`Big Pharma' Drug Deals Target Asian Sources: Chart of the Day

[OhioChick]

May 12 (Bloomberg) -- Pfizer Inc., GlaxoSmithKline Plc and other U.S. and European pharmaceutical companies will increasingly sign long-term contracts with Asian drugmakers rather than one-off supply deals, Citigroup Inc. said in a report.

``We see more companies beginning to look on contract manufacturing and research services players as partners rather than mere suppliers or vendors,'' Citigroup said in the May 8 report, based on the bank's annual survey of pharmaceutical and biotechnology companies. ``The number of respondents willing to outsource to Asia -- including India and China -- has increased materially.''

Mumbai-based Nicholas Piramal Ltd. and Shanghai-based WuXi PharmaTech Cayman Inc. ``are our preferred plays on this opportunity,'' said the report by research analysts Prashant Nair, Hoki Luk and Akshay Rai. Two other Indian drugmakers, Dishman Pharmaceuticals & Chemicals Ltd. and Jubilant Organosys Ltd. were also cited as ``best plays'' among Asia's contract manufacturers, Citigroup said.

The chart of the day shows the relative value of the largest pharmaceutical companies in China and India, with market value and share performance and comparison to earnings displayed. Nicholas Piramal shares are the second-best performers this year among those of companies worth more than $1 billion.

``With growing patent expiries, drying up of pipelines and need to focus on areas of core competence,'' outsourcing to Asian companies will become ``more of a strategic option for innovators rather than a mere tactical one adopted case by case,'' the analysts wrote, based on the survey of more than 175 pharmaceutical and biotechnology companies.

Investing in Asian outsourcing companies can be risky, though, as ``any slip-up in executing the contracts would be a big negative,'' the analysts wrote.

http://www.bloomberg.com/apps/news?pid=20601080&sid=aR.Re2TeFNqg&refer=asia