Co-op in Chinese drugs venture
Add comment August 6th, 2007
The Co-operative Group is moving into the generic drugs industry with the construction of a factory in China in partnership with a Chinese pharmaceutical company.The group today announced that it had signed a joint venture with Tasly Group China, one of the country’s top three drug companies.
It has taken a 60% stake in the venture which will employ up to 200 people and is expected to begin production of a range of generic drugs within a year. Total investment for the project is £20m.
John Nuttall, managing director of the healthcare division of the Co-op, said the new factory would make well-established generic medicines as well as newer generic versions of drugs that have recently come off-patent. These will be brought back to the UK to supply the Co-op’s 600 pharmacies.
Mr Nuttall said the group planned to sell the generics it makes in Europe and was interested in going into the US. The drugs will not have the Co-op brand but another to be decided.
This is the group’s first move into drug manufacturing and its first venture in China. The generics industry is a lucrative one, as more and more blockbuster drugs come off patent, providing profitable opportunities for companies to copy them.
Global blockbusters such as Pfizer’s Viagra are reaching the end of their patent, and by 2009, $80bn worth of blockbuster drug patents will expire.
Mr Nuttall said the move would give the group control over its source of supply and would help improve margins. He said the Co-op had chosen China because of the wide experience of its partner Tasly in making drugs as well as lower production costs.
Frances Cloud, a generics analyst at Nomura Code Securities, said this was the first Chinese deal of its kind. She said an Indian company would normally do this kind of deal.
China has been criticised recently for the lack of safety of some of its products. The head of the country’s food and drug administration was executed last month after he was found guilty of accepting bribes from companies to approve their products without the necessary checks. Some of the drugs were blamed for several deaths.
Mr Nuttal said the Co-op had management control of the joint venture, adding that any drugs that came into the UK had to adhere to strict guidelines set by the MHRA, the UK’s drugs regulator. “We’ve got a very high degree of confidence that the products will comply with UK standards.”
Ms Cloud questioned the group’s timing. “A year from breaking ground to actually having products coming out is rather short,” she said. Announcement of the venture comes after the recent merger of the Co-operative Group and United Co-operatives, which was completed at the end of last month.
The enlarged group is the world’s largest consumer co-operative with sales of more than £9bn, 4 million members and 87,500 employees. The Co-op is the third largest pharmaceutical chain in the country with annual sales of £450m and more than 33 million prescriptions dispensed every year.
