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Pharmaceutical M&A in the Asia-Pacific Region - India and China drive regional activity but Japan still dominates high value transactions
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Introduction
Expanding healthcare coverage in emerging Asia-Pacific markets, rapid economic growth and burgeoning middle classes are attracting foreign M&A as companies attempt to offset future losses from the looming threat of the 2011 "patent cliff" and slowing growth in major developed markets. As these markets develop, consolidation of the domestic industry is also driving M&A in the Asia-Pacific region.
Scope
*Provides an overview of the healthcare systems and pharmaceutical markets of key countries within Asia-Pacific.
*Overview of drivers, resistors and trends within the Asia-Pacific M&A landscape.
*Analysis of the types of acquisitions and healthcare sectors targeted.
*Analysis of geographic M&A activity and transaction values.
Highlights
Sluggish performance in the major pharmaceutical markets prompted by growing generic competition and increasing healthcare cost-containment are forcing companies to seek opportunities elsewhere. Massive populations, rapid economic growth and burgeoning middle classes make emerging Asia-Pacific markets particularly attractive to foreign companies.
Companies penetrating these markets often acquire local manufacturers and generics firms that provide a quick, cost-effective point of entry from which to later launch more expensive branded products. However, some Asia-Pacific countries are introducing or considering measures to protect the domestic industries from foreign domination.
Within the period analyzed in this report, the highest number of M&A deals involving APAC based companies was recorded in 2008. Strong recovery from the global financial crisis can be seen in late 2009. Furthermore, 2010 seems to be off to a good start, with a number of large deals involving APAC-based companies having been announced.
Reasons to Purchase
*Gain insight into the number and Scope of M&A transactions in Asia-Pacific, and key drivers and resistors.
*Identify which are the most perused pharmaceutical sectors in terms of M&A deals, and which companies have been the most acquisitive in recent years.
*Identify which markets have been most frequently targeted through M&As, and which have attracted the attention of Big Pharma.
ABOUT DATAMONITOR HEALTHCARE 2
About the Healthcare Strategic Analysis Team 2
Geographic specific reports: 2
Global issue reports: 2
About the Healthcare Asia-Pacific Team 3
1. Executive Summary 4
Strategic scoping and focus 4
Key findings 5
Key definitions 6
Company classifications 6
Acquisition types 6
Geographic classifications 7
Other 7
Related reports 8
Upcoming related reports 8
TABLE OF CONTENTS 9
2. Overview of the APAC pharmaceutical markets 10
Key findings 10
Gaining government drug reimbursement is the key to success in Australia 12
Government participation in healthcare 12
Key health concerns 12
Pharmaceutical market structure 13
Chinese healthcare reforms continue to improve market access 15
Government participation in healthcare 15
Key health concerns 16
Pharmaceutical market structure 16
Hong Kong operates separately from mainland China 18
Indian government investments are needed to improve local market attractiveness 20
Government participation in healthcare 20
Key health concerns 21
Pharmaceutical market structure 21
Indonesia is still far from becoming a truly attractive market 23
Government participation in healthcare 23
Key health concerns 24
Pharmaceutical market structure 24
The Japanese market is well-established and highly regulated 26
Government participation in healthcare 26
Key health concerns 26
Pharmaceutical market structure 27
Malaysia is a rising star within APAC 29
Government participation in healthcare 29
Key health concerns 29
Pharmaceutical market structure 29
New Zealand offers only limited growth and a small market 32
Government participation in healthcare 32
Key health concerns 32
Pharmaceutical market structure 32
The Philippines is a poor nation still struggling to provide affordable healthcare access 35
Government participation in healthcare 35
Key health concerns 36
Pharmaceutical market structure 36
High-quality healthcare is available in the established Singaporean market 38
Government participation in healthcare 38
Key health concerns 38
Pharmaceutical market structure 38
