Amgen establishes JV in China to commercialise Vectibix
Espicom View: Amgen is a relative late-comer to China, with most of its competitors already having established a presence in the country. Amgen's performance in emerging markets has so far been lacklustre, but its entry into China will likely cause a turnaround in its performance over the medium-term. We believe that as well as bolstering Vectibix sales, the formation of a joint venture is also a shrewd move to establish a robust sales force before Amgen launches biosimilars into the Chinese market. Tapping into local expertise will help Amgen to penetrate the fragmented Chinese market more deeply and to benefit from its rapid growth. In the short-term, Amgen should tread with caution, however, as the Chinese government's continued calls for greater affordability, resulting in pricing pressures, will put a cap on any profits it expects to reap from selling Vectibix.
Amgen and Zhejiang Beta Pharma have signed an agreement to form a joint venture (JV) to commercialise Amgen's Vectibix (panitumumab) in the Chinese market. The JV will benefit from Zhejiang Beta Pharma's expertise in the development and commercialisation of molecularly targeted therapies, as well as Zhejiang Beta Pharma's oncology sales network in China.
According to the agreement, the new JV will be named Amgen-Beta Pharmaceuticals. Zhejiang Beta Pharma will own 51 per cent and Amgen will own the remaining 49 per cent interest in the JV. The creation of the JV is subject to the satisfaction of certain closing conditions, including the approval of relevant government authorities in China. Vectibix is a prescription medicine used for the treatment of metastatic colorectal cancer (MCRC).
Amgen has historically been over reliant on sales in the US, but with Vectibix sales there staying flat in 2012 compared to 2011 (US$122 million), and patents due to expire, the establishment of this JV is a clear attempt to ensure that the drug still brings in a healthy level of revenue. Amgen has been actively pursuing entry into China, and expects to launch its first product in 2015. Aside from the commercialisation of Vectibix, the JV will ensure that Amgen has an established presence in China before the launch of any biosimilars in the market. Amgen is currently building a plant in Singapore in order to produce biosimilars of its competitor's products; the plant is expected to be completed in 2017. The company expects its biosimilars business to generate approximately US$1 billion in emerging countries.