TOKYO -- Sumitomo Corp. will market livestock drugs such as vaccines in China by investing in local pharmaceutical giant Shandong Sinder Technology, aiming to harness growing demand.
Shandong Sinder makes vaccines, antibiotics and other drugs for chickens and pigs in four locations, including Beijing and Shandong and Sichuan provinces, for use by livestock farmers. The company generated about 350 million yuan ($54 million) in sales in fiscal 2014 and has a staff of about 1,100.
The Japanese trading house will soon take a 25% stake in the Chinese drugmaker for an undisclosed price.
Sumitomo will send staffers to discuss collaboration but is considering offering production licenses or shipments from 10 or so Japanese manufacturers of animal drugs with which it has business ties. It will also consider exports to Vietnam, Indonesia, Malaysia and other parts of Asia.
The Tokyo-based company currently sells veterinary drugs via a U.S. pet goods manufacturer it acquired in 2004. Sumitomo aims to increase groupwide sales from animal drugs from a little over 10 billion yen ($81.4 million) in fiscal 2014 to 100 billion yen eventually. The Asian expansion will be a key step toward this goal.
The global market for veterinary drugs, excluding feed additives, stood at around $20 billion in 2013, according to Sumitomo. The market has been growing at 3% a year, thanks in part to rising meat consumption in China and other emerging economies.
The Chinese market is the second largest in the world, at an estimated $4.8 billion, after the $7 billion U.S. market.
Merck and other Western drug giants are actively cultivating related operations. Sumitomo seeks to compete by taking the rare step of investing in a Chinese drugmaker.
The Japanese agriculture ministry supports Asian expansion by domestic companies making animal drugs, from the perspective of keeping bird flu virus and other pathogens from entering Japan via its neighbors.