasvati Venture Capital for the 30% share it did not own.

Fresenius Kabi, the generics division of the German healthcare company, last year acquired controlling interest in Indonesian drugmaker Ethica Industri Farmasi from Soho Global Healthcare. They are working on a $60 million plant to make IV generic drugs and infusion solutions. Fresenius Kabi claims to be the market leader in IV generics in Indonesia.

- read the Reuters story

Related Articles:
GSK buys full control of consumer unit in Indonesia
Pfizer is expanding its plant in Indonesia--again
Fresenius carving out its piece of expanding Indonesian drug market