CHINA’S health care companies are on an acquisition tear, attempting to buy their way into international markets like never before.

    Chinese firms have announced more than US$3.9 billion in overseas acquisitions in the pharmaceutical, biotechnology and health care sectors this year, a pace on track to exceed last year’s record total and a tenfold increase from the amount spent in all of 2012, data compiled by Bloomberg show.

    That surge is driven by Chinese tycoons and businesses seeking to diversify in the face of slowing growth at home and a government push to upgrade the “Made in China” brand. In the domestic market, many of these companies are grappling with a fragmented drug industry with close to 5,000 manufacturers and aggressive competition that is pushing down generic drug prices. Success overseas would allow them to expand their portfolios, find new areas of growth and provide a ready-made entry into developed markets that have high regulatory standards.

    Among recent deals, China’s Creat Group Corp., founded by businessman Zheng Yuewen, agreed in May to acquire Bio Products Laboratory Ltd., a maker of human blood plasma products in the United Kingdom, for US$1.2 billion in the largest international pharma acquisition by a Chinese company, according to the Bloomberg-compiled data. Also in May, Shanghai Fosun Pharmaceutical Group Co., backed by billionaire Guo Guangchang, made a non-binding offer to buy 96 percent of India’s Gland Pharma Ltd., which is focused on injectable drugs.

    The Chinese industry is likely to continue pushing overseas. “There’s a few Chinese companies that have been investing in pharmaceutical products that are getting close to being approved in the United States and Europe,” said George Lin, head of Asia consumer, retail and health care investment banking at Bank of America Corp. “If those are approved, then the Chinese are likely to be much more interested in pursuing overseas targets in similar areas that have a strategic alignment.”

    Chen Qiyu, chairman of Fosun Pharma, one of the most active buyers in China’s health care sector, said in an interview last year that he hoped to increase overseas revenue to as much as 40 percent of the total over the next five years via acquisitions.

    China’s pharma industry is still lagging far behind other sectors and multinational peers on the size of international acquisitions. China National Chemical Corp., also known as ChemChina, in February agreed to buy Swiss pesticide and seeds maker Syngenta AG for about US$43 billion. And the global health care industry has seen mammoth deals like Allergan Plc.’s US$40.5 billion agreement to sell its generic drug business to Teva Pharmaceutical Industries Ltd. last year.

    In health care, the Chinese companies tend to target companies with US$100 million to US$300 million in sales and valued at about US$300 million to more than US$1 billion, said John Wong, chairman of Greater China at Boston Consulting Group.

    Chinese companies also tend to look at businesses that complement their existing areas of expertise. Creat’s chairman also jointly controls Shanghai RAAS Blood Products Co., a blood plasma company and the largest listed health company in China. Among other deals, China’s Humanwell Healthcare Group, which makes anesthetics and contraceptive drugs, spent US$550 million buying Laurelton, New York-based generic drug maker Epic Pharma LLC this year.

    In rushing to get a foothold overseas, Chinese companies may run the risk of buying a company “that has a weak portfolio and the local management team disappears after the sale,” said BCG’s Wong. “Then the Chinese company is left with a declining asset.”(SD-Agencies)