China poised to have the fastest-growing biologics sector during next decade

The latest CPhI Pharma Insights report looks at the future of the Chinese pharmaceutical industry

The latest CPhI Pharma Insights report on the Chinese pharma economy shows the confidence of international companies in the expanding Chinese market.

The report, released at CPhI China 2016, reveals that, of the international companies surveyed, 85% believe China is set to have the fastest-growing biologics sector over the next decade, while 65% predict patented new chemical entities (NCEs) will be discovered and developed within the country in as little as five years’ time. The driving force behind these findings is the growing biotechnology and R&D industry, which is heavily supported by the Chinese government.

As a result, Big Pharma and generic manufacturers will increasingly aim to gain access to the Chinese market, with 74% of international companies looking to ‘increase or initiate partnership with local companies’. This remains a key trend as both international and Chinese companies are seeing natural synergies – Chinese companies benefit from increasing their knowledge of advanced technologies and international companies benefit from market access with a partner familiar with its complexities.

According to the report, these arrangements and strategic alliances will proliferate over the next few years, as 90% of domestic companies are also searching for international partners, and their primary goal is to increase the ‘company’s knowledge and development base’.

Big Pharma and generic manufacturers will increasingly aim to gain access to the Chinese market

More than 50% of the domestic respondents believe ‘the Chinese manufacturing sector will advance their manufacturing capabilities in complex formulations and biologics to levels comparable with those in the West within the next 3–5 years’. This emphasises the shift towards developing higher manufacturing and regulatory standards; more than 60% of companies surveyed are already implementing GMP standards, 40% Quality by Design, 40% continuous improvement, and nearly 20% either six-sigma or OPEX.

International companies also share a renewed confidence in the improvement of standards within the Chinese market, with more than 50% stating that they believe ‘commercial manufacturing can be competently outsourced within China’. Moreover, nearly 30% believe that both ‘CMO activity’ and ‘clinical drug supply and formulation services’ can be competently undertaken by Chinese companies – most remarkably, 27% believe ‘US and European drug supply’ can also be completed by manufacturers within the country.

The report concludes that the chief driving force behind rising standards within the Chinese market – and therefore its export potential – has paradoxically been an increased awareness among domestic consumers and the desire for more tightly regulated, higher-quality drugs.

Chinese firms are increasingly investing for the future, with 21% installing cold chain storage technology, 16% are investing in ADC development, 43% commercial and scale-up facilities and 27% in continuous processing. Continuous processing remains at the cutting edge of the industry and is predicted to revolutionise pharma manufacturing over the next decade. However, its initial set-up costs and the new learning required are high, implying a significant change in approach from Chinese companies.

Two major challenges were identified as potential factors holding back the Chinese pharmaceutical sector. First, finished drug supply of solid dose forms is not showing the accelerated pace of development that the biologics sector is experiencing, and the report suggests that ‘too much ground has been ceded to Western and Indian manufacturers’ who lead this sector internationally. Second, as China’s overall pharma economy expands, the CFDA is experiencing greater backlogs and regulatory bottlenecks. The domestic industry strongly supports the implementation of a US-style GDUFA system to alleviate these pressures and 94% state that the ‘CFDA must grow rapidly to a comparable size to the US FDA if it is to properly regulate its industry’.

The report suggests that in five years’ time, the Chinese pharma market will look very different, with generics and APIs still being exported in huge numbers, but alongside this, there will be a well-established biologics and research industry, with multinational CMOs. In addition, it is likely that in only 5–10 years’ time, there will be Chinese patented NCEs – which have been researched, clinical trial manufactured, and distributed by Chinese companies – specifically developed for local patients.

Another area of interest for international pharma is traditional Chinese medicines (TCMs), with 79% of companies seeking to enter this market in the next few years. The consensus among international pharma and generic companies is that 'if you can’t beat them, join them', as clearly, there remains an overwhelming growth opportunity to be harnessed.

Overall, confidence in short-term growth remains extremely high, with 25% of domestic companies believing China will soon be the world’s top biopharma innovator. Emphasising this shift, 41% believe future biologic sales will be predominantly led by international exports.

Another area of interest for international pharma is traditional Chinese medicines (TCMs)

The majority of foreign companies are forecasting explosive growth in China as the country’s healthcare system evolves over the next five years. Not only do 60% of foreign organisations, who are already present in the market, project that their sales will grow by more than 25%, but 15% are even predicting a growth of 200% or greater in this timeframe.

Similarly, more than 70% of Chinese firms are either ‘confident’ or ‘extremely confident’ in the sustained buoyancy of the Chinese market and 65% of Chinese firms expect growth of around 20% in the next year alone. A further 26% anticipate growth at 20–40%, with 8% expecting to double in size.

'This report mirrors our experiences on-the-ground during CPhI China 2016 where there was a clear confidence in future prospects from both international and domestic companies. What is noticeable is a renewed commitment to investing for longer-term growth, with partnerships and manufacturing deals becoming increasingly ambitious,' said Chris Kilbee, Group Director Pharma, UBM EMEA.

'The API and generic market will remain extremely strong and biologics investment and production will proliferate. Our research suggested that within five years China is going to be challenging on a number of fronts – with international CMOs and perhaps even locally researched and developed NCEs.'

For a copy of the CPhI China Pharma Insights report 2016 click here.

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