THE China Medicine Material Group, which produces and sells traditional Chinese medicine, is to merge with the China National Pharmaceutical Group Corp (SinoPharm).
Experts said they view the move as a prelude to a larger-scale wave of mergers and acquisitions in the fragmented industry in the face of competition from multinationals.
SinoPharm said the merger had got the nod from the State-owned Assets Supervision and Administration Commission, which supervises State-owned enterprises.
The merger operation will begin this week, the company said.
SinoPharm specialises in the production and distribution of Western medicine and medical equipment.
Its yearly sales income exceeded 10 billion yuan (RM4.6bil) last year and its exports of medicine totalled US$200mil (RM760mil).
The China Medicine Material Group, the country's top player in the production and distribution of traditional Chinese medicine, said it would attach greater importance to the modernisation of traditional medicine production and promotion of traditional medicine exports.
SinoPharm said the merger would be market-driven and form a comprehensive conglomerate.
Insiders said the merger is part of a state plan to forge national flagships in the medicine field.
According to the government's 10th Five-Year Plan (2001-05) for the medical industry, 10 conglomerates in the sector are expected to be set up, each with annual sales of more than five billion yuan (RM2.3bil).
SinoPharm has been expanding aggressively and moving towards such a target.
Its China National Medicines Corp Ltd subsidiary went public on the Shanghai Stock Exchange last November and raised 252.25 million yuan (RM116mil).
In January, SinoPharm joined with the Shanghai Fosun High-Technology (Group) Co Ltd, a big local medicine producer, to form a medicine group.
The China National Pharmacy Industry Co, another SinoPharm subsidiary, is also preparing for its flotation later this year.
Wang Jinxia, secretary-general of the China Commercial Medicine Association, said a reshuffle of the industry is just taking shape.
“The formation of local giants in the field of production, retailing and wholesale is a must to combat foreign conglomerates,” she said.
The State also plans to form 40 regional medicine circulation groups, each with annual sales of more than two billion yuan (RM920mil) by 2005.
Wang said: “These groups and the 10 large companies are expected to control more than 70% of total medicine sales in China by then.”
She called on China's medicine producers and distribution companies to work together to rapidly expand their businesses to survive the challenges of China's World Trade Organisation membership.
China's annual medicine market is expected grow from the current US$21bil (RM80bil) to US$60bil (RM228bil) by 2010. – China Daily