Multinational pharmaceutical companies are now eyeing the Chinese pharma market not only for APIs or manufacturing services but also for research operations. Undoubtedly, winds are changing for the Chinese drug industry. Sushmi Dey finds out more about these plethora of changes in conversation with Hu Kun Ping, Vice-President, Reed Sinopharm Exhibitions who recently organised API and INTERPHEX China in Shenzhen…
How is the Chinese drug market positioned at present in the global economic scenario?
According to industry publication Medicine Economic News, China is the hot spot for the global bulk pharma market with 22 percent world market share, a growth rate exceeding 15 percent, annual sales of approximately $70 billion, and export turnover of $600 million. It is the second largest market for active pharma ingredients, a fact that cannot be ignored.
China has lately attracted a lot of multinational pharma companies. What makes this market lucrative for Foreign Direct Investments (FDIs)?
The rising middle class and living standards in China have resulted in an enormous demand for pharma products. PricewaterhouseCoopers (PWC) in one of its reports “Gearing up for a global gravity shift—growth, risk and learning in the Asia pharmaceutical market” published in 2007, says that according to the Economist Intelligence Unit, China’s total pharma sales will be doubled to $28.3 billion by 2010.
According to PWC, foreign direct investors are eager to tap into China’s extensive labour market and profit from this bullish economy through its cost effectiveness. China offers international pharma conglomerates a rich plethora of cost-effective and quality raw materials, and an opportunity to leverage the country’s rapidly growing biotechnology, natural ingredients, CRO and outsourcing sectors. Because China boasts of strong manufacturing capabilities and a highly skilled workforce, an increasing number of multinationals are setting up research and development centres here. In addition, the market outlook for formulations exports is positive and will be one of the major trends shaping this industry.
But Chinese pharma market is still mainly dominated by its domestic manufacturing players, which restricts many MPCs from investing further. What do you have to say about it?
According to the latest report released by the China Pharmaceutical Industry Association (CPIA), almost half of the Top 100 drug-manufacturing enterprises (based on sales figures) are foreign-invested entities or Chinese-foreign joint venture organisations. Of the Top 10, seven companies are foreign-invested enterprises, while only three are domestic manufacturers. This clearly demonstrates the fact that international players are taking up a bigger piece of the Chinese pharma market pie.
There is a common global perception that China lacks quality and research. What is your opinion on this? Are there any steps taken by the government or the pharma industry in this direction?
The growth of multinationals has helped fuel China’s economy and raised the bar for manufacturing quality. The Chinese government has taken active steps to calibrate domestic research and development capabilities with world-class standards. Contract Pharma reports that starting from July 2004, China’s State Food and Drug Admin-istration (SFDA) imposed a regulation for all pharma manufacturers to observe GMPs. As a result, companies that could not meet these criteria were eliminated, while reputable large organisations saw their production capacity increase dramatically. In addition, three national laws were passed to protect intellectual property rights in China, and the country has strengthened its legal framework to be consistent with the WTO agreement on TRIPS. The State Council of the People’s Republic of China announced in their 11th Five-Year plans that they will be devoting significant amount of resources into developing frontier technologies, particularly in sectors such as biology and advanced manufacturing technology. By 2020, investments in research and development are expected to be 2.5 percent of the country’s GDP.
You had recently organised API China/Interphex China in the autumn of 2007. What was the agenda of the show?
The API China and INTERPHEX China event is truly a business platform. The essence of both shows is to provide a one-stop business destination for international and domestic buyers and sellers of ingredients, intermediates, fine and specialty chemicals, excipients, raw materials, packaging materials, processing and packaging machinery to trade, source and network. To encourage peer-to-peer exchange of market innovations and technical know-how, Reed Sinopharm specially invited a group of pharma engineers and technical experts to the autumn 2007 show. Come 2008, we hope to see a greater pool of these industry professionals at our events.