South Korea is relatively lucrative, but can be tricky to navigate 41
Government participation in healthcare 41
Key health concerns 41
Pharmaceutical market structure 42
Taiwan's regulatory environment is improving but still has some way to go 44
Government participation in healthcare 44
Key health concerns 44
Pharmaceutical market structure 45
Thailand's large public sector is tightly controlled by the government 47
Government participation in healthcare 47
Key health concerns 48
Pharmaceutical market structure 48
The pharmaceutical drug market grows amid a poor healthcare system in Vietnam 50
Government participation in healthcare 50
Key health concerns 51
Pharmaceutical market structure 51
3. Overview of M&A activity 53
Key findings 53
Drivers and resistors of APAC M&A 56
Stronger growth forecast in emerging compared to developed markets 57
Big Pharma look to emerging markets to replace lost revenue as the patent cliff threatens blockbuster sales 58
Product development costs are rising rapidly in developed markets, particularly for clinical trials 59
Changing socio-demographics create patient demand for better healthcare 59
Policy and regulation changes are creating a more certain business environment in APAC markets 61
Overview of M&A activity by geography 62
China was the most common target location for acquisitions by APAC-based companies 63
China was the most common location of APAC-based acquiring companies 63
India holds the greatest interest for leading pharma companies in terms of acquisition prospects 64
Half of all M&A deals involved both APAC-based acquirers and targets only 65
Overview of M&A activity by deal type and size 67
100% acquisitions are the principal deal type involving APAC companies 67
Majority acquisitions are a favored strategy of large generics players 68
Few minority acquisitions are pursued in APAC 68
Acquisitions of complete business units are the most common form of asset purchase 69
Many buyouts were performed by existing shareholders 70
M&A value was highest in 2008 70
Overview of M&A activity by healthcare sector and therapy area 74
Pharmaceutical manufacturers are the most common APAC M&A targets 74
Leading pharma players have preferences for specific sectors 78
Acquirers target highest value and volume therapeutic areas 79
4. Country specific M&A activity 81
Key findings 81
*Australia had a strong start to 2010 82
M&A summary 84
China showed mainly domestic M&A activity, although international deals are on the rise 85
M&A summary 87
M&A activity in India was particularly high in 2008, then dropped off again 88
M&A summary 90
Japan saw biggest deal of the region when it purchased Indian generics company in 2008 91
M&A summary 93
Most Malaysian M&A deals involved the broader healthcare industry 94
M&A summary 95
M&A activity in New Zealand slowed down considerably in 2009-10 96
M&A summary 97
Singaporean companies were particularly active as acquirers 98
M&A summary 99
M&A activity in South Korea is increasing consistently 100
M&A summary 101
The majority of M&A deals in Taiwan took place in 2008 102
M&A summary 103
Other APAC countries were involved in few M&A deals from Q1 2007-Q1 2010 104
Indonesia 104
Philippines 104
Thailand 105
Vietnam 105
Significant M&A in APAC has continued throughout the first half of 2010 106
Abbott acquires formulations business of India's leading pharmaceutical firm 106
Indian pharmaceutical industry grows wary of multinational dominance 106
GlaxoSmithKline focuses on small acquisitions in emerging markets 107
GlaxoSmithKline invests in South Korea 108
GlaxoSmithKline cannot find value in Indian acquisitions 108
Chinese CRO deal falters 108
International players continue to expand presence in APAC through means other than M&A 109
5. Bibliography 110
Publications and online articles 110
Company press releases 116
Datamonitor products 118
APPENDIX 119
Methodology 119
Key definitions 120
Company classifications 120
Acquisition types 120
Geographic classifications 121
Other 121
Exchange rates 121
About Datamonitor 122
About Datamonitor Healthcare 122
Datamonitor consulting 122
Disclaimer 124
LIST OF TABLES
Table 1: Comparison of key health indicators in the South-East Asian and Western Pacific regions with global indicators, 2006-08 11
Table 2: Australia - key demographic and health indicators, 2006-08 14
Table 3: China - key demographic and health indicators, 2006-08 18
Table 4: India: key demographic and health indicators, 2005-08 22
