Kings of the east

The Chinese regulator National Medicinal Products Administration (NMPA) conditionally approved a novel drug for Alzheimer’s. The nine month study conducted in 34 Chinese hospitals with 818 patients demonstrated that the new drug improved cognitive functions within four weeks! The study is a major breakthrough amidst plenty unsuccessful attempts in developing a treatment for Alzheimer’s.

The country is already the top source for active pharmaceutical ingredients (API) with an estimated 80% of all active ingredients used in drug products coming from China. The capacity utilization for API manufacturing sites in China continue to stay at a higher percentage, displaying their industrial operations expertise. Recently Chinese dependence was highlighted as a potential risk to U.S. national security. As an example, the department of commerce study determined that 97% of all antibiotics in U.S. came from China which is a cause of anxiety. There is however lack of reliable data to gauge the volumes of Chinese API used. API is converted into finished formulations in other countries prior to shipping them to the U.S.

On the other hand, pharmaceutical formulations are the U.S’s second-largest and fastest growing consumer export to China after jewelry. China's share of U.S. pharmaceutical exports has been growing at a higher than normal rate. U.S. pharmaceutical exports to China experienced a 438% increase between 2007 and 2016.

Major pharmaceutical organizations are counting on the Chinese market for double digit growth in the coming years. There has been a higher momentum in investments and partnerships with Chinese firms to tap the emerging market potential. The country is already the second largest pharmaceutical market in the world with a growth estimate of $175 billion by 2022 as the Chinese population aged 65 and older increase.

The Chinese regulator has been fueling the growth with reforms since 2015. Reforms include implementing priority review, fast track processes and increasing review workforce to almost eleven fold. China has also been revising laws allowing foreign generic organizations to enter the market. The reforms have already resulted in increasing approvals.

Companies are compromising on the price as a strategy to enter the Chinese pharmaceutical market. Do you think the low-price/high-volume based strategy will pay off for foreign pharmaceutical organizations?

Does the increasing exodus of big pharma executives to local start-ups reflect emerging opportunities in domestic Chinese pharmaceutical organizations?

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