This event gathered a large number of decision makers in the Chinese pharma industry and allowed them to engage in high level discussions at networking events and key conferences. The conference program at the event was aimed at educating event participants on current industry trends and issues. Some of the conference topics included, “Insuring market access to the US and EU—meeting standards and managing product liability risks”, “API market information release—overview of China national pharmaceutical market” and “New development of the pharmaceutical industry in China”. Presented by prominent speakers from the National Development and Reform Commission, tax authorities, environmental units, and other government bodies, attendees received a thorough update on the latest policies, regulations, industry developments and analysis of the market. With CPIA’s ardent support, API China’s conferences have become one of the most widely recognised industry forums that draw strong attendance.
Who were the major domestic and international participants in this show?
There were 1,119 local and overseas exhibitors and about 1,000 visitors from all over the world. On the first day alone, over 18,000 trade professionals packed the halls that spanned 45,000 square metres, about the area of seven football fields. In total, more than 30,000 participants attended this season’s event. API China is also a strategic forum for high-level industry discussions, and the 14 conferences and 18 seminars offered at this event enabled attendees to share market intelligence and scientific learning with one another. The event attracted a wide range of China’s pharma enterprises and multinationals such as Pall Life Sciences, Colorcon, Rousselot, Capsugel, Alcan Packaging, BASF, Degussa, and Aurobindo, among many others.
Why do you think an API/Interphex China is a good business platform for international pharmacos?
API China and INTERPHEX China provide international companies with a comprehensive business platform that helps them to take advantage of opportunities in the Chinese pharma market. API China’s 43-year history in China and INTERPHEX’s worldwide brand equity combine to provide international companies with a unique opportunity to network and trade in the Chinese pharma market. Also, the co-located events provide an ideal venue for global organisations to connect with Chinese decision makers and uncover new business opportunities.
China is one of the world’s largest producers of a wide range of high quality and cost-effective pharma products, and big international players recognise this. That is why we are seeing an increasing number of foreign bellwether organisations such as Pall Life Sciences, Honeywell, Colorcon, Novasep Process, and United Industries among others, exhibiting at the event. Top executives and key decision-makers make it a high priority to personally attend these shows.
The show failed to attract too many international participants this year, what is going to be your strategy in this regard in years to come?
In the short span of two years, we have tackled the global market aggressively with numerous internationalisation programs. It will take us some time to see tangible results but we are confident that with each edition’s brand-building and awareness generation efforts, we can establish top-of-mind recall with international prospects. Reed Sinopharm is continually striving to tailor customised business solutions for each individual, and this is one of our vantage points that will attract more overseas exhibitors in time to come. In 2008, RSE plans to expand its global outreach efforts by introducing innovative marketing strategies, which focus on educating the international community on the tangible benefits of connecting with Chinese decision makers at a trusted venue like API China.
What are the major changes implemented in the exhibition since last year?
In general, each new edition sees an improvement over the previous when it comes to addressing the needs of international attendees and exhibitors. We injected several ecumenical programs into the 2007 events, particularly at the autumn edition, to elevate API China and INTERPHEX China’s global standing. Foreign exhibitors in the respective country pavilions enjoyed international zone benefits and publicity opportunities with the media. In addition, we embarked on a series of road shows to strengthen the events’ brand awareness in key markets such as Europe, USA, Middle East, and Asia.
Next in line is API’s 60th edition anniversary in 2008. What are your plans in the pipeline?
2008 is a critical year for China, largely due to the Olympics being staged in Beijing. As such, we will be planning several initiatives to help domestic firms leverage these exciting internationalisation opportunities. With the world’s focus on China in 2008, we see the need to constantly outdo ourselves and break into new frontiers. As part of our extensive international media hosting program, we’ll be inviting a group of prominent international trade media to attend the show and participate in exclusive interviews with key exhibitors. We are also planning several commemorative events and high profile networking sessions to bring together the industry’s luminaries.