Shanghai Pharma seeking deals to drive overseas expansion

China’s Shanghai Pharma is planning to open an R&D unit in San Diego as part of an international expansion drive that could also include acquisitions in the U.S. and Europe, according to media reports.

An article in the South China Morning Post, citing company chairman Zhou Jun, suggests that Shanghai Pharma—which has grown within China through a series of acquisitions in recent years—now wants to repeat the process overseas with additional "technology and market access" deals.

That doesn’t necessarily mean outright acquisitions and may initially involve forming partnerships and taking equity stakes in companies, particularly in light of what the paper describes as "heightened scrutiny" of some Chinese acquisitions by the U.S. government on grounds of national security.

Shanghai Pharma is already a big player in the domestic Chinese market and consolidated that position toward the end of last year by acquiring the Chinese business of drug distributor Cardinal Health for $557 million.

In 2017, it was also in the running for German generic drug maker Stada, which was eventually taken over by private equity firms Bain and Cinven, and has previously talked about buying foreign manufacturing facilities to help it sell its products in Western markets. At the end of 2016, it bought a majority stake in Australian group Vitaco to boost its presence in consumer healthcare.

According to the SCMP, the San Diego R&D unit could open later this year, and the company also intends to form partnerships with U.S. medical and drug research institutes and acquire rights to distribute U.S.-developed drugs in China.

Shanghai Pharma’s parent Shanghai Industrial Investment is looking at setting up a biotech investment fund in partnership with other financial institutions and investors that could help develop future acquisition targets.

The drugmaker has also just signed an agreement with the Shanghai Institute of Endocrine & Metabolic Diseases to collaborate on five research projects looking for new therapies for diabetes and obesity. Recent figures suggest that 39% of the Chinese population is obese, up from less than 4% 30 years ago.