Feb. 27 (NBD) -- China's leading drugmaker Harbin Pharmaceutical Group Co., Ltd. ("Harbin Pharma") said in a filing to Shanghai Stock Exchange last Saturday it will be the sole purchasing part to acquire a 40.1 percent stake in U.S. nutritional supplements retailer GNC Holdings Inc. ("GNC"), instead of teaming up with its sister company HPGC Renmintongtai Pharmaceutical Corporation. 

If the deal is completed, Harbin Pharma will become the largest single shareholder of GNC.

It is widely believed that Harbin Pharma expects to accelerate its upgrading of healthcare products through the new purchase. 

A source with Harbin Pharma's parent company echoed the viewpoint, saying to NBD that slow product upgrading is a long-standing issue facing China's pharmaceutical industry. The deal will give Harbin Pharma access to more than 1,800 products of GNC, and this will broaden the Chinese firm's product line and accelerate its upgrading and transformation of healthcare products. 

The listed drugmaker saw its revenue from the healthcare product business reach the peak in 2012, being 1.546 billion yuan (244.8 million U.S. dollars). The figure dropped by 12.47 percent in the following year and by 25.71 percent in 2014. The situation improved a bit in 2015 and 2016. 

Through the partnership, Harbin Pharma and GNC can complement each other. 

The above-mentioned source stated that the former has advantages in marketing and customer reach while the latter has a wide variety of products. 

In the same filing, Harbin Pharma also revealed that the company and GNC are looking to set up a joint venture to run business in mainland China. 

The new entity will be 65 percent owned by Harbin Pharma and 35 percent owned by GNC, and will have exclusive rights to distribute GNC's products in mainland China. However, the final terms rest with the definitive agreement. 

NBD noticed that GNC has been struggling with steep drops in share price and operating profits since 2015. 

The U.S. company's market value has evaporated by nearly 90 percent and its operating profits fell to -260 million U.S. dollars in 2017 from 393 million U.S. dollars in 2015. According to The Wall Street Journal and PR Newswire, the company's long-term debts reached up to 1.353 billion U.S. dollars, some of which will expire in February 2019. 

Despite its lackluster performance, GNC had been approached by several Chinese pharmaceutical enterprises amid China's growing demand for healthcare products. 

Data from the world's leading strategy consultancy Roland Berger Strategy Consultants show that China's healthcare product market totaled 120 billion yuan (19.0 billion U.S. dollars) in 2015, an increase of 2.7 times from 45 billion yuan (7.1 billion U.S. dollars) in 2005. 

A report by Forward Industry Research Institute on China's healthcare product market 2018-2023 says that the Chinese healthcare product market will hit 235 billion yuan (37.2 billion U.S. dollars) by 2020.

Email: lansuying@nbd.com.cn