Chinas Changing Role in the Global Pharmaceutical Supply Chain

REUTERS/Michaela Rehle

CHINA’S CHANGING ROLE IN THE GLOBAL PHARMACEUTICAL SUPPLY CHAINBob KennedyManager of Industry ResearchThomson Reuters

3 May 2012

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THOMSON REUTERS GENERICS & API INTELLIGENCE • 20 years of experience in global generics

• Unique research that tracks global generic API development and manufacturing activities

• Intelligence appears in Newport Premium™ database used by professionals in:– Strategy, Planning and Product Targeting– Business Development & Licensing– Competitive & Business Intelligence– API Sourcing Specialists– Patents & Intellectual Property

• Supports Life Sciences consulting projects

• Serves 300 customers operating in 43 countries

• Team based in Portland, Maine, USA

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AGENDA• Global API manufacturing landscape

• Trends, drivers and challenges of the Chinese API manufacturing industry

• Comparison of China to other API sourcing markets

• Forward integration into finished dosage forms

• Future prospects for the Chinese pharmaceutical industry

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GLOBAL API MANUFACTURING LANDSCAPE

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API MANUFACTURING LANDSCAPE171

264

314

1528

Established

Less Established

Potential Future

Local

Experience insupplying regulated

markets

Established: companies with years of experience supplying highly regulated marketsLess Established: companies with less of a track record in supplying regulated markets in terms of the length of their history or number of products suppliedPotential Future: companies with little or no known experience but have aspirations to become involved in regulated marketsLocal: companies with no record, capability or interest in supplying to regulated markets

Source: Thomson Reuters Newport Premium™

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REGIONAL HUBS – API MANUFACTURINGOver 1/4 of the 400+ experienced manufacturers are in India and China 142

1002617

15

36

52

66 USA

Rest of World

Japan

Germany

Spain

Italy

China

India


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TRENDS, DRIVERS AND CHALLENGES OF THE CHINESE API MANUFACTURING SECTOR

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CHINESE API MANUFACTURER RATINGS


0

20

40

60

80

100

120

140

160

180

Established Less Established Potential Future

2005

2011

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PROGRESSION OF CHINESE API MANUFACTURER RATINGS: 2005 vs. 2011


3

14

901

4

40

5

14

31

2

5

3

2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Est (2011) LE (2011) PF (2011)

Est (2005)

LE (2005)

PF (2005)

Local (2005)

NR (2005)

Est: Established LE: Less Established PF: Potential Future NR: Groups not rated by Newport in 2005

n=13 n=37 n=164

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REGULATORY FILINGS BY CHINESE COMPANIES


0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

US DMF (Type II) Filings COS Filings

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US DMF FILINGS vs. US FDA INSPECTIONS IN CHINA


0

10

20

30

40

50

60

70

80

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

No. Groups with US DMF (Type II) Filings No. Groups with FDA Inspections

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SOURCING DRIVERS IN CHINA • Talented pool of scientists and engineers

• Lower cost base and economies of scale

• Scale of infrastructure

• Improving IP and anti-counterfeiting environment

• Newly revised GMP regulations

• Leadership (cost and/or technical) in certain product classes– Intermediates– Base chemicals– Fermentation-based APIs– Steroids

• Government support for API exports to regulated markets

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REGULATED MARKET ACTIVITY DEALS: API & INTERMEDIATES

Company Partner Activity

Chongqing Huapont Janssen various

Hubei Shine Star Flamma amino acids & derivativesJiangsu Hansoh Hospira gemcitabine hydrochloride

Ningbo Smart Novartis diclofenac sodium

Shenzhen Hepalink APP heparin

Zhejiang Hisoar Boehringer various, intermediates

Zhejiang Hisun Eli Lilly capreomycin, vet drugs

Zhejiang Hisun Alpharma vancomycin

Zhejiang Huahai Merck, Novartis various, intermediates

Zhejiang Medicines Hospira vancomycin


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SOURCING CHALLENGES IN CHINA• Risk of technology theft

• Environmental costs and increasing prices

• Compliance issues– Ongoing training needed to ensure adherence to SOPs & GMPs– High turnover rate for qualified and experienced QA/QC staff– Lack of an effective QA program among big groups

• Language barriers

• Limited long-term strategic planning– Focus on quick targets rather than sustainable profits

• Limited experience with supporting patent challenges

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CHINA VERSUS OTHER API SOURCING MARKETS

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API MANUFACTURER RATINGS

0

10

20

30

40

50

60

70

Italy India China

20052011

Data represents combined total of Established + Less Established companies


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US DRUG MASTER FILINGS

0

50

100

150

200

250

300

350

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ChinaIndiaItaly


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CERTIFICATES OF SUITABILITY FILINGS

0

20

40

60

80

100

120

140

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

China IndiaItaly


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US FDA INSPECTIONS

0

10

20

30

40

50

60

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ChinaIndiaItaly


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COST COMPARISON

Cost Type China India Europe U.S.

