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China Pharmaceuticals and Healthcare Report Q2 2012 Published : March 2012

No. of Pages : 112


BMI View: 2012 is a very important year for the country as the government look to carry on their achievements following the healthcare reform in 2009. We highlight that the expansion of the National Essential Drug List (NEDL) slated to happen this year will bring strong opportunities for pharmaceutical companies especially domestic firms while multinationals will benefit from the increase in medical insurance coverage in the National Drug Reimbursement List. China’s 12th five-year healthcare plan, if executed smoothly, will allow the country to maintain its position as the world’s most attractive emerging pharmaceutical market. Headline Expenditure Projections Pharmaceuticals: CNY432bn (US66.7bn) in 2011to CNY520bn (US$81.3bn) in 2012; +20.4% in local currency and +21.6% in US dollar terms. Healthcare: CNY1,876bn (US$290bn) in 2011 to CNY2,073bn (US$324bn) in 2012; +10.5% in local currency terms and +16.6% in US dollar terms. Medical Devices: CNY140bn (US$21.6bn) in 2011 to CNY158bn (US$24.7bn) in 2012; +13.3% in local currency terms and +14.5% in US dollar terms. Risk/Reward Rating: China’s score of 62.5 is a decline from Q112, causing it to slip in ranking from fourth on our proprietary index to fifth, ahead of Taiwan but behind Singapore. The country lags behind Singapore in terms of per-capita pharmaceutical and health expenditure. Key Trends And Developments In February 2012, Pfizer signed a framework agreement with Chinese company Zhejiang Hisun Pharmaceutical to set up a joint venture (JV) to develop, produce and commercialise generic pharmaceutical products in China and other markets. According to the agreement, the JV will be called Hisun Pfizer Pharmaceutical, with Hisun owning 51% and Pfizer owning 49%. The aggregate investment and registered capital will total US$295mn and US$250mn respectively. Both parties could contribute some existing products, cash, manufacturing sites and other assets after the formation of the JV, which is subject to closing conditions, including the approval of the authorities in China. In January 2012, the State Food and Drug Administration approved Novartis' wet (neovascular) age-related macular degeneration (AMD) treatment Lucentis (ranibizumab). Wet AMD causes blindness and severe vision loss in patients over 50 and there are about 300,000 new cases diagnosed a year in China alone. Novartis will also launch its oral type 2 diabetes treatment Galvus (vildagliptin) in China as an additional medication to complement metformin. Type 2 diabetes affects 75mn Chinese people; more than in any other country. The release of both treatments indicates Novartis' commitment to providing innovative healthcare solutions to emerging markets. BMI Economic View: The spike is China's headline consumer price inflation figure in January to 4.5% year-on-year (y-o-y), while a concern, appears to mask the underlying trend of disinflation evident in core inflation and producer price inflation. With money supply growth still historically weak, and housing market weakness gathering pace, we maintain our average CPI forecast of 3.1% for 2012, and still see two 25 basis points interest rate cuts as growth and inflation fall further. BMI Political View: China faces myriad economic, social and environmental challenges over the coming decades that could seriously test the Communist Party’s ability to govern. The best-case scenario for any eventual political transition would entail an elite-led liberalisation of the authoritarian system, while the worst case scenario would involve a violent change of regime.

Chinese Pharmaceutical and Healthcare Market Table of Content Executive Summary . 5 SWOT Analysis . 7 China Pharmaceuticals And Healthcare Industry SWOT .. 7 China Political SWOT ... 8 China Economic SWOT . 9 China Business Environment SWOT .. 9 Pharmaceutical Risk/Reward Ratings .. 10 Rewards ... 11 Risks 11 China – Market Summary .. 12 Regulatory Regime . 14 Intellectual Property Issues . 16 Counterfeit Medicines .. 18 Pricing Regime 19 Price Cuts 20 Reimbursement Regime 22 Industry Trends and Developments . 24 Epidemiology ... 24 Communicable Diseases .. 25 Non-Communicable Diseases .. 25 Healthcare Sector 27 Hospital Sector 28 R&D Activity 29 Selected List Of MNC With R&D Bases In China 30 Clinical Trials Activity . 32 Biotechnology Sector ... 34 Active Pharmaceutical Ingredients .. 36 Vaccine Sector . 37 Industry Forecast Scenario ... 39 Overall Market Forecast.. 39 Other Healthcare Data Forecasts 62 Key Risks To BMI’s Forecast Scenario 62 China Shijiazhuang Pharmaceutical Group (CSPC) ... 72 North China Pharmaceutical Corporation (NCPC) . 74 Hubei Biocause Pharmaceutical .. 76 Shanghai Pharmaceutical 78 Leading Multinational Companies 80 GlaxoSmithKline .. 80 Pfizer ... 82 AstraZeneca . 85 Merck KGaA 88 Sanofi ... 90 Novartis ... 92 Roche ... 95 Eli Lilly (Lilly China) ... 97 Section 1: Population ..104 Section 2: Education and Healthcare .105 BMI Methodology . 108 How We Generate Our Pharmaceutical Industry Forecasts 108 Risk/Reward Ratings Methodology .109 Ratings Overview 109 Weighting 111

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