Asia Set To Become New Center Of Pharma: PricewaterhouseCoopers Report

Asia is poised to become the new center of the global pharmaceutical industry, according to a PricewaterhouseCoopers report, with China and India set to be the largest beneficiaries.

The report, "Gearing Up for a Global Gravity Shift: Growth, Risk and Learning in the Asia Pharmaceutical Market," released May 21, claims that based on surveys of both multinational pharmaceutical companies, as well as Asian pharmas, Asia will not only become the largest pharmaceutical market in the world, but the countries in the region will be "powerhouses of the industry."

PWC found that 55 percent of multinational companies and 62 percent of domestic (Asian) companies in the survey believe that Asia, rather than North America or Europe, will be the "center of gravity" for the pharmaceutical market in the near future.

MNCs are attracted to China and India because of their highly skilled, yet low-cost workforces. In addition, the two nations have emerged as major suppliers of bulk drugs at prices lower than anywhere else in the world, placing them at the top of MNCs' list for locations to expand, followed by Singapore and South Korea. A third of MNCs already in Asia plan to further expand in the next year, according to PWC.

"The race is very much on between countries to lure international pharmaceutical players to set up bases in their respective territories by offering grants, incentives and infrastructure supports," the report states. "The interest of MNCs in setting up more R&D facilities and conducting more clinical trials in certain Asian countries is increasing."

"Competition and the need to harness expertise and reduce costs are also leading the big pharmaceutical companies to explore partnerships and merger and acquisitions opportunities in the region."

PWC found that Asia-based pharmas were also seeking to expand. About three-quarters of these firms said that exporting outside of their local market was a top priority, while 34 percent are seeking to acquire other companies.

In addition, Asian firms are also seeking to enhance their R&D activities. Fifty-five percent of these firms said they seek investment primarily for R&D purposes.

However, the report also highlighted MNCs concerns with expanding in Asia, notably over intellectual property and legal protections. About half of MNCs said they are "extremely concerned" about IP and legal risks, while 60 percent said that the lack of IP protection was a major deterrent for investing in the region.

Despite the concerns, both MNCs and Asian pharmas believe the situation is improving: 74 percent of MNCs and 79 percent of domestic companies said they have seen improvements in IP protections over the last five years.

Singapore's reputation for strong IP protection was cited by PWC as one of the reasons why the island nation has "become recognized as a premier global hub in Asia for the manufacturing of pharmaceuticals." In addition, large phamas, including Novartis, GlaxoSmithKline and Lilly conduct R&D there.

[Yeoh Keat Chuan, director of the Singapore Economic Development Board's Biomedical Science Group, spoke with "The Pink Sheet" DAILY about the country's efforts to attract pharmas and biotechs to the country ("The Pink Sheet" DAILY, Jan. 24, 2007).]

China, however, is gaining interest among big pharmas for its R&D potential. Last year, both Novartis and AstraZeneca announced plans to open Chinese R&D centers, and a number of pharmas either operate or plan to invest in manufacturing facilities there. In January, Merck indicated that it was actively seeking opportunities with Chinese-based research companies ("The Pink Sheet" DAILY, Jan. 30, 2007).

India is also becoming an R&D player, according to PWC. "The Indian pharmaceuticals industry has risen above the generics label and is now undertaking serious drug discovery contract research for big pharmaceutical companies."

For example, Ranbaxy and GSK have partnered since 2003 on identifying drug targets ("The Pink Sheet" DAILY, April 3, 2007). Ranbaxy VP-Global Strategy & Development Shyam Bishen has also said that Indian pharmas are increasingly going to focus on R&D and licensing ("The Pink Sheet" DAILY, Nov. 22, 2006).

- Jonathan M. Block

This article is reprinted from "The Pink Sheet" DAILY – May 23, 2007

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