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Fast-Speeding Life Sciences Industries in Asia-Pacific

Thursday, November 24th, 2011

Geographically huge and culturally and economically diverse, the Asia-Pacific region is currently sprouting concrete growth and dominant economic trends. This growth is riding high on the back of the life sciences industries, especially in China and India, which are experiencing growth at breakneck speed. One primary reason for this is that several pharmaceutical companies are expanding into the Asia-Pacific region to increase their market share and reduce costs.

Large economies like China, India and Korea, as well as smaller markets like Malaysia and Singapore, are all driving the life science industry growth. Not only are foreign companies expanding operations and investment in the region, but mergers and acquisitions and joint ventures are also taking place with local companies. Additionally, many of these local companies are aiming to develop their own life science investments with increasing financial support from governments. With such trends happening, the region has quickly risen as a favorable place for life science companies to operate.

Laws and regulations surrounding the industry, as well as industry codes of practice, have also been increasing exponentially. Several companies are coordinating with Asian governments in order to create a more transparent environment and are trying to find their footing in this complex and booming region.

China is the largest and fastest growing Asia-Pacific market. Along with China’s enormous population, this certainly makes it a key strategic market for multinational pharmaceutical and medical device companies. Life sciences organizations are increasing their investments there, in some cases moving global research and development capabilities to China and building manufacturing plants.

Next on the rankings list is India. Though the growth in India’s pharmaceutical and medical technology markets is not as dramatic as China’s, multinational pharmaceutical and medical technology companies are seeing high levels of opportunity there and are investing for the long term.

ut and consolidation in the near future. While the current landscape is dominated by Indian companies today, over the next five years we will see innovation play a much more significant role,” Hasit Joshipura, managing director of India and vice president of South Asia for GlaxoSmithKline Pharmaceuticals Ltd., said in a report.

A recent survey has indicated the combined annual revenues of Indian life sciences companies totals US$21 billion, which accounted for 19 percent of the total revenues in the Asia-Pacific region. South Korea, Australia and Singapore followed India in terms of revenue.

Japan, however, has the most developed life sciences market in this part of the world, with the largest pharmaceutical and medical technology markets in the region and the second-largest globally after the United States.

The life sciences industry in the year 2010 recorded an overall growth trend with fresh mergers and acquisitions (M&A) in the Asia-Pacific region as compared to 2009. The industry recorded double-digit growth of 16.6 percent; clocking in at US$128.26 billion in 2010 revenue. That year witnessed an increase in the number of deals to 166, valued at $19.33 billion with an average deal size of $490 million.

Novartis/Nestle Group led the acquisition table by acquiring Alcon, a leading eye care group company for US$28.3 billion. This was followed by France’s Sanofi-Aventis’ acquisition of Genzyme. Sanofi-Aventis has publicly disclosed its US$18.5 billion, $69-per-share cash offer for Genzyme. Similarly, Merck KGaA acquired all outstanding shares of common stock of Millipore for US$107 per share in cash, or a total transaction value, including net debt, of approximately US$7.2 billion.

Several global companies such as Abbott Labs, Cephalon, GlaxoSmithKline, Cardinal Health, Novartis Pharma have also made significant investments in the APAC region by acquiring stakes or completely acquiring the companies from the region. Seven Australian companies were acquired in 2010, followed by five each from India and China and three from South Korea. The total value of inbound deals of the top 20 companies in 2010 stood at US$10.69 billion.

The acquisition of Pirmal Healthcare Solutions of India by Abbott was one of the most talked about inbound deals that happened in 2010, as the latter acquired the former at US$3.72 billion. The next to follow the list was the acquisition of Healthcare Scope of Australia by Carlyle Group and TPG, both from America, at US$2.35 billion. Another leading deal witnessed during the year was the acquisition of Sigma Pharmaceuticals of Australia by South Africanbased Aspen Pharmacare at US$806 million. Besides inbound and outbound deals, the APAC region also witnessed domestic deals as well. This all signifies that the trend of companies in emerging markets such as India, Australia, China and South Korea are moving towards acquiring companies or stakes in developed markets to establish their presence in the developed markets.

While Asian drug-makers looked overseas to expand their market presence, foreign multinationals continued to invest in Asia by acquiring domestic pharmaceutical manufacturers. In May 2010, US pharmamajor Abbott Laboratories acquired Indianbased Piramal Healthcare’s generics business for US$3.7 billion.

Apart from mergers and acquisitions, joint alliances are also becoming an increasing trend across the Asia-Pacific region. Many Asian companies are joining hands, thereby giving a strong support to the pan-Asian life science industry. Reportedly, Sinovac Biotech from China formed an alliance with Parenteral Biotech of India to expand its presence in the Indian market and 3SBio from China joined hands with Shanghai-based Ascentage Pharma to research, develop and commercialize their best-in-class targeted cancer therapeutics. Similarly, QRxPharma from Australia entered into alliance with China’s Aoxing to develop MoxDuoIV, for acute treatment of moderate to severe pain. In another deal between Asian firms, 3SBio joined hands with Taiwan-based Panacor Bioscience to develop and commercialize Nephoxil for the treatment of hyperphosphatemia in China and Optomagic of South Korea entered into drug discovery collaboration with Shenogen Pharma of China.

2010 also witnessed Drug DiscoveryPPD, a leading global CRO, establishing a joint venture with China’s Taijitu Biologics in the area of the discovery of novel biotherapeutics. Similarly, Bayer HealthCare and Regeneron, a drug research company, collaborated with the Singapore Eye Research Institute (SERI) for investigating the efficacy and safety of VEGF Trap Eye in patients with choroidal neovascularisation (CNV) of the retina as a result of pathologic myopia.

Technological advances have also been driving the growth of the life science industry worldwide. The life science industries of Japan, China, and India will adopt cloud computing, says a new report from Ovum. Cloud computing provides a way to reduce costs, simplify management, and improve services in a safe and secure manner. Cloud services available to health and life science organizations go much beyond email and communications, meetings and collaboration. These services cover a much broad range of possibilities, including application development, data and image storage and sharing, and PC management and security.

“The challenge for life sciences companies operating in Asia-Pacific is to learn quickly, be adaptable, show leadership, and be flexible. The current economic situation further highlights the necessity of these characteristics,” said Gerald Lema, president of Asia-Pacific for Baxter International, in a release.

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