AstraZeneca China reviews non-core businesses, sale talks ongoing for anaesthetic unit - sources
• Anesthetic unit could be sold as a whole or in parts
• Humanwell, Nhwa and Hengrui flagged as potential buyers
AstraZeneca [LON:AZN], the UK-based global pharmaceutical giant, is reviewing strategic options for its non-core businesses in China, two sources and two people claiming knowledge of the situation said.
Specifically, the company is in early stage talks with potential buyers for its anaesthetics drug unit in China, one source and the two people claiming knowledge said. Interested parties include both private equity funds and China-listed pharmaceutical companies, they added. Several funds in consortium have shown interest in acquiring the whole anaesthetic unit with a view to listing it in China in the future, said one of the sources.
The AZ anaesthetics operations in China include two drugs: diprivan (propofol) - an intravenous general anaesthetic used to induce and maintain general anaesthesia, intensive care sedation and conscious sedation for surgical and diagnostic procedures, and Naropin (ropivacaine) used for surgical anaesthesia and acute pain management.
According to AstraZeneca’s annual report, the local anaesthetic unit recorded global sales of USD 488m in 2014. The local and general anaesthetics business recorded approximately USD 600m global revenue in 2014 versus USD 750m in 2010.
AZ could sell the whole anaesthetic unit or just one of the drugs, one of the sources said. Diprivan on its own sold USD 200m globally, of which CNY 700m (USD 110m) came from China, according to a sector banker and one of the people claiming knowledge.
Given that the majority of revenues of diprivan come from China it makes more sense for a Chinese strategic bidder to acquire this unit to create centralized manufacturing synergies together with an existing similar portfolio, the sector banker suggested. The buyer could then dispose of any non-Chinese operations. A Chinese bidder may also buy the general anaesthetics unit and then if it is not interested in non-Chinese operations, dispose of these, an industry source said.
Potential strategic buyers could be Humanwell Healthcare [SHA: 600079], Jiangsu Nhwa Pharmaceutical [SHE: 002262] and Jiangsu Hengrui Medicine [SHA: 600276], that are the top three players in the anaesthetic space, the second person claiming knowledge said.
A source at Humanwell said he is not aware of a sale process but noted that AZ’s distribution network in China is attractive. However, whether it will place a bid would all depend on the price. AZ’s anaesthetic drugs are Humanwell’s key generic drugs in China, so Humanwell will not be interested in the drugs itself but in the sales channels.
A source from Nhwa noted that it is interested to learn more about the potential sale of AZ’s anaesthetic unit.
AZ’s anti-infectives and gastro business are also non-core and it was suggested that these could be disposed of given their small market share and the fact that they are “outdated drugs”. Its anti-infectives business consists of Cubicin (daptomycin) for the treatment of gram-positive infections, including MSSA and MRS, and its gastrointestinal business includes two proton pump inhibitors (PPI) Losec (omeprazole) and Nexium (esomeprazole) for acid-related diseases.
AZ set out the strategy in 2013 to build up growth in five growth platforms – Brilinta, diabetes, respiratory, emerging markets and Japan. The five platforms have accounted for more than half of AZ’s global revenues based on financial performance in 3Q14, helping to navigate a period during which some of its established products are scheduled to lose exclusivity.
Oncology will become its sixth growth platform in the mid-term and with several potential submissions in 2015-2016, this unit is expected to contribute the largest proportion of pipeline-driven revenue growth and potential to grow to quarter of sales by 2023, according to a company announcement.
AZ’s China has experienced 19% growth in 1H15, according to its 1H15 results announcement. It has generated USD 12.36bn total revenue in 1H15.
AstraZeneca declined to comment.