Shanghai looks to U.S., Europe for branded-drug buyout

Shanghai Pharmaceuticals is shopping. In the Chinese drugmaker and distributor's first strategic update as a public company, Shanghai said its near-term plans include two things: growth in branded drugs and growth by acquisition, preferably both at the same time.

The plan is just about the reverse of Shanghai's counterparts in Big Pharma. As U.S. and European drugmakers--and even the Japanese--target the Chinese market, particularly with branded generic meds, Shanghai wants to move West, and with branded drugs. The company has identified some potential buyouts and is now analyzing that list, Reuters notes; the company would like to do a deal in six months to a year.

"The potential target could be a mid-sized drug company in the U.S. or Europe owning patent drugs," Chairman Lu Mingfang said during a conference call (as quoted by China Daily), adding that Shanghai wants to make "structural improvements" to its product portfolio by boosting the proportion of branded meds, "so as to better weather industry risks in the future."

The company is facing some domestic challenges, executives said, including economic pressures that have prompted the Chinese government to cut drug prices for the 27th time. Prices of raw materials for its products have also surged, the company said. In fact, input costs increased enough to depress Shanghai's first-half gross profit margin by 3.3 percentage points.

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