Unleash the Dragon

With an army of scientists and a sea of consumers, China is poised to become pharma's most valuable market and partner
Dec 01, 2004

The right price
China is currently the seventh-largest healthcare market in the world. By 2010 it is expected to become the fifth-largest, with pharmaceutical sales of $24 billion, and some experts believe that by 2020 China will surpass the United States to become the world's largest pharmaceutical market.

As China has become more affluent, there has been increasing demand for therapeutics, medical devices, and other healthcare products and services. Hepatitis B and C and HIV/ AIDS continue to be major problems, but the overall Chinese disease profile is looking more and more like that of the Western world. Cancers (especially lung, liver, colorectal, and gastric) and cerebrovascular, cardiovascular, and respiratory diseases accounted for 77 percent of deaths in 2000, and it is expected that changing lifestyles will soon put the spotlight on diabetes and obesity.

Meanwhile, the expanding class of Chinese "luxury consumers" is expected to reach 100 million in the next decade. These affluent individuals have fueled the explosive entry of upscale brands such as Gucci, Armani, Cartier, and Mercedes into China and have been the force behind the rise of new private hospitals with US-style premium services. These consumers demand better healthcare, and they can afford it; they represent a lucrative market for foreign companies marketing state-of-the-art medical treatments.

The bayhelix group
China offers tremendous opportunity for healthcare companies. Chinese companies are looking for global partners on many levels: to provide novel Western pharmaceutical, diagnostics, and medical device products that will be marketed in China by local partners; to feed the country's burgeoning drug discovery, contract research, and contract manufacturing industries; and, in the long run, to market Chinese-discovered and- developed products globally. This article will look at the market, the "returnee" entrepreneurs who are transforming the Chinese life sciences industries, and some of the most important opportunities for partnership—especially in the emerging market for traditional Chinese remedies.

Opportunities in Life Science and Healthcare Last year, General Motors made a profit of $437 million in China—more than half its entire North American profits, at close to eight times its North American margin. In the high-tech arena, the chip giant Intel generated revenues of $3.7 billion from China last year, making the country its third-largest market in the world and one of the most profitable. With venture investment of more than $200 million in 50 Chinese companies, Intel is possibly the most dominant high-tech brand in China. By comparison, pharmaceutical companies have lagged behind in their expansion into China. According to some estimates, for example, Pfizer's 2003 Chinese pharmaceutical revenue accounted for less than 1 percent of total revenue (approximately $140 million out of $45 billion), although the company is reported to have invested more than $500 million in China since the 1980s. Pfizer currently markets more than 40 pharmaceuticals there and plans to launch 15 new drugs in China in the next five years.

In addition to Pfizer, the big pharmaceutical players in China include:

  • GlaxoSmithKline, which has invested $400 million in the country and last year reportedly generated about $300 million in revenue there.
  • AstraZeneca, which has invested $140 million in China, achieved revenues of $151 million in the country last year, and expects to increase its Chinese sales force to 900 people.
  • Novartis, which expects to see 20 percent annual growth in its China business in the next five years and has invested $70 million in China since its entry in the late 1980s. Sales have been growing by an average of 20 percent annually since 2000 and last year hit $120 million.

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