Lilly Sells Antibiotics Business and Suzhou Plant to China's Eddingpharm for $375 Million to Focus on Core Therapeutic Areas

PharmNet, April 24: For RMB 2.5 billion, Eli Lilly sells the rights to two products in mainland China, along with its manufacturing facility in Suzhou.

 

 

Today (April 23), Eli Lilly announcedPharmaceuticalsEOC Pharma Group (China) Co., Ltd. signed an agreement to sell the rights to its antibiotic products Ceclor and Vancocin in mainland China, as well as the Ceclor production facility located in Suzhou.

 

According to reports, the terms of the agreement indicate that Eli Lilly will receive an upfront payment of $75 million (approximately RMB 500 million) and, upon successful closing of the transaction, an additional $300 million (approximately RMB 2 billion). As part of this transaction, all Ceclor production facilities and employees in affected functional departments will have the opportunity to continue working at the plants for EOC Pharma Group.

 

Furthermore, Eli Lilly will provide support to EOC Pharma Group (China) Co., Ltd. during the upcoming transition period to ensure a smooth handover of business operations and the continuous supply of Ceclor.

 

This means that for RMB 2.5 billion, Eli Lilly sold its antibiotic products and pharmaceutical factories to Chinese pharmaceutical companies.

 

 

According to available data, Ceclor (Cefaclor Sustained-Release Tablets (II)) entered the Chinese market in 1993 and became a widely recognized oral antibacterial brand among domestic physicians. Vancocin (Vancomycin Hydrochloride for Injection) entered the Chinese market in 1996 and, due to its efficacy and safety profile, became the gold standard for treating MRSA (methicillin-resistant Staphylococcus aureus) infections.

 

It is reported that EOC Pharma Group in 2008AgentGSK’s Zinnat (cefuroxime axetil tablets) had an established anti-infective product team; however, due to the impact of domestically produced generic drugs on the Zinnat market in recent years, its anti-infective portfolio has gradually weakened. This collaboration with Eli Lilly will strengthen EOC Pharma’s anti-infective portfolio.

 

“This move will also enable Eli Lilly China to concentrate its resources and strengths on key therapeutic areas, focusing on exciting new opportunities and therapies, thereby bringing more innovative medicines to patients in China,” said Ji Liwen, President and General Manager of Eli Lilly China.

 

Industry insiders have remarked that the divestment of a product line by foreign pharmaceutical companies, or entering into commercial collaborations with external parties regarding a specific product line, constitutes a strategic decision concerning non-core business activities. This approach is largely exemplified by Eli Lilly and EOC Pharma Group.

 

In fact, since 2015, foreign pharmaceutical companies have been continuously reducing cost pressures by divesting non-core businesses. An increasing number of foreign pharmaceutical companies are engaging in commercial collaborations with Chinese domestic pharmaceutical companies for specific product lines.

 

 

As measures such as consistency evaluation, volume-based procurement, and medical insurance cost containment continue to be implemented, the patent cliff for multinational pharmaceutical companies is gradually becoming apparent.

 

According to estimates by the China Pharmaceutical Industry Information Center, the market size of original patented drugs from state-owned enterprises in China reached RMB 141.9 billion, accounting for approximately 14.23% of the overall market for chemical and biological drugs. By 2025, core patents for 48 imported chemical drug varieties will expire in China.

 

PatentPharmaceuticalsThe expiration of patents will create substantial market opportunities for China’s generic drug market, with the market size projected to reach RMB 1.4116 trillion by 2020. To avoid falling into the “profit abyss” of the patent cliff, multinational pharmaceutical companies have adopted various strategies, among which divesting non-core businesses has become a common choice.

 

On February 25, General Electric announced that it had agreed to sell its biopharmaceutical business to Danaher Corporation for $21.4 billion. The statement indicated that the division’s revenue was approximately $3 billion in 2018. The divested biopharmaceutical business is part of GE Healthcare and primarily serves the biopharmaceutical industry.EnterpriseProvide instruments, consumables, and software products for process development and manufacturing processes.

 

On December 19, 2018, GlaxoSmithKline and Pfizer announced the formation of a joint venture to merge their consumer healthcare businesses, with projected revenues reaching £9.8 billion (RMB 85.8 billion).

 

In fact, as early as October 25, 2017, Pfizer had planned to sell its consumer healthcare business through an auction, with the sale price potentially exceeding $15 billion.

 

On November 29, 2018, Bayer AG announced its plan to exit the animal health business and sell part of its consumerHealthBrands and product lines, with a total of 12,000 layoffs.

 

In July 2018, Novartis announced that it would divest Alcon’s eye care device business, with the spin-off expected to be completed in the first half of 2019, and simultaneously launched a share buyback program of up to $5 billion.

 

On June 22 of the same year, the acquisition by Luye Pharma of AstraZeneca’s Seroquel and its extended-release tablet business in 51 countries and regions was successfully approved by vote.

 

It is understood that AstraZeneca sold Seroquel to focus its efforts on key therapeutic areas such as oncology, cardiovascular disease, nephrology, metabolism, and respiratory conditions, thereby dedicating more resources and attention to the development of core products.