High stakes to ensure China's healthcare needs

High stakes to ensure China's healthcare needs

by Pininvest Analysis

China Healthcare on pininvest.com

  • 17 constituents
  • 44.7% 1y performance
  • 22.4% volatility
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Already the largest drugs market after the US, with an aging population,  more demanding patients and more combative families, China remains a tumultuous market place for pharmaceutical firms

Domestic companies are confronted with a radical transformation of their business model

  • with the loss of their traditional distribution network of hospitals, ordained by the regulators to guarantee affordable healthcare and combat corruption (until recently,prescribing  the drugs the patient would have to buy had also been a major source of financing for the hospitals themselves)
  • and the progressive shift away from the branded generics, often provided by western pharmaceutical labs and which used to be the staple of Chinese drug business

Outlined in the 2016 ‘Healthy China 2030’ and in the 2017 ‘5-year plan’, covering all the aspects of health and medical services, food and drug safety, and environmental management, the transformative trend is unmistakable

As more new Chinese medicines get approved (innovative new molecules require 8 to 10 years on average from initial research stage) and modern health care coverage and services extend across the country, both the domestic and the foreign pharmaceutical providers will be meeting new challenges

The funds allocated to Chinese research are increasing exponentially ($5bn in 2016 - $11bn in 2017) and so are, in all likelihood, the expectations – while simultaneously, foreign Pharma Majors have been cutting back on research in China in 2017 with Novartis shuttering its Shanghai biologics team (as well as a larger team in Switzerland), followed by Eli Lilly and Glaxo

Chinese contribution to pharmaceutical research has been small (2.5% of new molecules discovered between 2007 and 2015 – compared to 56.3% for the US, according to an industry report quoted by Bloomberg). But the fairly recent build-up of Chinese research and the time lag from discovery to implementation should not allow any premature conclusion

However, the ambition and the complexity of the task ahead will undoubtedly encourage focused research efforts, prioritize specialization targets, with uncertain consequences for foreign competitors

More on diabetes in China and about Novo-Nordisk in China