Attempting to buy their way into international markets like never before, China’s health-care companies are on an acquisition tear.

Going at a pace on track to exceed last year’s record total and a tenfold increase from the amount spent in all of 2012, Chinese firms have announced more than $3.9 billion in overseas acquisitions in the pharmaceutical, biotechnology and health-care sectors this year.

Government push to upgrade the “Made in China” brand and the Chinese tycoons and businesses seeking to diversify in the face of slowing growth at home are driving this spree. With close to 5,000 manufacturers and aggressive competition that is pushing down generic drug prices, many of these companies are grappling with a fragmented drug industry in the domestic market. Providing a ready-made entry into developed markets that have high regulatory standards, finding new areas of growth and allowing them to expand their portfolios would be made possible from success overseas.

According to the Bloomberg-compiled data, in the largest international pharma acquisition by a Chinese company, China’s Creat Group Corp., founded by businessman Zheng Yuewen, agreed in May to acquire Bio Products Laboratory Ltd., a maker of human blood plasma products in the U.K., for $1.2 billion. A non-binding offer to buy 96 percent of India’s Gland Pharma Ltd., which is focused on injectable drugs was made in May by Shanghai Fosun Pharmaceutical Group Co., backed by billionaire Guo Guangchang.

The Chinese industry is likely to continue pushing overseas.

“There’s a few Chinese companies that have been investing in pharmaceutical products that are getting close to being approved in the U.S. and Europe. If those are approved, then the Chinese are likely to be much more interested in pursuing overseas targets in similar areas that have a strategic alignment,” said George Lin, head of Asia consumer, retail and healthcare investment banking at Bank of America Corp.

He hoped to increase overseas revenue to as much as 40 percent of the total over the next five years via acquisitions, said Chen Qiyu, chairman of Fosun Pharma, one of the most active buyers in China’s health-care sector, in an interview last year.

A consortium that acquired Ambrx Inc., a protein therapeutics R&D company in the U.S. for an undisclosed amount last year included Fosun Pharma. Its Gland offer was still part of a bidding process and a deal wasn’t guaranteed, it said in its May statement. It could improve the company’s “degree of internationalization” if successful.

Franck Le Deu, a senior partner at McKinsey & Co said that a good platform for globalization for Chinese firms can be provided by Indian drugmakers with strong generic drug expertise and commercial presence in developed markets.

Chinese companies also face fierce competition for prime assets even as they are emerging more often on the list of bidders for health-care businesses. Among bidders for French pharmaceutical company Ethypharm SA was Luye Group Ltd., which controls a Chinese drugmaker and health-care provider, said people familiar with the matter in March. However ultimately the French drugmaker was agreed to be bought out by another bidder, European private equity firm PAI Partners.

When there’s no big logical strategic player and buyers are down to private-equity firms in an auction is the situation when Chinese companies can fit in very well, said Lin at Bank of America.

“The really attractive products, the biotech products, those are going to be highly sought after by the mega caps. So the Chinese are not going to be competitive,” said Lin.

(Adapted from Bloomberg)

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