Table 5: Indonesia: key demographic and health indicators, 2005-08 25
Table 6: Japan: key demographic and health indicators, 2006-08 28
Table 7: Malaysia: key demographic and health indicators, 2006-08 31
Table 8: New Zealand: key demographic and health indicators, 2006-08 34
Table 9: Philippines: key demographic and health indicators, 2004-08 37
Table 10: Singapore: key demographic and health indicators, 2006-08 40
Table 11: South Korea: key demographic and health indicators, 2006-08 43
Table 12: Taiwan: key demographic and health indicators, 2001-2010 46
Table 13: Thailand: key demographic and health indicators, 2002-08 49
Table 14: Vietnam: key demographic and health indicators, 2006-08 52
Table 15: APAC - Top 10 highest value M&A deals, Q1 2007-Q1 2010 73
Table 16: APAC - focus of target companies acquired in M&A deals involving APAC-based companies, Q1 2007-Q1 2010 76
Table 17: Australia - summary of key M&A deals, Q1 2007-Q1 2010 84
Table 18: China and Hong Kong - summary of key M&A deals, Q1 2007-Q1 2010 87
Table 19: India - summary of key M&A deals, Q1 2007-Q1 2010 90
Table 20: Japan - summary of key M&A deals, Q1 2007-Q1 2010 93
Table 21: Malaysia - summary of key M&A deals, Q1 2007-Q1 2010 95
Table 22: New Zealand - summary of key M&A deals, Q1 2007-Q1 2010 97
Table 23: Singapore -summary of key M&A deals, Q1 2007-Q1 2010 99
Table 24: South Korea -summary of key M&A deals, Q1 2007-Q1 2010 101
Table 25: Taiwan -summary of key M&A deals, Q1 2007-Q1 2010 103
Table 26: Exchange rates to US dollars, July 8, 2010 121
LIST OF FIGURES
Figure 1: Map of Asia-Pacific (APAC) region 7
Figure 2: Drivers and resistors of pharmaceutical growth in the emerging markets, 2010 53
Figure 3: APAC - total number of M&A deals by quarter and year, Q1 2007-Q1 2010 54
Figure 4: APAC - pharma M&A activity strategic rationale and future outlook, 2010 56
Figure 5: Forecast pharmaceutical sales growth (for the top 50 companies in 2009) for the main four geographic regions worldwide, 2009-2014 57
Figure 6: Deficit in global annual sales for the top 50 pharma companies (excluding generics companies) due to generic erosion of brands facing patent expiry from 2010 onwards, 2010-14 58
Figure 7: APAC - growth in gross domestic product (GDP) of Malaysia, Thailand, China, Indonesia, Philippines and Vietnam, 2004-08 60
Figure 8: APAC - M&A mix (acquirer/target) by quarter, Q1 2007-Q1 2010 62
Figure 9: APAC - key locations of M&A targets sought by APAC-based acquirers, Q1 2007-Q1 2010 63
Figure 10: APAC - key locations of acquirers seeking APAC-based targets for M&A, Q1 2007-Q1 2010 64
Figure 11: APAC - M&A deals targeting APAC-based companies and involving leading global pharmaceutical companies or their direct subsidiaries by year, Q1 2007-Q1 2010 65
Figure 12: APAC - role of APAC-based companies in M&A deals, Q1 2007-Q1 2010 66
Figure 13: APAC - Deal type by quarter, Q1 2007-Q1 2010 67
Figure 14: APAC - M&A by deal type, Q1 2007-Q1 2010 69
Figure 15: APAC - M&A deals by value range, Q1 2007-Q1 2010 71
Figure 16: APAC - value of M&A deals by quarter, Q1 2007-Q1 2010 72
Figure 17: APAC - primary industry of M&A targets by region, Q1 2007-Q1 2010 75
Figure 18: APAC - focus of M&A by location and development status, Q1 2007-Q1 2010 77
Figure 19: APAC - target sectors of M&A deals by company sales rank, Q1 2007-Q1 2010 78
Figure 20: APAC - therapeutic focus of target companies for M&A deals involving APAC-based companies, Q1 2007-Q1 2010 79
Figure 21: Australia - number and value of M&A transactions by acquirer/target location and year, Q1 2007-Q1 2010 83
Figure 22: China and Hong Kong - role of Chinese companies in M&A transactions by year, Q1 2007-Q1 2010 86
Figure 23: China and Hong Kong - leading sectors targeted in M&A transactions, Q1 2007-Q1 2010 86
Figure 24: India - International markets targeted by Indian acquirers by year, Q1 2007-Q1 2010 89
Figure 25: India - most prolific Indian acquirers by target sector, Q1 2007-Q1 2010 89
Figure 26: Japan - foreign targets acquired by Japanese firms by country of headquarters, Q1 2007-Q1 2010 92
Figure 27: Japan - value of M&A involving Japanese companies by value range, Q1 2007-Q1 2010 92
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Pharmaceutical Industry: Pharmaceutical M&A in the Asia-Pacific Region - India and China drive regional activity but Japan still dominates high value transactions
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