Cardinal will continue acquisitions in China

Updated: 2011-09-27 07:45

By Gao Changxin (China Daily)

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SHANGHAI - Pharmaceutical wholesaler Cardinal Health Inc said it is looking for more acquisition opportunities in China after its $60 million purchase of distributor Zuellig Pharm China last year.

Buying out Zuellig, which had $1 billion in sales and distribution to about 49,000 hospitals and clinics, helped the US-based company establish a foothold in China, where Cardinal previously only conducted sourcing.

Cardinal Chief Executive Officer George Barrett said acquisitions will continue to help the company get bigger in China's booming drug distribution market.

"We will continue to look for opportunities to expand our footprint here in China," Barrett said in an interview in Shanghai on Monday.

"I cannot be really specific on particular targets but I will be very disappointed if, looking back a year from now, we have not already made some acquisitions here."

Potential acquisition targets will be those that can help Cardinal build scale, reduce distribution layers or expand geographic representation, he said.

Cardinal's acquisition ambitions come at a time when the Chinese government is encouraging consolidation in its drug distribution industry to boost efficiency, after years of rapid but fragmented growth.

In the 12th Five-Year Plan (2011-2015), China aims to have one to three large-scale drug distribution companies over the next five years.

The country's drug distribution industry grew an average of 15.4 percent annually from 2000 to 2009, with sales increasing 17.3 percent to about 667 billion yuan ($104 billion) in 2010, according to the China Association of Pharmaceutical Commerce

Jiang Guangce, a manager of the medical fund of CongRong Investment Management Co Ltd Shanghai, said the consolidation will help promote and facilitate foreign companies' acquisitions and development in China.

But, he added, foreign companies can only be regional, not national, leaders in China's drug distribution industry because the industry is still subject to some foreign investment restrictions.

Barrett said Cardinal's competitive edge in China is its strong relationships with major drug manufacturers in the US and worldwide.

"We have deep relationships with multinational pharmaceutical companies and medical device companies all over the world," Barrett said.

"And we have technologies and capabilities that we think are valuable to the market here. So we believe we can be a very valuable player to the Chinese market."

Cardinal aims to make its presence felt in all of the links in the country's drug distribution, from drug manufacturers and hospitals to drug retail stores. And expansion will be made through a combination of acquisitions and organic growth

On Monday, Cardinal unveiled a major logistics center in Shanghai, its biggest in China. The 40,000-square-meter center will be the cornerstone for the company's development in Shanghai, one of the biggest drug distribution markets in China.