UCB Sells Chinese Plant and Older Meds for $680M

Belgium-based pharmaceutical company UCB is undertaking a significant restructuring, announcing its decision to sell its established neurology and allergy business in mainland China to local healthcare asset manager CBC Group and Abu Dhabi-based investment firm Mubadala. The transaction is valued at $680 million and includes several of UCB's key products such as the seizure medications Keppra and Vimpat, Neupro for Parkinson’s disease and restless leg syndrome, as well as the allergy treatments Zyrtec and Xyzal. Additionally, UCB is transferring ownership of its manufacturing facility located in Zhuhai, Guangdong Province, as part of this deal.

UCB's CEO, Jean-Christophe Tellier, emphasized that this strategic move aims to expand the reach of the company's past innovations, allowing more patients in China to benefit from its established treatments. The partnership with CBC and Mubadala will enable the development and operation of a leading neurology company at scale in China, utilizing UCB’s existing drug portfolio and manufacturing capabilities. In the short term, UCB is exploring opportunities to introduce new medicines in the fields of immunology, neurology, and rare diseases in the Chinese market. Tellier reaffirmed UCB's commitment to enhancing patient outcomes through ongoing collaboration with local partners and fostering innovation.

This divestment is expected to be finalized in the fourth quarter of the year and is not projected to affect UCB’s financial guidance for 2024. The decision aligns with a broader trend among major pharmaceutical companies that are increasingly seeking local partners to commercialize their products in China. For instance, Pfizer recently signed an agreement with Keyuan Pharma, granting the Shanghai-based company exclusive rights to distribute and promote its pneumococcal vaccine Prevenar 13 in China. Similarly, GSK has partnered with Chongqing Zhifei Biological Products to distribute its shingles vaccine Shingrix in the region. Other notable pharmaceutical companies such as Biogen and Sanofi have also restructured parts of their operations in China in recent months.

The growing trend of collaborating with local partners in China is driven by several factors, including heightened pricing and competitive pressures in the market, which have diminished the return on investment for in-house commercial operations. According to Justin Wang, head of L.E.K Consulting’s China practice, these market dynamics are prompting global pharmaceutical companies to seek local partnerships to better navigate the complex Chinese healthcare landscape.

Conversely, there is a shift among certain U.S.-based pharmaceutical companies, which are becoming more cautious about collaborating with Chinese partners due to the BIOSECURE Act. This legislation aims to restrict certain Chinese biotech equipment and service providers from accessing the U.S. market, citing national security concerns. A survey by L.E.K. Consulting indicated a significant decline in the confidence of U.S.-based life sciences companies regarding partnerships with Chinese entities. However, this trend is less pronounced among companies outside the United States, where there has been a milder decrease in confidence levels.

In summary, UCB’s divestment of its neurology and allergy business in China reflects a broader industry trend of leveraging local partnerships to enhance market presence and navigate competitive challenges. This strategic move is designed to bolster UCB’s efforts to introduce new treatments and improve patient outcomes in China while aligning with the company’s long-term growth objectives. The deal is poised to be completed by the end of the year without impacting UCB’s financial outlook for 2024.

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