Shanghai Pharmaceuticals Holding, one of China’s largest pharmaceutical firms, is scouting for acquisitions in the United States and Europe, despite increased scrutiny of Chinese investments. Acquisitions, including overseas ones, is one of the firm’s two-pronged development strategy besides in-house research and development, according to chairman of Zhou Jun. “We are deploying more people and financial resources to do our own research and development, and are also seeking to gain technology and market access through the short-cut route of acquisitions,” he told the South China Morning Post in an interview on the sidelines of the JP Morgan Healthcare Conference in San Francisco earlier this month. The Hong Kong and Shanghai-listed firm has spent US$100 million to US$150 million annually on R&D, amounting to 15 to 20 per cent of its profit in recent years. It focuses mainly on treatments for digestive, metabolic, cardiovascular, infectious, nervous system and mental diseases. The company, 35.5 per cent controlled by the Shanghai municipal government’s Shanghai Industrial Investment (Holdings), in November announced plans to buy Cardinal Health’s China operations for about US$557 million. Cardinal is the third largest pharmaceutical distributor in the US and the eighth largest in China. The deal would make Shanghai Pharmaceuticals the largest distributor in China for imported drugs and second largest in overall pharmaceutical distribution. After growing its business through the acquisition of dozens of domestic firms in the past two decades, Shanghai Pharmaceuticals made its maiden overseas acquisition late 2016 by buying 60 per cent of Australia’s health products supplier Vitaco for 938 million yuan (US$146.7 million). Shanghai Pharmaceuticals plans to open a research centre in San Diego as early as this year, form partnerships with US medical and drug research institutes and acquire rights to distribute US-developed new drugs in China. Besides the US, it has also been vying potential business partners or acquisition targets in Israel and Europe – mainly Germany and France – for off-patent drugs manufacturing and new drugs development. Asked if heightened scrutiny and rejections by the US government in some Chinese acquisitions on grounds of national security may affect the firm’s acquisition effort there, he said Shanghai Pharmaceuticals will engage in communications with the authorities if it encounters such difficulty. “We do not necessarily have to buy out US firms, we can first become their shareholder and business partner to explore synergies in market and product development … and we intend to keep the targets’ management team and operating systems after such potential acquisitions,” he added. Separately, he said parent Shanghai Industrial Investment plans to join hands with financial institutions and industry investors to set up a “very big” biotechnology fund, mainly to invest in mid to advanced-stage drug development projects. Such projects could become potential acquisition targets for Shanghai Pharmaceuticals in the future, or they could be spun off separately, he added.