The Indonesian pharmaceutical market is expected to double in value over the next 5 years as the Southeast Asian nation next year puts in place national health coverage. Some drugmakers are still eyeing the market, but Fresenius Kabi is jumping in.
The generics division of the German healthcare company has bought controlling interest in Indonesian drugmaker PT Ethica Industri Farmasi (EIP) from PT Soho Global Healthcare. The two will build a $60 million plant to make IV generic drugs and infusion solutions and make Fresenius Kabi the market leader in IV generics in Indonesia. The product portfolio of the proposed venture generated sales of more than €40 million last year.
"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."
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 he expects the new plant in Cikarang, West Java, to be ready for production in 2015. The plan also calls for investing another $40 million in two more plants to make antibiotics. The JV expects to employ 1,000 people, he told reporters. Soho is the fourth largest drugmaker in the country now with a market share of about 4%, Pitt said, and with Fresenius backing it intends to shoot for the top spot. "Our ambition is to become the largest (pharmaceutical company) in Indonesia," he said.
The JV will tap into a growing market as the Indonesian government launches universal health coverage next year. Citing government and IMS statistics, Fresenius Kabi said about 245 million people are expected to have health coverage by 2019, and the Indonesian drug market is expected to double to €7.1 billion by 2018.
Fresenius is not the first to think of Indonesia. Merck ($MRK) last year opened a packaging plant to serve Indonesia and other markets. And Sanofi ($SNY) CEO Chris Viehbacher has mentioned it as one of the emerging markets where there are deals still to be found. But it is not without its perils, particularly for branded drugmakers. Last year Indonesian President Susilo Bambang Yudhoyono signed a decree granting compulsory licenses for generics of key HIV drugs. Those included GlaxoSmithKline's ($GSK) Ziagen (abacavir), Merck's ($MRK) Sustiva (efavirenz), Abbott Laboratories' ($ABT) Kaletra (lopinavir + ritonavir), and Gilead Sciences' ($GILD) Truvada (tenofovir + emtricitabine) and Atripla (tenofovir + emtricitabine + efavirenz).