China Heads for Regulated Markets

China’s pharmaceutical manufacturing trade show API China and Interphex China, the 5th Chinese edition of Interhex USA, was held at Suzhou, China from November 5 - 7, 2008. Show organizer Reed Sinopharm Exhibitions says some 30, 000 local and international trade visitors attended the shows hosting over 1,200 exhibitors.

The autumn edition of API China featured an export-focus area, where international buyers sourced and purchased Chinese-made products. The technology showcase zone allowed visitors to view live technology and product presentations by exhibiting companies.

According to the Market Analysis on Chemical Pharmaceutical Industry report by the China Pharmaceutical Industry Association and Reed Sinopharma Exhibitions released last month, the export delivery value of pharmaceutical products from January to August 2008 reached RMB29 billion ($4.25 billion), up by 30.2% over the same period last year.

Data from China’s General Administration of Customs show higher export values of pharmaceutical products in the first half of 2008 by 3.4%. In the same period, the average profit of pharmaceutical product companies increased by more than 80%. Against this backdrop, Pharma Asia spoke to key exhibitors and a Russian delegate on their plans for the future.

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Better product quality through training and education

Brief: The German-based company provides excipients for granulation and capsule filling, and specialized products such as direct compression and inhalers. It also provides expertise in excipient processing and modification for contract manufacturing. It opened its China office six years ago.

Pfeifer: The Chinese government’s policies encourage companies to export to the regulated markets, and to produce quality products for the local market.

While our customers in the traditional Chinese medicine (TCM) sector are using more quality ingredients in their product formulations, they can ensure better product quality through improved training, education and expertise in processing their products.

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Hire talent to expand business

Brief: Established in 1943, the Chinese company manufactures antipyretics, analgesics, anti-infectives, drugs for the central nervous system, steroids and cardiovascular system, as well as pharmaceutical preparations and intermediates for the local and overseas market.

Zhang: We have been a listed company since 1997 in Shenzhen, China and 1996 in Hong Kong. We export $140 million worth of products every year to Europe, North America and Japan. Nine of our products are certified with Europe’s Certification of Suitability (COS), and five are FDA approved.

We aim to internationalize our company with APIs. Besides sales and trade, we are working with a US-based, over the- counter (OTC) pharmaceutical company Perrigo in a joint-venture to produce pharmaceutical products and expand our business overseas.

We have learnt much about management policies in our overseas trips such as to GSK headquarters in 2001. Our people are important to our business – about 50 graduates from the local universities in China join our company every year. We believe talent and education is vital to our business and our effort to enter the export markets.

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Serving European production facilities in China

Brief: The specialty chemicals company headquartered in Munich, Germany, has two divisions: adsorbents and catalysts. Almost 80% of its sales are derived from outside Germany and in the fast-growing regions of Southeast Asia and the Middle East. The China office was set up four years ago to offer products that are manufactured in its facility in China.

Tong: Our main customers have moved their operations from European countries such as France to China due to the latter’s favorable production environment, as well as the area’s growing regional markets.

We also serve Chinese customers who typically require high-end packaging with off-set printing. As a result of the Chinese government’s policies that encourage local companies to export to regulated markets, we also undertake this effort. We address counterfeiting issues by having nondisclosure agreements with our customers and encouraging them to apply for product patents.

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Eyeing on regulated markets to double growth

Brief: Listed on the Hong Kong Stock Exchange, the Hong Kong-based company has a four production facilities and 70 sales and distribution offices in China. The company’s main product lines are cephalosporin, antibiotics and generic drugs. In China, it has a 30% market share in the cefoperazone market and 10% market share in the active pharmaceutical ingredients (APIs) and intermediates market.

Yi: There are stricter patent laws in China ever since its admission into the World Trade Organization (WTO). Currently, about 90% of our machines and equipment are made in China for the production of products for the local market. However, we are making preparations to export our products to the regulated markets in three years time by having 50% of our machinery imported from Europe and the regulated markets. This would double our projected 2008 revenue forecast of RMB 920 million ($135 million) by 2011.

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Achieve certification for the regulated markets

Brief: Founded in 1993, the company provides packaging services such as folding boxes and leaflets to pharmaceutical manufacturers. It has achieved industry certification such as ISO 9001 (quality management system certification), ISO 14001 (environment management system certifi cation) and OHSAS 18001 (occupational health and safety management certification). Customers include Bayer, Novartis and Japanese company Astellas.

Zhang: Besides achieving the various certifi cations to cater to our customers in the regulated markets, we also source our machinery from German company Heidelberg. The machines are able to work with the specific packaging paper thickness and have the color consistency that our customers require.

About 90% of our revenue comes from the pharmaceutical packaging business in China. The rest is derived from export markets such as Australia, Europe, Japan, Korea and Pakistan.

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Riding on the outsourcing trend

Brief: With 9,000 employees in China, the company produces over 30 kinds of penicillin and cephalosporins and exports to over 20 countries.

Yu: In 2007, our total revenue was RMB4 billion ($0.59 billion) with $100 million deriving from our exports. Less than 20% of our products are exported. Through outsourcing, we may be able to compete with some companies in Europe by exporting lower cost products.

Companies from the US and Europe are also setting their offices and production facilities in China. This will create more jobs in the country and transfer expertise and technology know-how to the workforce, thereby raising the quality of production in China.

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100% GMP compliant by 2020

Brief: The Russian association has 500 members who are distributors, scientists, researchers and media professionals. Members attend regular meetings to share experiences and issues on pharmaceutical marketing.

Pertrukhina: We are here to understand more about the Chinese market as many manufacturers in Russia buy pharmaceutical ingredients from the country. Currently, Russia is working on being compliant with the good manufacturing practice (GMP) regulations. We aim to have 80% of our industry compliant by 2012, and 100% compliant by 2020. About 80% of Russian products are for the domestic market while others are exported mainly to countries of the former Soviet Union.

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