Shanghai Pharmaceuticals buys major stake in special API maker

By Natalie Morrison

- Last updated on GMT

Related tags Pharmacology Active ingredient

Shanghai Pharmaceuticals buys major stake in special API maker
Shanghai Pharmaceuticals has bought a 70 per cent stake in ingredients developer and manufacturer Changzhou Kony Pharm in a bid to boost its standing in the API market.

Under the deal, the firm will gain access to Kony’s APIs (active pharmaceutical ingredients), produced for anti-virus and cardiovascular therapy areas – which are “new generation, high quality, high capacity, high efficiency ingredients with low pollution”.

A member of the board, who preferred to remain unnamed, told that both China-based companies will now work together to reduce costs and increase efficiency.

He said: We now plan to reduce costs by consolidating Kony Pharm’s resources, starting with certain costs in the R&D (research and development) of special APIs.

“Optimizing our industry chain by participating in the special APIs development may also allow us to cut the cost of intermediates. In addition, raw material costs reduced with upstream suppliers.”

In a press statement executive director and chairman Lu Mingfang said the investment will “optimize the pharmaceutical industry full value chain and achieve synergy”​ for Shanghai Pharmaceuticals.

Kony’s estimated revenue for 2011 is expected to hit $182m, and the firm forecasts rapid growth in the future.

Working on a global scale

Kony currently exports 50 per cent of its products to India, South America, Europe and the US.

Shanghai Pharmaceuticals says it will now consider extending its global reach by making the facility compliant with WHO (World Health Organisation) good manufacturing practice (GMP).

“One has to be included in the WHO procurement plan in order to be a WHO GMP compliant. We would like to be if the opportunity arises,” ​the board member told us.

Takeover time

The news is the latest in a buyout spree for the firm after it unveiled plans to raise $550m (€418m) for acquisitions from investors including Temasek Holdings and Pfizer.

Recent takovers include a 51 per cent buyout of cancer API producers Jinhe Bio-Technology​, a September purchase of antibiotic’s producer Shanghai New Asiatic Pharmaceutical, and a buyout of CITIC Pharmaceutical, in April.

The spokesperson told us that​up until recently, Shanghai Pharmaceuticals has had a relatively small involvement with APIs, but that we should expect more deals in the same vein as Kony and Jinhe biotech.

“Even though we have an integrated industry chain, Shanghai Pharmaceuticals develops a relatively small amount of APIs,”​ the spokesman told us.

“Our recent acquisitions of API companies can enrich our API product line. They can also accelerate our new launches as a base for our R&D and pilot testing.”

Mingfang added: “We believe that after our acquisition of Jinhe Bio-Technology, the takeover of Kony Pharma will help us optimize the pharmaceutical industry chain and achieve synergy, which will in turn drive our business growth as well as profitability and create greater value for shareholders and investors.”

He said the firm is now hunting further mergers and acquisitions.

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