By Piper Terrett
The USA is still the biggest market for the pharmaceutical industry, worth $300bn annually, but China is gaining ground and is expected to become the third largest market this year.
Chinese pharmaceutical sales were valued at $40bn in 2011 and are forecast to reach $50bn in 2012 and $200bn in 2015.
The rapid urbanisation of the country, with its population of 1.3 billion, and the change in lifestyle of its new town dwellers are providing new opportunities for the life sciences industry – and some Welsh companies, such as GE Healthcare’s Cardiff operation, are already capitalising on this.
Last December, GE’s Maynard Centre showcased its life sciences research operation to Chinese trade representatives as part of the 10th UK-China Joint Economic and Trade Commission talks.
Other UK-based players have also been early movers. AstraZeneca, which set up an innovation centre in the country in 2007, has invested $100m in China, while GlaxoSmithKline is one of the biggest multi-national drug companies there, using the country as a manufacturing base as well as selling vaccines and over-the-counter drugs within the Chinese market.
“All the big pharma and orthopaedics companies, such as Smith & Nephew, have positioned themselves in China for the growth,” says Navid Malik, head of life sciences research at broker Cenkos Securities.
And in the coming years there are likely to be more opportunities for other pharmaceutical and life science businesses, whether large or small.
As they move from a rural setting to an urban one, many of China’s citizens are enjoying a more Western way of life, such as eating fast food and leading a more sedentary lifestyle.
Unfortunately, lifestyle changes are contributing to an increase in chronic diseases such as diabetes, stroke, heart disease and respiratory problems. Gastric and liver cancers are also on the rise.
At the same time, China has a growing elderly population, and the Chinese government is investing in rural healthcare.
However, taking advantage of these market drivers can be a challenge. Finding the right Chinese partner to work with can be difficult and, while things are improving, Chinese respect for intellectual property (IP) can leave something to be desired.
“The opportunities are substantial,” says Malik. “By 2020 the Chinese market will rival the US’s. But for smaller companies it’s very hard to find the right partner and people have had their fingers burnt. That’s why a lot of Western companies are reluctant or nervous about moving into the Chinese market – they fear their IP may be compromised.”
Malik says that companies should look for Chinese partners that already have a footprint in Europe and will therefore have “the right expectations”. He also suggests studying case studies of other businesses which have tried to set up in China, such as Volkswagen, and the problems that they have encountered and how they overcame them.
Some financial commentators anticipate a ‘hard-landing’ for the Chinese economy, as growth there slows due to the problems in the Eurozone which is hurting Chinese exports. Figures released in July showed that Chinese growth in the second quarter slowed to 7.6 per cent.
However, while times haven’t been easy in the global pharmaceutical market during the downturn, it is less affected by the impact of the economic cycle than other sectors.
Patients will always need medicines, regardless of the state of the world economy. And, thanks to a $124bn government healthcare reform programme initiated in 2008, around 1.2bn of China’s population are now covered by health insurance.