Cardinal Health (NYSE:CAH) is reportedly shopping its Chinese drug distribution business, drawing keen interest from state-backed pharmaceutical firms in a deal that could be worth as much as $1.5 billion.
Citing “sources familiar with the matter,” Reuters reported that Shanghai Pharmaceutical, China Resources Pharmaceutical Group and Sinopharm Group are among the potential bidders for Cardinal Health China, which went on the block after its parent was spooked by upcoming drug pricing reforms in the People’s Republic. The unit could fetch anywhere between $1.2 billion and $1.5 billion, according to the report.
Cardinal Health is also shifting its mix of drugs and medical devices, as evidenced by its $6 billion acquisition of a portion of Medtronic‘s (NYSE:MDT) patient monitoring & recovery business and its $2 billion acquisition of Cordis, the Johnson & Johnson(NYSE:JNJ) stent-making arm, in October 2015.
Dublin, Ohio-based Cardinal tapped Lazard as an advisor on the Chinese drug distribution sale, the sources told the wire service. The deadline for the first round of bids is tomorrow, they said.
Cardinal Health China, which started in 2010 with the $470 million takeover of Zuellig Pharma China and the subsequent rollup of several other Chinese distributors, pulled down more than $3.5 billion in sales last year.
The planned sale was prompted by the trial of a “two-invoice” procurement system for drug distribution unveiled in January requiring drug manufacturers to work with a single distributor; it’s slated to go into full effect next year.
“The new policy is likely to squeeze margins for most distributors in China. They will be under pressure for future profitability,” one of the sources told Reuters. “It does make Cardinal and others worried.”
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