Pharmaceutical manufacturer Aspen Pharmacare will acquire Swiss drug maker Sandoz’s Chinese subsidiary for up to €92.6m (R1.9bn) as it seeks to expand its footprint in China, it announced on Monday.
It will also sell Sandoz the European commercial rights to a portfolio of four anaesthetic drugs in a linked deal worth up to €55.5m (R1.1bn).
Aspen has previously signalled that it was seeking acquisitions in China to diversify its business and offset the risk created by the government’s move to volume-based procurement in 2019.
Under this system the Chinese government uses its purchasing power to exert downward pressure on the price of off-patent drugs, and companies that do not secure state contracts lose out on a large share of the market.
“Aspen has been quite public about the fact that some of our biggest products there are going on VBP. We will lose profit and turnover with VBP ... this deal helps give us critical mass, sustain the teams we have there, and gives us some breathing room as the balance of our pipeline comes in,” said Aspen CEO Stephen Saad in an interview with Business Day.
China is the world’s second-largest pharmaceutical market and is currently the third-biggest contributor by country to Aspen’s sales. Management hopes it will ultimately become the top contributor, said Saad.
“China is very important for Aspen's future — it has 1.4-billion people, and they like branded products when they can afford it,” he said.
Swiss drug maker Novartis spun off its generic business Sandoz in October.
Under the terms of the agreement announced on Monday, Aspen acquires the entire share capital of its subsidiary Sandoz China, along with the commercialisation rights and related intellectual property for a portfolio of well-established brands including the acromegaly treatment Sandostatin, bone treatment Aclasta and the anti-fungal medicine Voriconazole.
Aspen will pay Sandoz up to €92.6m, with €18.5m contingent on the sale of other pipeline products to be launched in the near future.
Aspen said the acquisition was expected to add R1.8bn in annual sales to the group.
Aspen will sell the European commercialisation rights and related intellectual property for four of its anaesthetic products — Nimbex, Tracrium, Carbocaine and Naropin for up to €55.5m, with €9.3m contingent on the sales performance of these products.
Aspen acquired Nimbex and Tracrium from GlaxoSmithKline in 2016, and Carbocaine and Naropin from AstraZeneca the same year. These products contributed about R280m to group sales in the year to June 30, said Aspen.
“The disposal will allow Aspen’s European management to adopt a more focused approach to its remaining anaesthetic products in the region,” the company said.
The deal is expected to be finalised in the second quarter of next year and is subject to approval from China’s competition authorities.
Aspen’s share price closed 1.96% higher at R188.90 on Monday.
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