Mergers afoot for China’s biotechnology industry as suppliers become attractive targets for Big Pharma

30-Sep-2020 Intellasia | South China Morning Post | 6:02 AM Print This Post

China’s fragmented outsourced drug discovery services market will see further consolidation as companies seek to grab market share amid a biotechnology boom.

The market, dotted with companies with specialty expertise, are becoming attractive targets for suitors seeking a foothold in the world’s second largest pharmaceutical market, according to private equity firm Advent International.

“The industry is growing at around 20 per cent a year in the last few years, benefiting from the biotech boom,” Andrew Li, head of Greater China, said in an interview. Such outsourced providers stand to benefit from their position in the value chain, regardless of whether drug development efforts come to fruition or not, he added.

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The preclinical outsourced drug discovery services market in mainland China is forecast to grow at a compound average annual rate of 18.2 per cent to $4.1 billion (HK$31.8 billion) in 2024 from $1.8 billion last year, according to market research firm Frost & Sullivan. Drug developers are increasingly using outsourcing partners to help them conduct preclinical laboratory tests and clinical trials to take advantage of cost savings, especially China, Li added.

Advent, which focuses on five broad sectors including health care, last week took control of Shanghai-based Sundia MediTech, and plans to merge it with its San Diego-based BioDuro. No financial detail was disclosed. Both companies have been in business for the past 15 years and most of their research operations are located in China serving global clients, mainly in the United States, Europe and increasingly Asia-Pacific.

The combined entity BioDuro-Sundia has over 2,000 employees, making it the third largest player among China’s contract drugs research organisations focusing on preclinical work, according to Li.

“Their clientele, geographic focus and their capabilities are quite complementary to each other,” Li said. “As a merged entity they can provide our pharmaceutical clients with end-to-end solutions throughout the entire drug development process.”

While BioDuro-Sundia is “IPO-ready,” it would prefer to focus on building its business for now rather than taking advantage of currently strong stock market appetite for biotech firms, Li added.

The leader of the pack, Shanghai-based WuXi AppTech, had 7.2 billion yuan (US$1.06 billion) of revenue in the first half this year and 12.9 billion yuan in 2019. It had over 21,700 staff as of December.

Its nearest rival Pharmaron Beijing, with over 6,500 employees, recorded 2.2 billion yuan of revenue in this year’s first half and 3.8 billion yuan last year.

The top players of the sector with over 100 players have been snapping up small participants with niche expertise.

For example, Pharmaron bought a majority stake in clinical site management services provider Beijing LinkStart SMO in July, after taking over Nanjing-based peer CR Medicon Holding last year.

WuXi AppTech last year acquired US-based clinical research services firm Pharmapace, while Viva Biotech last week agreed to pay $80 million for Hong Kong-based small molecule drugs research firm SYNthesis.

“Only the top few players have established integrated full-service offerings and together they command a significant share of the market,” Li said. “The rest are occupied by many specialty players.”


Category: China

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