AstraZeneca acquires BeiKang Pharmaceutical Company Ltd.

WILMINGTON, Del.—AstraZeneca has announced the establishmentof an agreement to acquire Guangdong BeiKang Pharmaceutical Company Ltd., aprivately owned generics manufacturing company based in Conghua City, Guangdongprovince, China. The acquisition nets AstraZeneca access to a portfolio ofinjectable medicines for the treatment of infections, which the company willmake available to patients in China. Once the transaction is completed,AstraZeneca will assume responsibility for the manufacture and commercializationof the medicines.

Financial details were not disclosed, and the deal, which issubject to the approval of regulatory authorities including the Ministry ofCommerce in China, is expected to close in the first quarter of 2012.

"AstraZeneca continues to invest in the key emerging marketssuch as China where the combination of growing populations, elevated levels ofchronic diseases and increasing income are driving demand and expectations forbetter healthcare treatment," Mark Mallon, President of AstraZeneca'sAsia-Pacific region, said in a press release. "Our new acquisition furtherunderscores our intention to serve the health needs of Chinese patients throughour innovative medicines and, increasingly, high quality branded generictreatments that are locally produced to global standards."

The acquisition closely follows another China-based dealpublicized back on Oct. 10 in which AstraZeneca announced that it would invest$200 million in a new manufacturing facility in China Medical City, Taizhou,Jiangsu province. The site, it was noted in the press release, represents thecompany's largest investment ever in a single manufacturing facility globally.It will manufacture intravenous and oral solid medicines in China, andconstruction is expected to be complete by the end of 2013.

China has continued to be a large target market forAstraZeneca, given the large population the country sustains and the growingneed for accessible medical and pharmaceutical supplies. Approximately 800million patients in China are estimated to not be covered by the network of bighospitals in China's large cities and to have limited access to qualitytreatments. The pharmaceutical market in China grew from $10 billion in 2004 to$41 billion in 2010, and is expected to reach over $100 billion by 2015according to IMS Health. Since 1993, when the company first established apresence in China, AstraZeneca has invested approximately $500 million in thecountry, and saw a turnover of more than $1 billion last year.

The announcement comes on the heels of a decidedly lessencouraging press release from yesterday, in which the company announced thatit would be cutting approximately 1,150 leadership positions and salesrepresentatives among its U.S. sales force. The cuts represent about 24 percentof AstraZeneca's sales organization in the United States, and are part of thecompany's restructuring program, which was announced last January. Arestructuring cost between $50 million and $100 million related to theannouncement will be charged in the fourth quarter of this year.

Milena Izmirlieva, an Advanced Markets Analyst with IHSGlobal Insight, noted that the workforce reductions and the acquisition"indicate a shift in company strategy as AstraZeneca adjusts its organizationto deal with patent expiries and boosts its portfolio with generics for sale ingrowing emerging markets." As patent losses and market pressure increase, "theattraction of the fast-growing emerging markets increases, particularly becausea mature portfolio and even branded generics are sufficient to gain sizeablerevenues there," said Izmirlieva.