Recently, Huadong Medicine announced that it will acquire Shaanxi Kyushu Pharmaceuticals through acquisitions, and then incorporate the latter's new anesthetic drug R&D production base into the capsule to seek development in the anesthetic field.
Huadong Medicine recently announced that the company plans to acquire a 78.87% equity interest in Xi'an Bohua Pharmaceutical Co., Ltd. and Xi'an Bohua's 65% stake in Shaanxi Jiuzhou Pharmaceutical Co., Ltd. for 98 million yuan. After the acquisition is completed, Huadong Medicine will To achieve the control of the above two pharmaceutical companies.
This is an ordinary merger, but it has aroused widespread concern in the industry. The reason is that Shaanxi Jiuzhou Pharmaceutical Co., Ltd. acquired by Huadong Medicine is a new-type narcotic drug R&D production base in the Midwest. The company has already acquired compound ammonia phenol dihydrochloride. Due to the production of tablets and compound tramadol hydrochloride two anesthetic production approvals. This means that Huadong Medicine will rely on this merger to enter the narcotic field, which is strictly regulated by the state and has a certain monopoly.
The first step of M&A is “the purpose of M&A is to carry out the transfer of raw material medicines, which can relieve the company’s current environmental pressure and production capacity requirements; secondly, several products from Bohua and Kyushu are relatively good and we are very optimistic.” Huadong Medicine and Securities Department Mr. Shao disclosed in an interview with a reporter from the Medical Economics Daily.
Huadong Medicine’s announcement also showed that Bohua and Kyushu Pharmaceuticals have production conditions for APIs and preparations, and have capacity expansion conditions, which will effectively ease the company’s current production site and capacity constraints. Through this acquisition, it is possible to rationalize the distribution and scale operation of raw material medicines and chemical intermediates that have plagued the company, and to effectively reduce production costs.
The reduction of environmental pressure has been expected in this acquisition. Some securities commented that: the current emission indicators of Huadong Medicine's major production plants have not been able to increase, and the Hangzhou City where the company is located as a tourist city is an ecologically sensitive area. In the new “Drainage Standards for Pharmaceutical Wastewater”, the COD discharge standard for chemical synthesis pharmaceutical companies in ecologically sensitive areas is 50mg/l, which is 200mg/l more than that in Xi'an Bohua Pharmaceutical's western region. Emissions standards are more stringent. Therefore, Xi'an Bohua's production base in a non-ecologically sensitive area will help the company reduce its environmental pressure and discharge costs.
“This is a relatively good industrial extension of Huadong Medicine. I think its main purpose is still the demand for production bases.” said Yu Kai, an analyst at Wuhan Newland Securities.
With regard to environmental protection issues, Huadong Pharmaceutical appears to be very cautious, and the transfer of raw material medicine origin may not completely solve the problem. The announcement clearly stated that the pharmaceutical industry, especially raw material drug manufacturers, faced greater environmental pressures. Under the background that the country is increasingly paying attention to environmental protection, Xi'an Bohua may face greater environmental protection cost pressure in the future.
In addition to the “Product Structure Adjustment, Characteristic Management, and Solving Problems of Environmental Survival Pressure” pointed out in the Announcement, there was news before this that “East China Pharmaceutical’s acquisition was also aimed at seeking anesthetic agent distribution rights”. Mr. Shao explained: “Our company has already had the qualifications for the wholesale of narcotic drugs and is a regional wholesaler of narcotic drugs and the first type of psychoactive drugs. At present, there are only three national wholesale companies for narcotic drugs and the first type of psychotropic drugs. We haven't done further consideration in this area yet."
Risks and Opportunities Coexisting Kyushu Pharmaceutical's possessing narcotic drug manufacturing qualifications is undoubtedly the highlight of this acquisition. It is understood that Kyushu Pharmaceutical has obtained production licenses for compound aminophenol dihydrocodeine tablets and compound tramadol hydrochloride tablets. Aminophenol dihydrocodeine tablets are currently one of the world's four new narcotic drugs. Currently, only two companies, Lu Tan Pharmaceutical and Kyushu Pharmaceutical, manufacture and sell them. Compound tramadol hydrochloride is a non-controlled drug, and Kyushu Pharmaceutical is the second domestic manufacturer outside of Xianyang Sen. It is reported that there are still a number of anesthetic drugs in Jiuzhou Pharmaceutical under the supervision of the State Food and Drug Administration.
Through this acquisition, Huadong Medicine announced its entry into the field of narcotic drug production and sales. At present, the production of anesthetics has a certain degree of monopoly, and only a dozen companies in the country are engaged in the production and sales of narcotic drugs. "The production and sales of narcotic drugs are strictly controlled by the state and the varieties are monopolistic. We are very optimistic about this prospect," said Mr. Shao. According to statistics, sales of codeine analgesics on the Chinese market have continued to grow in the past four years. In 2004, the national market’s sales were approximately RMB 58 million, in 2005 it was RMB 74 million, and in 2006 it was 0.91. Billion yuan, sales in 2007 may exceed 110 million yuan. (Note: This volume does not contain the codeine phosphate oral agent which is mainly used for antitussive).
In the face of a market full of potential, will the strong entry of Huadong Medicine make the narcotic drug market change?
"There will be no major impact on the anesthetic market in the short term. After all, Kyushu Pharmaceutical is not outstanding." Yu Kai predicted.
The attitude of Huadong Medicine is also very cautious. "Kyushu Pharmaceutical has just started production now, and changes in the market structure are not easy to say now. Moreover, the production plan for narcotic drugs must be approved, so the output is uncertain." Mr. Shao believes. Chen Xu, general manager of Kyushu Pharmaceutical Co., Ltd., said: "It has not been authorized to be interviewed."
It is understood that after the completion of the basic construction of Kyushu Pharmaceutical, no official production and sales have been started. This is mainly due to the fact that its main product, the registration document for the production of amylphenol dihydrocodeine tablets, was obtained in October 2007. According to the relevant regulations of the State Food and Drug Administration, the anesthetic drug company including the product is being approved. After the document number, the annual production plan must be submitted to the National Bureau of the People's Republic of China. After approval is obtained, the company can purchase raw materials from Qinghai Pharmaceutical Factory, the raw material manufacturer of the drug. At present, the pharmaceutical raw materials have been purchased, and production began just after entering April. This is also the concern of Huadong Medicine: “Before this, Kyushu has not yet carried out production and business activities. In the future, raw materials procurement, production processes and process settings, sales strategies and channel construction require a process, and there is a certain risk of business management.”
In fact, Huadong Pharmaceutical is not the first case of mergers and acquisitions into the field of Ma Jing medicine with certain monopoly properties. Earlier, Dongsheng Group acquired the admission ticket for the production of narcotic drugs through the acquisition of Qinghai Pharmaceutical Factory, an anesthetic drug manufacturer, as well as its monopoly in this field. Qinghai Pharmaceutical Group has also become an important support for the profit growth of Tung Shing Group since then. Now it is one of the only remaining pharmaceutical assets of Dongsheng after its capital chain crisis.
However, some people in the industry pointed out that “whether or not the production companies that are strictly monitored in these countries must be given additional thresholds to ensure the safety of the production and use of special drugs?” It is understood that the current mergers and acquisitions It does not involve relevant regulations.
On the other hand, for companies entering the field through mergers and acquisitions, apart from enjoying the profits brought about by the monopoly sector, it is also worth noting that: “The anesthetic drugs produced are even state-controlled drugs, subject to policies Larger, changes in national policies will directly affect the company's production and operating conditions."

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