[Follow Up] Who Is Up for Another Round of Joint Ventures?

Thursday, September 20, 2012 7:49

Following up on my post last week Who Is Up for Another Round of Joint Ventures?, both Pfizer and Merck made an announcement that they have both entered into JV agreements with local firms to distribute their generic drugs in China”

On Sept. 13, the world’s largest drug company Pfizer and China’s Zhejiang Hisun Pharmaceutical Co jointly set up a new company based in the city of Hangzhou. With a registered capital of US$250 million, Hisun owns a 51% stake in the joint venture, while Pfizer owns 49%

According to a separate piece by  the China Perspective announcing the Merck deal

Merck owns 51% of the Shanghai-based joint venture and Simcere Pharmaceutical the remainder, and both companies will use their facilities in China to produce the drugs.

Both deals having characteristics that I feel are important to highlight:

  1. Both deals are structured around generics.
  2. Both deals ultimately represent a structure that plays off the strengths of each firm.  foreign brand, process, and QC … local distribution
  3. Both deals will insulate the firms from any decline in market, as well as speed up their entry to the market
  4. Both deals will insulate the firms from a number of risks, not the least of which his the legal risks brought on by the well documented business practices that take place with in the industry.

Characteristics that exist in several other key markets where I am seeing similar activity …. auto, insurance, and energy.  Which is to say that while JVs are not ideal for many reasons, the firms I have spoken with about the potential for JVs feel there is a time and place for the vehicle when done properly.

Particularly if it can insulate risk, increase speed to market, and be kept separate from other investments / products in China

Let’s just hope that these partnerships are being built better than they were 8-10 years ago.

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