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INVESTMENT: SHANGHAI PHARMACEUTICALS
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A SERIES OF ACQUISITIONS AND JOINT VENTURES BY
SHANGHAI PHARMACEUTICALS
By Morgan Brady

BT 201812 investment 01收购和合资企业系列
上海医药

在成为世界主要制造商之后,中国经济正在发展并进入更具增值的运营模式。 随着经济的发展,有一个部门看起来很有希望,因为它似乎处于强劲增长浪潮的开端。 这个部门是医疗保健行业,因为其中的许多公司都有望看到好转。 其中包括上海医药(集团)股份有限公司的子公司上海医药控股有限公司。

上海医药是一家大型上市公司,在上海和香港交易所上市。 上海市政府的上海实业投资(控股)拥有该公司35.5%的股份。

5月,上海医药控股有限公司与Bracco Imaging S.p.A.签署协议,Bracco Imaging S.p.A.是诊断成像业务最大的公司之一,总部位于意大利米兰。 自2001年以来,Bracco与Shanghai Sine合资,直接在中国开展业务。 该合资企业于2016年再延长20年。

这符合公司的战略,因为它不断发展成为全球范围内主要参与者。 虽然其份额的价值可能无法反映公司目前的潜力,但它可以在短期或中期随时上升。

China’s economy is evolving and moving into a more value-added mode of operation, after having evolved into a major manufacturer in the world. And as the economy progresses, one sector looks very promising, as it seems to be at the brink of strong wave of growth. This sector is healthcare, as many companies in it are poised to experience a high upturn. Among those companies is Shanghai Pharmaceuticals Holding Co., Ltd, which is a subsidiary of Shanghai Pharmaceutical (Group) Co., Ltd.

BT 201812 inspiration 04About Shanghai Pharmaceuticals

Shanghai Pharmaceuticals is a large publicly traded company, listed on both the Shanghai and the Hong Kong exchanges. Shanghai municipal government’s Shanghai Industrial Investment (Holdings) owns 35.5 percent of the company’s shares.
 

The company produces western style medications for critical needs, in addition to modern TCM products and medical devices. It researches, develops, manufactures, distributes and retails pharmaceutical and healthcare products. Overall, it provides approximately 800 varieties of drugs and 20 dosage forms. It has 163 subsidiaries and 66 branches and is connected to China’s two largest distribution networks. It employs more than 950 employees. In addition to its production of pharmaceuticals, it engages in consulting services, assets management, investments holding operations, and other relevant activities.
 

Market Valuation
This company has a market capitalization of 60.41 billion Hong Kong dollars. Its stock has been hovering around the same place for the last five years. However, this may be due to challenges with distribution networks that the company works with. The sector is expected to see further growth given the large domestic demand, driven in part by age related demographics, and in another part by the increasing attention that people are paying to their health.

BT 201812 investment 04Strategic Expansion
The company is conducting a series of strategic acquisitions, signaling an ambitious growth mindset. Back in February this year, Shanghai Pharma acquired Cardinal health in full for the amount of $557 million. This acquisition is important since Cardinal Health is the third largest pharmaceutical distributer in the US and the eight largest in China. To seal the acquisition and meet some of its outstanding financial obligations, Shanghai Pharma secured a loan to the tune of $920 million for one year.

BT 201812 investment 02

Shanghai Pharma, Primavera Complete $239M Buyout Of Australia’s Vitaco

Buying Companies Abroad
This acquisition is the not first of its kind. Initially, Shanghai Pharmaceuticals focused on acquiring local companies, but in 2016 it started buying companies abroad as it acquired 60 percent of Vitaco, one of Australia’s healthcare products suppliers. Total value of the deal amounted to $147.6 million.
 

Shanghai Pharmaceuticals has plans for expansion around the globe. Back in January, it revealed plans to open a research center in San Diego in order to be able to distribute the drugs that it develops in the US and China. The company also aims to acquire companies in Europe (with a focus on Germany and France, and the Middle East).
 

The chairman Zhou Jun had explained at an earlier time that the company’s growth strategy takes two paths at the same time: acquisitions and in-house research and development. Mr. Jun believes that acquisitions are shortcuts that enable the company to gain access to new technology fast.
 

Apart from the acquisitions, Shanghai Industrial Investment (a parent company) has plans to establish a massive biotechnology fund, in cooperation with investors and financial institutions.

BT 201812 investment 03Joint Ventures
In May, Shanghai Pharmaceuticals Holding Co. Ltd signed an agreement with Bracco Imaging S.p.A., which is one of the largest companies in the diagnostic imaging business with its headquarters located in Milan, Italy. Bracco has been present directly in China since 2001 in a joint venture with Shanghai Sine. The joint venture was extended for additional 20 years in 2016.
 

The current R&D agreement aims to deliver innovative therapeutic drugs in the oncologic field. Bracco’s microbubbles technology platform has attracted Shanghai Pharmaceuticals into this endeavor, as this technology has changed medical imaging in Contrast Enhanced Ultrasound (CEUS). This technology is non-invasive and enables visualization and assessment of cardiac cavities, large vessels and tissue vascularity in real time and in a cost-effective manner. Shanghai Pharmaceuticals plans to use this technology for monitoring in the oncologic field.
 

Another partnership was with Russia’s BIOCAD, as the two companies agreed to build a facility in China, to manufacture drug substances. The agreement entailed that two joint ventures will be established for production, clinical development, registration, and marketing of several high-cost medicines based on monoclonal antibodies. A ceremony followed the signature of the agreement at the Eastern Economic Forum in Vladivostok, Russia on 12th September.
 

Conclusion
Shanghai Pharmaceuticals is the second largest pharmaceuticals company in the industry in China according to statistics in 2017. The market for pharmaceuticals is attractive both in China and elsewhere. A series of acquisitions and joint ventures with different innovative companies around the world put Shanghai Pharmaceuticals in an advantageous position. This is in line with the company’s strategy as it continuously grows and develops its capabilities to become a major player on a global scale. Although the value of its share might not reflect the company’s potential for the time being, it can rise at any time for short or medium terms.

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