China’s Ping An buys stake in Japanese herbal drugs firm

The Chinese insurer and Japan’s Tsumura will jointly make and sell the latter's traditional medicine products in China.

Ping An Insurance is buying a 10% stake in Tsumura, which makes and sells Japanese herbal medicine, known as kampo drugs. 

Kampo has its roots in Chinese culture, and now the insurance company is reuniting the two branches of traditional medicine.

Together, Ping An and Tsumura will form a joint venture in China to combine the secrets of kampo with traditional Chinese medicine, from cultivation of herbs to the final product.

Chinese consumers’ growing emphasis on wellness is creating a wave of new investment opportunities.The cultural shift is transforming swathes of industry: demand for vitamins has sparked a wave of Chinese outbound M&A. Consultants at PwC estimate China's health food market, for one, will grow by RMB100 billion ($14.6 billion) in the next five years.

Founded in 1893, Tsumura is the world’s largest maker of kampo medicine. It produces 129 kinds of kampo medicine and has a share of 84% of the market as of March for prescription kampo products in Japan.

All of its kampo products are covered under the Japanese National Health Insurance (NHI) plan. This means the sale prices are falling gradually as a result of NHI drug price revisions

Tsumura China was established in December to oversee its operations in China and to help the company procure drugs. Tsumura sees crude drug demand in China growing over the long term, meaning it needs to continue working to secure reliable supplies of crude drugs.

Tokyo-headquartered Tsumura will sell treasury stock and issue additional shares in a private placement to Ping An for ¥27 billion ($244 million).

Upon completion of the deal, Ping An will become Tsumura’s largest shareholder.

Tsumura made net sales of ¥114.9 billion in fiscal 2017.

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