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Business

Tsumura charging into China's herbal drug market with Ping An's support

Big data and sales channels of local partner seen as gold mine

Plants for making herbal medicine are harvested at a farm in China.

TOKYO -- Japanese traditional drugmaker Tsumura & Co. will cultivate the Chinese market by tapping the broad customer base and professional network of local company Ping An Insurance Group, with which a tie-up was announced last month.

The two companies are expected to establish a joint venture, with Tsumura taking a majority stake. The new company will integrate all operations from procurement of ingredients to sales. The partners are also searching for land in candidate cities such as Shenzhen to build a research center. The facility will develop traditional medicine and quality control technology among other things. Construction could begin as early as 2018.

Tsumura is Japan's largest maker of kampo, or remedies rooted in traditional Chinese medicine. The drugmaker has a processing center in China, where many of its ingredients are processed, but no production center. By building a local factory, Tsumura will be able to make traditional medicines of stable quality.

The company currently sells decoction pieces -- chopped herbs steeped in boiling water -- in China and plans to expand sales using Ping An's customer base. Tsumura will also begin selling granulated kampo medicine and other drugs in the country as well. It is shooting for Chinese sales of 100 billion yen ($887 million).

Ping An, for its part, hopes to grow its pharmaceutical business through its partnership with Tsumura, which recently announced the Chinese group would become its largest shareholder through a private placement of shares. The investment was not driven by a desire for dividends but for synergies with its healthcare operations, according to a Ping An official in charge of overseas investment.

For example, the insurance provider will analyze user data from its healthcare application that connects patients and doctors online to market insurance, health food products and traditional Chinese medicines. The app already boasts 150 million users and 60,000 doctors who take 250,000 inquiries daily, yielding a vast volume of big data. Ping An will also provide traditional medicine to its partner hospitals wholesale.

In July, the Chinese government enacted a new law to promote traditional medicine. The law requires thorough management of ingredients among other regulations.

"Consumers are demanding uniformity since quality varies" based on the region, said Terukazu Kato, president of Tsumura. High-quality drugs will be brought to the market by adopting Tsumura's production and quality management techniques.

The Japanese market for prescription and over-the-counter herbal drugs is just under 200 billion yen per year. China's traditional medicine market, on the other hand, is roughly 15 trillion yen, Tsumura claims. Nearly all of Tsumura's 110 billion yen in sales are domestic, prompting the push to expand overseas.

After receiving funds from Chinese textile group Shandong Ruyi, Japanese apparel maker Renown restructured and expanded its presence in that country. Backed by Ping An's ample funds and widespread networks, Tsumura is making a similar charge into China's massive market.

(Nikkei)

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