CCM: Fosun Pharma acquires Indian pharmaceutical producer Gland

  On 3 Aug., 2016, Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (Fosun Pharma) announced its plan to acquire about 86.08% of the shares in the Indian pharmaceutical producer Gland Pharma Limited (Gland) for no more than USD190.26 million (RMB1.26 billion), an acquisition cost breaking record high in China's overseas M&A history.

  Source: Baidu

  Notably, in this transaction, the value of Gland was estimated to reach USD203.69 million (RMB1.35 billion), a figure 16 times Fosun Pharma's EBITDA (earnings before interest, taxes, depreciation and amortization) in fiscal year 2016 (1 April, 2015 to 31 March, 2016).

  Fosun Pharma is a leading healthcare company in China, who is engaged in pharmaceutical manufacturing, medical diagnosis and healthcare services. Of these, pharmaceutical manufacturing is the main business whose revenue accounted for 71.09% of the company's total in 2015. In Q1 2016, the company's revenue achieved USD486.75 million (RMB3.23 billion), up 15.20% YoY.

  The Indian producer Gland mainly targets at markets in the US and Europe and focuses on the production of pharmaceutical injections, like heparin sodium (one of its leading products, making a revenue of USD50 million in 2016 fiscal year) and acetylcysteine.

  Fosun Pharma's business structure by revenue, 2015

  Source: Shanghai Fosun Pharmaceutical (Group) Co., Ltd.

  Every year, Indian pharmaceutical preparation producers import large amount of APIs and intermediates that are worth over USD2 billion from China, such as acetylcysteine.

  Acetylcysteine, a cysteine derivative, is mainly used to loosen thick mucus. According to clinical trials, it is of great use in the treatment and prevention of respiratory diseases, like chronic obstructive pulmonary disease, bronchial asthma, acute respiratory distress syndrome and pulmonary fibrosis.

  In recent years, the domestic acetylcysteine market has developed rapidly. Of 360 hospitals in 22 cities / regions, the spending on clinical acetylcysteine reagents reached USD17.05 million (RMB113 million) in 2014 and mounted to USD20.37 million (RMB135 million) in Q1-Q3 2015, according to an investigation by the Chinese Pharmaceutical Association.

  At present, in the Chinese market, the acetylcysteine preparations, covering granules, tablets, capsules and injections, are mainly provided by 7 manufacturers such as Hangzhou Minsheng Pharmaceutical Group Co., Ltd., and acetylcysteine API by 3 producers, namely Shine Star (Hubei) Biological Engineering Co., Ltd., Zhejiang Cheng Yi Pharmaceutical Co., Ltd. and Wuhan Grand Hoyo Co., Ltd.

  Currently many domestic enterprises are marching into the rapidly developing acetylcysteine market. According to CCM's research, there are 19 enterprises applying for the production license for acetylcysteine granules and 4 for acetylcysteine capsules. It is predicted that the competition in the domestic acetylcysteine market will get intensified in the near future.

                                       Purchase value of acetylcysteine preparations in China, Jan. 2012-Sept. 2015