China's antibiotics makers diversifying
Shanghai. April 6. INTERFAX-CHINA - A growing number of China's antibiotics manufacturers are diversifying to ensure their future competitiveness, according to business insiders.
"Several years ago, some manufacturers of active pharmaceutical ingredients (API) for antibiotics started to increase their efforts in producing finished chemical drugs to guarantee higher profits," Wu Huifang, general manager of Beijing-based pharmaceutical information provider Healthoo.com, told Interfax.
As one of the oldest and largest manufacturers of antibiotics APIs in China, Shijiazhuang Pharmaceutical Group Ltd. has paid more attention to the manufacturing of chemical drugs in recent years. Its subsidiary, Zhongnuo Pharmaceutical Ltd., is now a leading manufacturer of cephalosporins for China's rural market, having taken advantage of the opportunities presented by China's health care reforms.
Another subsidiary of Shijiazhuang Pharmaceutical Group, Ouyi Pharma Ltd., began preparing an Abbreviated New Drug Application to the U.S. Food and Drug Administration (FDA) in 2006 and filed its first application for an immediate-release product in 2009. In February 2010, the firm passed a U.S. FDA Good Manufacturing Practice (GMP) inspection with a perfect score.
Shanghai Stock Exchange-listed Zhejiang Hisun Pharmaceutical Ltd., which mainly produces APIs for antibiotics and anti-tumor drugs, announced earlier this year that it would invest RMB 1.37 billion ($209.16 million) in the production of chemical drugs, including 4 million bottles of carbapenem injections.
According to Wu, a few manufacturers of finished chemical drugs have also started to invest in API projects to strengthen their competitiveness.
Also, Youcare Pharmaceutical Group Co. Ltd., one of China's leading manufacturers of cephalosporin drugs, began construction of a production base with an annual capacity of 2,000 tons of cephalosporin APIs in Taihe County of Anhui Province in January 2010, with a total investment of RMB 1.5 billion ($229.01 million). The company is also set to apply for GMP certifications in developed countries for its chemical drug unit in Beijing.
Further, Livzon Pharmaceutical Group Inc., another large manufacturer of cephalosporin in China, acquired Fuzhou Fuxing Pharmaceutical Co. Ltd., a manufacturer of antibiotics APIs and intermediate drugs in 2008. Since then, APIs have become an important part of Livzon Pharma's business interests. API sales revenue accounted for 30 per cent of its total sales in 2009 and 34 per cent in 2010.
"This diversification up and downstream is caused by sharp competition and risk of government-initiated price cuts in China, though China's domestic market is expanding fast. Meanwhile, some companies are looking to move into the global market," Wu said.
Liu Bing, pharmaceutical analyst from Guoyuan Securities, told Interfax that the expansions can help companies save costs and reduce risks. "To have businesses in both APIs and formulations can help large companies achieve sustainable growth," he said.
Antibiotics are the largest category of drugs by hospital purchases, which were valued at about RMB 77.51 billion ($11.83 billion) in 2009, up 16.62 percent year-on-year, according to figures from SFDA Southern Medicine Economics Research Institute (SMERI). The institute projected China's market for antibiotic drugs to reach RMB 171.75 billion ($26.22 billion) by 2015.
China's growing antibiotic market continues to attract other domestic pharma companies. Sichuan Kelun Pharmaceutical Co. Ltd., China's leading producer of large-volume parenterals (LVP), announced last month that it plans to invest in a RMB 3.99 billion ($609.16 million) factory in the Xinjiang Uyghur Autonomous Region.
According to Wu, while many pharmaceutical companies have diversified to hedge against risks, one of the most important industry-driving engines is technological innovation, which forms the core of a company's competitiveness. "The use of enzyme technology will be a future trend in China," Wu added.
Some antibiotic companies are adopting enzyme technology to produce antibiotic APIs. For example, the new technology is used in the production of 7-ACA by Joincare Pharmaceutical Group Industry Co. Ltd., to produce 7-ADCA by Zhuhai United States Labs Ltd. and to make cefalexin in DSM's manufacturing base in Zibo City of Shandong Province. "The enzyme technology can reduce pollution, which is in line with the Chinese government's environmental policy," Liu noted.