Merck hands over China joint venture to partner Simcere Pharma

SINGPAPORE--Merck ($MRK) is bowing out of its Chinese joint venture with Simcere Pharmaceutical. Merck forged the partnership in 2011 as a way to build up in the fast-growing market, with a focus on branded generic drugs.

Merck will hand over control to Simcere, a company spokeswoman told FiercePharma, as part of a shift in strategy at the joint venture. The venture, known as SMSD, "will now focus on local innovative and mature products, serving the local market," she said in an email. "The operation will be managed by Simcere Pharmaceutical Group in this new capacity."

The changes are designed to "better meet challenges posed by the rapidly changing external environment," the spokeswoman said.

Under the 2011 deal, each company handed over pharma assets to the JV, with Merck holding a majority 51% stake and Simcere claiming the rest. Among the drugs Merck contributed were its diabetes blockbuster Januvia, its now-off-patent statin drug Zocor and cardio med Cozaar.

The Merck spokeswoman didn't say whether the company's ownership stake in SMSD would change, or whether it would pull any products out of the deal. She did suggest that rejigging the partnership was part of Merck's overall restructuring. "Pharmaceutical companies are seeking transformation and reform, with a focus on their priority areas," she noted.

Merck has been remaking itself by selling off businesses, including its consumer health unit, which went to Bayer last year for $14 billion.

One of the JV's stated goals was spreading its products beyond major cities. The spokeswoman says the partnership succeeded. "Driven by the goal of improving medical accessibility, SMSD has built up multiple promotion channels and platforms to serve the China market, covering areas from the eastern seaboard to inland China, from developed cities to villages," she said.

China's sales and marketing channels have changed rapidly, the spokeswoman said, and e-channels continue to expand. "At the same time, SMSD has established a comparatively mature, professional, compliant team," she said. "They have delivered quality and mature brands, especially in the areas of cardiovascular diseases and metabolic diseases to patients to help overcome ever-increasing chronic disease challenges in China."

Merck's pharmaceutical sales in China hit $1.2 billion in 2014, up 13% from $1.1 billion in 2013. Overall, Merck sales grew 14% there last year.

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