Market surge creates opportunities and challenges


Biopharma in China

The sophistication of drug production in China has come a long way in a short time, offering both opportunities and challenges for Chinese and Western pharma and biotech companies, according to an article by Peter Young in Pharmaceutical Executive. In recent memory, China was “principally a low cost, low quality producer of pharmaceutical intermediates and fine chemicals,” according to Young, but the country cleaned up its manufacturing practices, developed more sophisticated medicines, conducted clinical trials, improved its regulatory system and developed “a more diversified, modern system of providing patient care.”

Additionally, according to Young, China has been working on creating “the very delicate ecosystem…that is required to attract leading researchers, develop drugs successfully, establish and fund biotech companies, and provide the providers of capital with the liquidity and valuation increases that are critical to the success of biopharmas in the West.” It involves developing “a delicate balance of strong research universities; government-sponsored research organizations; pharma companies with the right mix of tools and people; funding sources at every stage of product development of a biotech; a regional stock market that will support emerging biotechs; and the right living environment that can attract the best researchers.”

In other words, China is trying to develop the infrastructure to create a successful environment for pharma and biotech companies to flourish in a country where many of the amenities are relatively new. It is changing a number of rules about how to fund companies, when to allow them to go public, and how they are traded on stock exchanges. China hopes to reach its objectives by 2025 and appears driven to do so.

The push toward a full-scale pharma/biotech market structure in China creates opportunities for Chinese and Western pharma and biotech companies. The Chinese market for drugs is booming, and the incentives for selling new and existing drugs into the Chinese market are replete. Once a company copes with pricing, intellectual property, distribution, and regulatory issues, there are enormous opportunities for sales, “very much driven by the specifics of each drug and company,” Young explained.

Because there are numerous established Chinese biopharma companies, Western drug companies can partner or license product candidates or treatment approved in the US with Chinese organizations. With a burgeoning number of new drugs being developed by Chinese companies, Western biopharma companies with regional regulatory expertise, on-site sales and marketing resources, and funding are well equipped to handle clinical trials and marketing for those drugs in the US or Europe. While the revision of the Hong Kong Stock Exchange IPO rules will largely help Chinese biotech IPOs, it can be open for dual listings by Western biotech companies, which give them access to more Chinese investors.

On the down side, Chinese biopharma companies with government support could become aggressive competitors in some therapeutic areas. China could become more competitive with Western nations by having looser standards about the use of genetic engineering, greater availability of private and public equity funding at higher valuations, and a much larger availability of university research and graduates than before. The Chinese government is determined to gain a significant market share in sophisticated drugs through an investment in the biopharma industry.

The Chinese have clearly gained significant market share in pharmaceutical intermediate/fine chemicals and generics manufacturing. Whether they can do the same over time in the market for more sophisticated drugs is still an open question, but it is clear that the Chinese government wants its biopharma industry to achieve that goal.


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