Green Cross, Daewoong Diverge In Global Expansion Push
This article was originally published in PharmAsia News
Executive Summary
Two leading South Korean pharma firms are moving in different directions as they aim to expand globally, with Daewoong Pharm agreeing to buy a controlling stake in HanAll BioPharma, while Green Cross has divested its entire stake in Ildong Pharm.
SEOUL – Although the two companies seem to have different strategies, the ultimate purpose is the same: to focus on and accelerate expansion of their global businesses.
Daewoong Pharmaceutical Co. Ltd. said it will buy a 30.2% stake, equivalent to 15.5 million shares, in smaller rival HanAll Pharmaceutical Co. Ltd. for KRW104.6 billion ($94.1 million) to gain a new growth engine and take a step forward to become a global healthcare firm. The company will buy six million existing shares and an additional 9.5 million new shares in a rights offering. [See Deal]
South Korea’s Yuhan Corp. also holds a 9% stake in HanAll.
With the purchase, Daewoong will jointly run HanAll BioPharma, which has strength in biomedicine, incrementally modified drug and synthetic new drug segments. HanAll holds 151 local and overseas patents. Its main products include Tomiporan (cefbuperazone), Refosporen (cefazedone) and Normix (rifaximin).
HanAll has been investing an average of KRW14.6 billion per year in R&D in the past five years, accounting for 17% of its annual revenue.
Daewoong, which has biotechnology know-hows based on EGF (epidermal growth factor), the first South Korean biomedicine, and Nabota (botulinum toxin) , expects the acquisition to create synergies in securing new business opportunities by obtaining the next generation biomedicine pipeline.
Daewoong is currently developing in-house new drug candidate substance including anti-ulcer drugs and first-in-class chronic pain therapies. It plans to beef up its R&D competitiveness through sharing pipelines, workforce and technologies with HanAll.
HanAll has technology and production lines for antibiotics and injections, while Daewoong has one of the largest global networks among local pharmas with eight overseas branches, three global research institutes and three overseas production plants. The two companies are expected to advance into overseas antibiotic and injection markets.
The acquisition is likely to boost Daewoong’s revenue and portfolios as many of HanAll’s items don’t overlap with Daewoong’s products, while HanAll is likely to benefit from Daewoong’s strong global marketing and sales networks.
Daewoong aims to become a global pharma firm whose overseas sales surpass domestic sales by 2020 by making aggressive investment, developing new drugs and establishing export networks in 100 countries including China, Indonesia and Thailand.
As part of its internationalization efforts, Daewoong and its licensing partner Kang Stem Biotech signed a memorandum of understanding with China's Shenyang Medical College in May for a stem cell strategic alliance under which they will cooperate with their Chinese partner to proceed with R&D and clinical trials of stem cell therapies (Also see "Daewoong Eyes Entry Into China Stem Cell Sector" - Scrip, 8 May, 2015.).
Green Cross Exits Ildong
Meanwhile, Green Cross Holdings and its two pharma affiliates - Green Cross Corp. and Green Cross Cell Corp. - have sold off 7.36 million shares, equivalent to a 29.36% stake, in smaller rival Ildong Pharmaceutical Co. Ltd. to Ildong’s chairman for KRW139.8 billion to focus on its global business.
The share sale will beef up Ildong’s management control and put an end to years of speculations that Green Cross will attempt to take over Ildong.
Although Green Cross has never officially revealed its intention to take over the firm, it has raised its stake in Ildong to 15.35% by buying 1.77 million shares, and become Ildong’s second largest shareholder in 2012. Then in January 2014, it has again bought additional shares in the pharma firm to raise its stake to 29.36%.
Eventually, Green Cross had attempted to participate in the management of Ildong. Last year, it scuttled Ildong’s plan to transform into a holding firm. Early this year, Green Cross demanded that officials from its side to be included in Ildong’s board, but its plan wasn’t approved by shareholders in March.
There had been suggestions that Green Cross may sell its stake in Ildong after its failed attempt to enter the board, but Green Cross said the latest sale is to accelerate its business in overseas including North America and China.
“By positioning our assets more efficiently, we plan to strengthen our core capacity and spend the proceeds from the share sale to speed up global businesses,” said the company in a statement.
To expand its blood derivatives business, Green Cross is set to complete construction of a blood derivatives plant in Canada which will serve as its North American production base.
It plans to apply for regulatory approval to the U.S. FDA for its strategic global item immunotherapy I.V.-Globulin SN (intravenous immunoglobulin) this year. It also plans to proceed with global clinical trials for Hunterase (idursulfase), a biobetter of Shire PLC’s Elaprase (idursulfase) for Hunter syndrome. Along with this, Green Cross has also been expanding its businesses using cell and gene therapy technology.
Last month, Green Cross Holdings has invested in the clinical-stage U.S. biotech firm Juventas Therapeutics Inc. in a bid to diversify into the cell and gene therapy sector. Along with Posco Capital, Green Cross led a $7.5 million investment in the Cleveland-based company, which focuses on developing non-viral gene therapies to treat advanced cardiovascular diseases (Also see "Green Cross Juventas Investment Shows Gene Therapy Appetite" - Scrip, 21 May, 2015.).