Teva looks to sell generics in China through joint venture with Guangzhou Pharma: Bloomberg

Teva
Teva is looking to form a Chinese joint venture with local company Guangzhou Pharma, according to Bloomberg.

As the world’s largest generics maker, Teva still doesn’t have much of a presence in China, even though it is a country relies heavily on generics. The Israeli company is looking to remedy that by reportedly forming a joint venture with local company Guangzhou Pharma, according to Bloomberg.

The intel came from a Bloomberg interview with Li Chuyuan, the chairman of the Chinese firm which is known for some traditional Chinese medicine and a Viagra copycat.  He also said his company is awaiting Chinese approvals for some Teva drugs.

In a statement quoted by Bloomberg, Teva said it “has no agreement with any local partner to form a JV in China,” but went short of denying such a possibility or whether it’s in talks with Guangzhou Pharma.

Teva had made some inroads in China more than a decade ago with a $7.4 billion Ivax acquisition deal in which it gained 50% of the shares in Kunming Baker Norton Pharma, a joint venture between China’s Kunming Pharma and Ivax. The company’s amoxicillin is one of the best-selling antibiotics in China. But then in 2015, Kunming Pharma bought back 49% of the shares, leaving only 1% for Teva.

Teva has an API plant in China—which was dealt a warning letter from the U.S. FDA in April—and is selling drugs through a distribution agreement with a local company.

Different market analyses have put different numbers on China’s generics market size. A report (PDF) by the U.S. Department of Commerce put China’s generics sales in 2016 at $68 million, accounting for 64% of the country’s total drug sales, and said that it is expected to reach $80 million this year, surpassing the U.S. Another report by Fitch Ratings said the market share occupied by copycat drugs in China was 85%.

RELATED: Teva cuts guidance yet again as Copaxone copies, generics pressure take their toll

Teva has been reeling from a host of issues from growing competition, slower-than-expected launches, as well as the pricing pressures that has taken a toll on the entire generics industry. The company just slashed its guidance again to $22.2 billion ~ $22.3 billion from $22.8 billion ~ $23.2 billion, its third downgrade in the last four quarters. 

Whether China embodies growth for Teva will be a question for new CEO Kåre Schultz. 

In its 2016 annual filings to the SEC, the Israeli generics giant said, “Over time and with the right opportunities, we intend to expand our presence in markets such as China and Brazil.”

RELATED: China proposes new FDA rules to speed up foreign drug approvals

China represents a mixed opportunity, though. On the one hand, its regulatory environment and culture make it difficult to navigate, so, many foreign biopharmas have formed partnerships with local companies to help derisk their efforts there--where Guangzhou Pharma could be of assistance to Teva. Besides, Teva will also face some of the same obstacles it has already stumbled upon elsewhere in the world; the government is also pressing for lower drug prices, and given the country’s high reliance on generics, competition is almost guaranteed.

But as the country’s population ages, and in order to keep drug prices in check, China will continue to welcome generics where applicable. As China is pushing for a thorough generic bioequivalence evaluation to ensure quality of copycat drugs, many noncompliant manufacturers that have sustained mainly on low prices will be eliminated, giving internationally renowned players like Teva an opportunity. At the same time, local drug regulator is also rolling out a series of policy changes aimed at speeding drug approvals and at opening the market further to foreign drugs.