Labor $ $ $$$ $$$

Environmental $$$ $ $ $

Energy $$ $$ $ $

IP Protection $$ $$ $$ $$

cGMP

Monitoring$$$ $$ $ $

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FORWARD INTEGRATION INTO FINISHED DOSE

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50 CHINESE GROUPS HAVE LAUNCHES IN 11 LESS REGULATED MARKETS

Region No. of Groups No. of Products*

Bangladesh 1 64Egypt 5 6

French West Africa 3 7Hong Kong 7 247

Pakistan 10 30Philippines 10 33

Russia 10 28Saudi Arabia 1 1

Taiwan 4 137Thailand 8 57Ukraine 4 7


*Count represents the number of unique molecules and/or combination of molecules

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BREAKDOWN OF CHINESE LAUNCHES IN LESS REGULATED MARKETS BY ROA

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Bangladesh Egypt French West Africa

Hong Kong Pakistan Phillipines Russia Saudi Arabia

Taiwan Thailand Ukraine

Ophthalmic Oral Parenteral Topical Other


”n” represents the number of unique combinations of marketer, active ingredient, dose form and strength

n=94 n=9 n=13 n=474 n=43 n=46 n=47 n=1 n=233 n=94 n=14

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REGULATED MARKET ACTIVITY DEALS: FDF & DEVELOPMENT AGREEMENTS

Company Partner Region Activity

CSPC Alapis EU Co-development and registration of FDF in Greece and SE Europe

Fosun Omni Amerigen US Fosun to develop FDF for Amerigen

Shandong Xinhua Perrigo EU Ibuprofen tablets for UK market

Yabao Pharma Frontage Labs EU/US Collaboration agreement to develop sustained-release drugs

Zhejiang Hisun Cinfa EU Joint development of tacrolimus capsules

Zhejiang Hisun PharmTak US Collaboration agreement for development of new drugs

Zhejiang Hisun Farmaprojects EU JV to produce and market solid FDF

Zhejiang Hisun Tiefenbacher EU Fluvastatin sodium capsules

Zhejiang Huahai Merck EU/US Contract manufacture of unnamed finisheddose product

Zhejiang Huahai Ranbaxy US Benazepril hydrochloride tablets


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7 CHINESE GROUPS HOLD A COMBINED 20 ANDAS WITH FINAL FDA APPROVAL

Group Applicant Product Activity

China Resources HoldingsBeijing Double Crane fluoxetine hcl, meloxicam ANDAs acquired from Ranbaxy

Secan amlodipine besylate ANDA developed in-house

Dalian Merro Merro Pharmaceuticals Ibuprofen OTC ANDA acquired from Par

HEC Pharm HEC Pharm zidovudine ANDA developed in-house

Jiangsu Hengrui Medicine Jiangsu Hengrui Medicine irinotecan hcl ANDA developed in-house

Novast Laboratories Novast LaboratoriesLevonest, Dasetta 1/35, Dasetta 7/7/7, Philith

Oral contraceptive - branded generics; ANDAs developed in-

house

Yabao Pharma Beijing Yabaogalantamine hbr,

meloxicamANDA acquired from Par; now

discontinued

Zhejiang Huahai

Huahai US donepezil hcl ANDA developed in-house

Prinston

benazepril hcl ANDA acquired from KV

captopril ANDA acquired from Kali

lisinopril, lisinopril+hctz ANDAs acquired from Actavis

losartan potassium, risperidone

ANDAs developed in-house

ropinirole hcl ANDA acquired from Par


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US ANDAS – INDIAN COMPANIES

Year of approvalSource: Thomson Reuters Newport Premium™

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FUTURE PROSPECTS FOR THE CHINESE PHARMA INDUSTRY

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SMALL MOLECULES LOSING PATENT PROTECTION IN THE US

$0

$5

$10

$15

$20

$25

$30

$35

0

5

10

15

20

25

30

35

40

45

50

2011 2012 2013 2014 2015 2016 2017 2018

Combined Brand sales ($bn) Number of products

Num

ber o

f Pro

duct

sbillions (U

S $)


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SPECIALIZED MANUFACTURING• High Potency

– Requires specialized equipment for containment, operator training and safety practices

– Lucrative targets for API manufacturers

• Continuous Flow Processes

– More Asian companies investing in micro-reactor technology– Reduction of waste streams

• Micronization

– Improves formulation and dissolution properties– Better bioavailability, less API needed

• Quality by Design

– Increasing importance to regulatory bodies– Lower production costs

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FOLLOW-ON BIOLOGIC DEVELOPMENT IN CHINA

Company Proteins Antibodies Vaccines Launches

Anhui Anke FP HGH, IFN

Amoytop FP GCSF, IFN, HGH

Beijing Tiantan FP Hep B

China Bioway Biotech FP EPO, GCSF

China National Biotec FP Various

Dalian Hissen FP Hep B, Rabies

Fosun UD

Jiangsu Hengrui UD

Shanghai Biomabs UD

Shanghai Celgen FP Etanercept

Shanghai Citic Pacific Guojian FP UD Etanercept

Shenyang Sunshine FP EPO, IFN, IL2

Sinovac Biotech FP Various

Zhejiang Hisun UD

Key: FP = Full Production; UD = Under DevelopmentSource: Thomson Reuters Newport Premium™

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CONCLUSIONS• Continued emphasis on large batch production

• Additional companies will expand into finished dose for regulated markets

• Impact of new GMP regulations

• Greater EHS, waste water treatment enforcement

• Increased costs of labor and raw materials

• Improvements in quality, technical packages, IP

• Many companies will stay focused on local market

• Increased partnerships with Western companies seeking access to the growing Chinese market

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THANK YOU

Bob Kennedy

Manager of Industry ResearchThomson Reuters

+1 207 871 9700 [email protected]

mailto:[email protected]

mailto:[email protected]

Documents

Chinas Changing Role in the Global Pharmaceutical Supply Chain