A new report from PricewaterhouseCoopers (PwC) reveals that the Asia pharmaceutical industry is gearing up to be at the center of the global market and most pharmaceutical companies in the region expect this shift to happen fast. Fifty eight per cent of companies believe that the center of gravity of the global pharmaceutical market will be in Asia rather than North America and Europe in the near future.
The report, Gearing up for a Global Gravity Shift, is based on in-depth interviews with 185 senior pharmaceutical executives across nine different territories in the region; China, India, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
The rise of Asia pharmaceutical industry
Growth is top of the agenda for many companies with domestic companies seeking to go global and MNCs extending their presence in the region. Sixty five per cent of domestic companies report that increased global market share is important for their companies. A third of MNCs have immediate 12-month plans to further expand within the region through acquisitions or developing their own ?greenfield? sites.
?Not surprisingly, China and India head the list of target countries for expansion, with Singapore and South Korea next in the sights of MNCs,? said Mr Matthew Wyborn, Asia Pacific Advisory Leader of PricewaterhouseCoopers.
Mr Abhijit Ghosh, Pharmaceutical and Healthcare Leader at PricewaterhouseCoopers Singapore, added, ?Singapore is poised to become one of the leading countries in the Asian pharmaceutical space. Its growth as a base for pharmaceutical activities is boosted by the country?s Intellectual Property Right (IPR) protection record and pro-active government policy which aims to develop the biomedical science cluster as one of the key pillars of the economy.?
Mr Matthew Wyborn continued, ?MNCs are increasingly interested in setting up more research and development (R&D) facilities and conducting more clinical trials in certain Asia territories. At the same time, region-based pharmaceutical companies are seeking to expand their geographical footprint and become pan-regional or global players.?
Over a third (34 percent) of domestic companies is looking to acquire pharmaceutical companies. More than half (52 percent) of these companies are seeking to acquire international market share. At present, fewer than half (45 percent) of the domestic companies surveyed had an international presence but international growth is high on their agenda.
A thirst for funding
Capital constraints can be a significant brake on growth for domestic pharmaceutical companies. Around half of all the domestic pharmaceutical companies surveyed in the region might be looking for deals if funding obstacles could be overcome. There are few specialized venture capital funds to support start-up biopharmaceutical companies in Asia. These companies do not have access to a supportive stock market environment, such as in a junior market like London?s Alternative Investment Market (AIM). While domestic pharmaceutical companies in the region are hungry for investment, particularly for R&D, just over a third (36 percent) of them would consider selling all or part of their company to foreign investors to raise funds. Many are also looking towards IPOs as a fundraising route; with 36 percent having plans to raise capital from foreign capital markets.
Both MNCs and domestic companies report progress towards risk reduction in the region. Three quarters (74 percent) of MNCs and 79 percent of domestic companies say they have seen improvement in IPR protection in the past five years, primarily as a result of the introduction of new IP laws underpinned by a stronger government emphasis on IPR protection and more rigorous applications of existing laws.
A changing pharmaceutical business model
Competition from generics and pricing pressures in the healthcare market continue to create pressures for reduction in costs in all parts of the pharmaceutical value chain. Outsourcing to lower cost but highly effective companies in Asia has become a common response to these pressures. A majority of companies thought that most of the industry still does not see outsourcing in a sufficiently dynamic way and is missing opportunities for shared development, learning and improvement. So far, much of the focus has been on outsourcing drug manufacturing but increasingly, companies are turning their attention to R&D and clinical trials.
Mr Abhijit Ghosh said, ?As the industry moves to this future model, strategic partnerships or long-term partnerships are the preferred route, favored by 82 percent of the multinational pharmaceutical companies we surveyed who outsource.?
Looking ahead, the pharmaceutical landscape for both MNCs and domestic companies alike in Asia will look radically different in the medium term, the report said. Companies that are outsourcing in the right way, at the right pace look set to get ahead of the game.