Teva in Talks to Set Up China Venture With Guangzhou Pharma
(Bloomberg) -- Teva Pharmaceutical Industries Ltd. is making its boldest move in China with plans to set up a joint venture with Guangzhou Pharmaceutical Holdings Ltd. to make and sell the Israeli company’s generic drugs in the world’s second-biggest market for medicines, according to its partner.
The drugmaker known for its popular Chinese version of Viagra is awaiting local government approval for some Teva drugs, Guangzhou Pharma Chairman Li Chuyuan said in an interview at the company’s headquarters in southern China on Thursday. He declined to discuss the structure and financial details of the venture.
“With the regulatory reform in China to allow more foreign imports, we will lean into our strengths. If foreign companies want to come into this area, they should work with us,” the 52-year-old told Bloomberg TV. “You have products and technology -- you don’t have to build factories. You can cooperate with us and use our factories.”
Teva said the company currently has no agreement to establish a joint venture in China.
“As of today, Teva has no agreement with any local partner to form a JV in China. Teva has one API plant in China where we are selling medicines through a distribution agreement with a local company,” the Petach Tikva, Israel-based company said in a statement.
The company’s stock plunged on Thursday after reporting lackluster third-quarter results.
Teva, the world’s largest generic drugs maker, is striking as China’s demand for medicines surges because of its aging population and as chronic diseases such as cancer and diabetes become commonplace. Sales of copycat drugs there are expected to surpass the U.S. this year, topping $80 billion, according to the U.S. Department of Commerce.
At the same time, China is revamping its approval system for medicines that will ease bottlenecks in getting new treatments to consumers. The change is a potential boon for multinationals from Pfizer Inc. to GlaxoSmithKline Plc.
“We hardly have any presence in China, but nobody else does," Eyal Desheh, Teva’s then chief financial officer, said at an investor conference last September. "Entering the Chinese market is a huge challenge, and making money there is a huge challenge.”
Guangzhou Pharma is already seeing the benefits of China’s determination to speed up approvals. The company’s received about as many drug approvals in the last three quarters as it did in the past three years, Li said. With the regulatory revamp, now is the time for foreign drug makers to work with local manufacturers, he said.
“China is taking a liberalized route to open up, and we hope foreign companies will come in with a spirit of cooperation,” he said. “The truth is, with technology and products, you might not be able to get market share. You need to have manufacturing, network, talent. We have these advantages.”
Generic drugs make up 64 percent of pharmaceutical sales in China, according to the U.S. Commerce Department report. Teva operated one plant in China as of last year that makes active pharmaceutical ingredients, and its executives have highlighted the country as a market it needs to corner. The generics market there is projected to grow 9 percent through 2020, according to a Teva presentation last year.
Teva, like other copycat manufacturers, is scouting for growth as the profit margins for generics face steady price erosion. Its generics unit has underperformed as it contends with increased competition, pressure from customer consolidation and a delay in key launches. It agreed to sell its women’s health unit and oncology and pain franchises in Europe to pay off its $34.7 billion in debt.
Guangzhou Pharma also plans to buy a controlling stake in an Indonesian listed pharmaceutical company, Li said, declining to provide details. The company will build a manufacturing plant there. In China, it plans to build specialized hospitals for maternity care, elderly care and rehabilitation centers, said Li.
©2017 Bloomberg L.P.
With assistance from Rachel Chang, Tom Mackenzie, Haze Fan