Release
2020/07/13
OSAKA, Japan, July 13, 2020 – Shionogi & Co., Ltd. (Head Office: Osaka, Japan; President and CEO: Isao Teshirogi, Ph.D., hereafter “Shionogi” or “the Company”) today announced that, at a meeting held on July 13, 2020, its Board of Directors, pursuant to the Basic Agreement on the Capital Alliance (hereinafter, “the Basic Agreement”) dated March 30, 2020 between Shionogi and Ping An Insurance (Group) Company of China Ltd. (Headquarters: Guangdong Province, China; hereinafter, “Ping An Insurance”), passed resolutions to sign an agreement with Ping An Life Insurance of China, Ltd. (Headquarters: Guangdong Province, China; hereinafter, “Ping An Life”), which possesses equity-investment functions and is a subsidiary of Ping An Insurance, concerning the establishment of a joint venture called Ping An Shionogi Company Ltd. (Headquarters: Shanghai; hereinafter, “the Joint Venture (Shanghai)”), and an agreement with Shionogi (Hong Kong) (as defined hereinafter) and Tutum Japan Healthcare Limited (Headquarters: Cayman Islands; hereinafter, “Ping An Overseas”) , which is a subsidiary of China Ping An Insurance Overseas (Holdings) Limited and an indirect subsidiary of Ping An Group, concerning the establishment of a joint venture (Headquarters: Hong Kong; hereinafter, “the Joint Venture (Hong Kong)”). Hereinafter, the Joint Venture (Shanghai) and the Joint Venture (Hong Kong) are collectively referred to as “the Joint Ventures” and the two agreements concerning their establishment are collectively referred to as “the Agreements.” Upon the execution of the Agreements, the pre-execution conditions for Shionogi’s disposal of treasury shares by way of third-party allotment to Ping An Life (hereinafter, “the Third-Party Allotment”), which we announced in “Notice Regarding the Signing of the Basic Agreement on the Capital and Business Alliance with Ping An Insurance and the Disposal of Treasury Shares by Way of Third-Party Allotment”1 dated March 30, 2020, will be satisfied.
Furthermore, with the aim of overseeing the Joint Ventures locally, we passed a resolution to establish Shionogi (Hong Kong) Company Ltd. (Headquarters: Hong Kong; hereinafter, “Shionogi (Hong Kong)”) as a wholly-owned subsidiary of Shionogi.
In addition, we passed a resolution concerning the signing of two equity-stake transfer agreements (hereinafter, “the Equity-Stake Transfer”) to transfer all equity stakes in each of Shenzhen Liancheng Medical Company Limited (Headquarters: Guangdong Province, China; hereinafter, “the Shenzhen Sales Company”), which possesses sales functions, and Nanjing Chang'ao Medicine Technology Co., Ltd. (Headquarters: Jiangsu Province, China; hereinafter, “the Nanjing Factory”), which possesses pharmaceuticals manufacturing functions (both the Shenzhen Sales Company and the Nanjing Factory are under the control of C&O Pharmaceutical Technology (Holdings) Limited (Headquarters: Bermuda; hereinafter, “C&O”), which is a wholly-owned subsidiary of Shionogi), to the Joint Venture (Shanghai) and a share transfer agreement (hereinafter, “the Share Transfer”) to transfer all shares in Shionogi Healthcare Co., Ltd. (Headquarters: Chuo-ku, Osaka; hereinafter, “Shionogi Healthcare”), which is in the over-the-counter pharmaceuticals business, to the Joint Venture (Hong Kong).
I. Outline of the Establishment of the Joint Ventures
1. Purposes of the Establishment of the Joint Ventures, the Equity-Stake Transfer, and the Share Transfer
As we announced in “Notice Regarding the Signing of the Basic Agreement on the Capital and Business Alliance with Ping An Insurance and the Disposal of Treasury Shares by Way of Third-Party Allotment”1 dated March 30, 2020, Shionogi, Ping An Group and Ping An Life have signed the Basic Agreement for the purpose of pursuing, through the Joint Ventures, the following as main businesses:
(i) Build a data-drivenNote 1 drug discovery/development platform, and use the platform to discover and develop pharmaceutical products (new, generic and over-the-counter drugs)
(ii) Build a manufacturing and quality control system using AI technology, and use the system to assure the quality of pharmaceutical products (new, generic and over-the-counter drugs)
(iii) Build a sales and distribution platform utilizing O2O (Online to Offline)Note 2, and use the platform to sell and distribute pharmaceutical products (new, generic and over-the-counter drugs)
(1) The Joint Venture (Shanghai)（Ping An Shionogi Company Ltd.）
Pursuant to the Agreements, we have agreed to establish the Joint Venture (Shanghai), with to-be-newly-established Shionogi (Hong Kong) holding a 51% equity stake and Ping An Life holding a 49% equity stake, for the purpose of executing (i)-(iii) above. Furthermore, all equity stakes in each of the Shenzhen Sales Company and the Nanjing Factory, which are subsidiaries of C&O, will be transferred to the Joint Venture (Shanghai). The plan is for the Joint Venture (Shanghai) to be positioned as the base of Shionogi’s China and Asia operations, and to pursue businesses (i)-(iii) above. Specific details of businesses already agreed at the time of writing are as follows:
(i) Build a data-driven drug discovery/development platform, and use the platform to discover and develop pharmaceutical products (new, generic and over-the-counter drugs) thereof:
With a focus on infectious disease, CNS disorders, and pain, over many years Shionogi has amassed a wealth of knowledge about disease and strong drug-discovery capabilities, and by combining these competencies with Ping An’s lifestyle-related big data and AI analytical technology possessed by Ping An, we will be establishing a drug discovery/development platform that will allow us to efficiently create high-value-added, innovative medicines and healthcare services and deliver individually-optimized solutions that meet the respective needs of customers. We will also be granting exclusive negotiating rights in the Asia territory (including China) with respect to both approved and under-development products for which Shionogi owns the rights to the Joint Venture, and nurturing it as a development center for drugs that Shionogi is developing globally. As soon as the Joint Venture is established, we plan to sign licensing agreement for the territory concerning cefiderocol, a drug for treating multi-drug-resistant Gram-negative bacterial infections, and naldemedine, a drug for treating opioid-induced constipation. We are also considering licensing potential drugs for novel coronavirus disease (vaccines, therapeutic drugs, and diagnostic drugs) that are currently under development in Japan to the Joint Venture (Shanghai) when the timing is appropriate.
