Companies

Shanghai Pharma drug-making assets raise funds

By Daryl Loo and Fox Hu (China Daily)
Updated: 2011-05-04 13:01

A booth of Shanghai Pharmaceuticals Holding Co at the Shanghai industrial fair. The company is to raise funds from investors including Temasek Holdings Pte and Pfizer Inc to acquire more drug-manufacturing assets in China.?[Photo/China Daily]

BEIJING/HONG KONG - Shanghai Pharmaceuticals Holding Co is raising $550 million from investors including Temasek Holdings Pte and Pfizer Inc to fund acquisitions in the world's fastest-growing major economy.

The sale of shares to the investors, which also include Hong Kong-based Guoco Group and Bank of China Group Investment, is part of Shanghai Pharma's plans to raise as much as $2.2 billion in an offering of stock in Hong Kong, according to a term sheet sent to investors on Tuesday.

The funds will enable Shanghai Pharma to buy drug-manufacturing assets in China, where demand for medicines is forecast by IMS Health Inc to expand at least 25 percent this year.

Related readings:  Shanghai Pharma heads north  Shanghai Pharma taps banks for $1.5b HK IPO -sources  China Pharma Holdings Q2 profit rises 23%  CSRC accelerates IPO review

A soon-to-be-released government plan may push for the nation's three biggest drug companies to increase their share of the market to between 30 and 35 percent by 2015, from 21 percent in 2009, the 21st Century Business Herald reported.

"Shanghai Pharma should benefit from upcoming industry consolidation, since it is already one of the biggest players," said Pan Lei, an analyst at Beijing-based Guodu Securities Co, who recommends buying the shares.

"The company is seen as an attractive investment because its drug distribution business makes it stable."

Singapore state investment firm Temasek will invest $300 million, Guoco Group will invest $150 million, and Pfizer and Bank of China Group Investment will each buy $50 million of shares, according to the document.

Shanghai Pharma will use 30 percent of proceeds from its Hong Kong offering to buy other drug companies and allocate 40 percent to expand and strengthen its distribution networks, according to the term sheet.

Shanghai Pharmaceuticals has suspended trading in Shanghai until its Hong Kong shares begin trading, scheduled for May 20, according to the term sheet.

Temasek spokesman Jeffrey Fang and Pfizer's Singapore-based spokeswoman Neena Moorjani said they weren't currently able to comment on the investment. Guoco and Bank of China Group Investment didn't immediately respond to requests for comment.

Shanghai Pharma signed a Memorandum of Understanding with New York-based Pfizer on April 21 to pursue potential business opportunities in China.

Bloomberg News