JVs like Pfizer, Hisun hookup provide Chinese companies shot at Western markets

Joint ventures with Chinese companies have been seen as a way for Big Pharma to get better traction in the exploding China market. But it is not a one-way street. Chinese companies see the tie-ups as a way to build their own capabilities and begin to tap lucrative Western markets.

"Chinese companies are also ambitious," Zhang Fabao, a member of the China Pharmaceutical Technology Organization Expert Committee, told the China News Service. "They are eager to get international market access, realize technical upgrades and even build their brands through platforms abroad. That can be seen as a shortcut for Chinese pharmaceutical enterprises to go global and a win-win strategy for both sides."

Zhejiang Hisun Pharmaceutical negotiated a 51% share in an aggressive joint venture with Pfizer ($PFE), launched last year to produce branded generics in China. Simcere Pharmaceutical Group has hammered out partnerships with both Merck ($MRK) and Bristol-Myers Squibb ($BMY).

Hisun kicked in $295 million, 75 products and local market knowledge to Hisun Pfizer Pharmaceutical, which will make both branded and low-price generic drugs. Pfizer invested $250 million, 8 products and all of the know-how of a world-leading drugmaker. For Hisun, it is a way to get beyond being solely a producer of active pharmaceutical ingredients (APIs). "Hisun needs to upgrade its business. Entry into branded generics is a practical and profitable way," Xu Lingni, an analyst with China Investment Consulting, told the news service.

Simcere, a Chinese company with a track record in drug development, took a 49% stake in its JV with Merck. It brought two drugs to the table, while Merck, known as MSD outside the U.S., kicked in four. For now, the two are concentrating on cardiovascular treatments for the China market, but analyst Xu thinks the two will move their products outside China before long. In addition, Simcere is working on a heart drug that BMS had let go idle in its pipeline. If approved, Simcere has exclusive rights to sell it in China but will share proceeds with Bristol-Myers on sales in the rest of the world.

Shi Lichen with Alliance PKU Management Consultants said Chinese companies can use the relationships to learn the "softer" skills, like management, from their partners, but they need to pick them carefully. "Chinese partners should be clear-headed, avoiding becoming just manufacturing bases for multinational companies," Shi told China News.

- read the China News Service story

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