"A commitment to China."
"That's exactly what the Chinese are doing."
"China should become one of the seventh top markets in the world."
China is on the minds and lips of the CEO's of the large multi-national pharmaceutical companies, commonly referred to as Big Pharma. They are enthusiastic about China, for good reason.
Daniel Vasella, CEO & Chairman of Novartis said "The Chinese pharma market also has been growing year after year. It has had a low base, obviously, but grown double digit. And it is expected that by 2010, we will have a market of 25 billion US dollars. So it's then a substantial market."
Substantial, indeed. Some reports predict it will be the second largest market by 2020, surpassed only by the United States.
The story of big pharma--Roche, Novartis, Eli Lilly, GlaxoSmithKline--coming to China is probably not news to anyone. What is news, though, is how their relationship with China is evolving.
Liu Yuwen, General Manager of Biobay said "And for the multi-national companies, they have come to China for years. They have established sales force, they have established manufacturing facilities, which has been expanded due to market demands. But now, almost everybody come to China to set up their R&D centers. New drug discovery clinical study base, and also process development facilities. So this is the trend we have seen."
R&D--research and development. These are the hearts and souls of pharmaceutical companies. That's the real story about big pharma in China.
In late 2006, Novartis became one of the first big multi-national pharmaceutical companies to announce an R&D center in China that would engage in new drug discovery. It's investing 100 million US dollars for a new center in Shanghai, which is due to open next year.
And Roche's CEO Franz Humer explains why his company is so bullish about China.
Franz Humer, CEO of Roche said "And why the enthusiasm for China, I think very simple. It is two reasons, really. First, it is a big market, a fast-growing market, a market of the future. But not only a market, it is also an enormous resource of science. There is a new science base emerging in this country. And I think China has a lot to offer to the world, in terms of its capacity, its capability to find new drugs and new medicines."
People have known for years that China is a fast-growing market. But the key question is, why is big pharma coming to China with R&D now?
Sidney Taurel, CEO of Eli Lilly said "So we have seen some improvements in the IP side. I think the regulatory environment has also improved. The timing for approval of new drugs is acceptable. And all of this has actually encouraged us to do more than just sales and marketing in China. And actually engage in R&D."
Another reason for the move to China is the lower cost of doing business here. And in an industry that saw a downturn last year, with more than 100 billion US dollars of patented drug sales at risk between now and 2012, cost reductions are critical.
And those cost benefits can be further amplified by outsourcing. Everything from manufacturing to research can now be outsourced to local Chinese companies, who have been quick to take advantage of the trend.
Lower costs, an improved IP environment, and a huge consumer market. It's no wonder the large pharmaceutical companies have come to China and set up shop here. The trend only looks to continue as the global pharmaceutical industry faces slower pipelines and significantly more drugs come off patent in the next few years.