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Drug wholesaler Cardinal Health Inc. said it acquired Zuellig Pharma China

source:This site   release time: 2020-04-09 11:37:36   Browse:710Times  Font size: [Big] [in] [small]
one of China s largest pharmaceuticals importers, for $470 million, including debt, extending the U S firm s presence into the world s fastest-growing markets

Drug wholesaler Cardinal Health Inc. said it acquired Zuellig Pharma China, a health-care distributor and one of China's largest pharmaceuticals importers, for $470 million, including debt, extending the U.S. firm's presence into the world's fastest-growing markets.
The purchase of the company, known locally as Yong Yu, with annual sales of more than $1 billion, marks the first major drug-distributioninvestment in Asia by a major U.S. wholesaler.
Cardinal expects the acquisition, for $410 million in cash and assumption of $60 million of debt, to add slightly to operating earnings this fiscal year and to be more meaningfully accretive starting in fiscal 2012.
The deal gives Dublin, Ohio-based Cardinal a solid foothold in China's drug-distribution market, which the company said is expected to grow by an average of 20% a year through 2014. China is expected to become the second-largest pharmaceuticals market after the U.S. in about five years, the company noted. Closely held Yong Yu is the ninth-largest drug distributor in China's fragmented market.
The purchase 'follows an extensive evaluation of opportunities to drive growth in targeted geographies outside of North America where we believe our core capabilities would add value,' Cardinal Chairman and Chief Executive George Barrett said.
Cardinal announced this month that it was buying private, New York City-based regional drug distributor Kinray Inc. for $1.3 billion. The company also is buying specialty pharmaceutical concern Healthcare Solutions Holding LLC, including its P4 businesses, for at least $517 million when the transaction was announced.
Over the past 18 months, Mr. Barrett said, Cardinal has been solidifying the foundation of its core business, building its executive team and identifying key areas on which management wanted to focus. These include establishing its presence in the fast-growing specialty drug area, expanding its footprint in community pharmacies and 'exploring select opportunities to grow our business beyond our North American base,' he said.
This latest move by Cardinal, the second-biggest drug distributor in the U.S. by revenue and market capitalization behind McKesson Corp., marks the dawning of an era of global drug wholesaling, according to pharmaceutical industry consultant Adam Fein of Pembroke Consulting Inc.
'The acquisition represents the first major distributioninvestment outside of North America by one of the big three U.S. wholesalers,' he said on his blog, Drug Channels.
China is a logicalinvestment area for the distributors, given projections of strong growth in coming years in its drug market, which is estimated to reach $50 billion in 2011. Cardinal cited one estimatethat China's health-care market is expected to exceed $600 billion by 2021.

'We view entrance into the fast-growing and evolving Chinese distribution market as a growth-enhancing development,' Jefferies & Co. analyst Richard Close said. 'Combined with the P4 specialty platform and Kinray acquisitions . . . Cardinal is diversifying its revenue and profit profile.'
Reimbursement risk in China is low, as distributors are paid mostly through the social welfaresystem, although payment terms are far more drawn out than in the U.S., Mr. Close said. In China, he noted, most pharmaceuticals are distributed through hospitals, the primary sites for health-care services.

J.P. Morgan analyst Lisa Gill viewed the deal positively, 'as it provides a solid platform for Cardinal to grow a Chinese pharmaceutical presence.'

Barclays Capital analyst Lawrence Marsh called the acquisition 'an interesting, albeit small addition to the company's pharmaceutical supply chain platform.' He said he would look to gain additional perspectives at Cardinal's analyst meeting next week.

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