(ii) Build a manufacturing and quality control system using AI technology, and use the system to assure the quality of pharmaceutical products (new, generic and over-the-counter drugs):
To enhance pharmaceutical manufacturing and quality control, we will be fusing the manufacturing and quality control technology and knowhow Shionogi has acquired over the years with the AI technologyNote 3 possessed by Ping An to develop a new manufacturing and quality control system. We will be using AI to monitor the frontline of manufacturing and analysis in real time and make processes transparent, and by making the previous system more efficient, we will be aiming to put together and deploy an innovative pharmaceutical manufacturing and quality control system that offers both high quality and low costs. Initially, we plan to start with trial operation at the Nanjing Factory, which is going to be brought under the wing of the Joint Venture (Shanghai).
(iii) Build a sales and distribution platform utilizing O2O (Online to Offline), and use the platform to sell and distribute pharmaceutical products (new, generic and over-the-counter drugs):
We will be aiming for growth by collaborating with Ping An Good Doctor. Affiliated to Ping An Group, Ping An Good Doctor has established a comprehensive, one-stop healthcare ecosystem. It is today the largest mobile medical application in China in terms of user scale, with 315.2 million registered users by the end of 2019. It leverages on its in-house full-time medical team and its proprietary AI-based medical system to cover 24/7 end-to-end services including online consultation, prescription, referral, appointment, second medical opinion and drug delivery. Shionogi will begin supplying generic drugs it sells in China through the Shenzhen Sales Company and the Nanjing Factory, as well as over-the-counter drugs sold by Shionogi Healthcare via this healthcare platform. At the same time, Shionogi will be moving quickly to launch new drugs, such as cefiderocol, for which it has obtained approval globally in the Asia territory (including China). Furthermore, by not only offering our own approved and under-development drugs, but also actively launching new drugs, generics, and over-the-counter drugs for which there are high levels of medical need, we will be working to further expand our product lineup and raise customer satisfaction.
Note 1: Refers to the judgement/action based on data such as real-world data, marketing data, web analysis data, etc.
Note 2: Refers to the promotion of marketing and sales activities by combining online websites and offline physical stores.
Note 3: Refers to the technologies that use software etc. to artificially reproduce certain human intellectual behaviors or to monitor and analyze pictures and sounds and detect or forecast abnormal or illegal situations.
(2) The Joint Venture (Hong Kong) (Ping An Shionogi (Hong Kong) Company Ltd.)
Pursuant to the Agreements, we have agreed to establish the Joint Venture (Hong Kong), with to-be-newly-established Shionogi (Hong Kong) holding a 51% shareholding and Ping An Overseas holding a 49% shareholding, for the purpose of executing (i)-(iii) above by performing intellectual-property license management and exporting/importing products from/to countries in the Asia territory (including China). Furthermore, all shares in Shionogi Healthcare will be transferred to Joint Venture (Hong Kong), and Shionogi Healthcare products will be supplied to customers in the Asia territory (including China). Moreover, we expect the new platform business that will be created as a result of the establishment of the Joint Ventures and the Share Transfer and will cover the entire spectrum from prevention to treatment, as well over-the-counter drugs developed by the Joint Ventures, to be made available in Japan. Through this, we will be aiming for the Japan business, the most important business for Shionogi Healthcare, to make further strives forward.
On June 1, 2020, Shionogi announced the Shionogi Transformation Strategy 2030 (hereinafter, “STS2030”), our new medium-term business plan, which comprises our vision for 2030 and the growth strategy we will be following to achieve that vision2. The vision is “Building Innovation Platforms to Shape the Future of Healthcare,” and the concept behind the establishment of the Joint Ventures with Ping An matches that. The first five years of STS2030 is positioned as STS Phase 1, and our basic course of action for this phase will be to “realize transformation to a new growth as a total healthcare company” by pursuing R&D and top-line (sales) strategies to create new value and a transformed management foundation strategy to realize value creation. Under our top-line strategy, we are positioning China as a target area alongside Japan and the U.S., and the two Joint Ventures to be established will be playing a central role in bringing about Shionogi’s business transformation into total healthcare company, establishing a new drug-discovery/development model, and delivering top-line growth.