Pharma MNCs eye opportunities in China's smaller cities
Shanghai. February 16. INTERFAX-CHINA - Following success in China's major metropolitan markets, multinational pharmaceutical firms are increasingly sending sales agents into second- and third-tier cities, according to a recent industry report.
"In recent years multinational companies (MNC) have started deploying sales reps to hospitals in small- and medium-sized cites, particularly in developed areas," said the foreign investment report, issued by China Chamber of Commerce for Import Export of Medicines Health Products in December 2010.
Multinational pharma firms are also prospecting for mergers and acquisitions (MA) targets in the provinces.
MNCs have carved out a large share of China's high-end tier-one markets where sales of innovative drugs have seen strong growth. A report from the Southern Medicine Economic Research Institute (SMERI), an affiliate of the State Food and Drug Administration (SFDA), has shown that 16 of the 20 best-selling ophthalmic drugs in China's hospitals in 2008 were manufactured by foreign companies.
According to the report, mergers and acquisitions (MA) are a key point of entry into lower-tier markets for MNCs. Sanofi-Aventis Corp. recently acquired BMP Sunstone Corp., a manufacturer and distributor of over-the-counter (OTC) drugs, while GaxoSmithKline (GSK) took over Nanjing MeiRui Pharma Co. Ltd. Industry observers said the deals will help the firms gain access to distribution networks to penetrate deeper into the China market.
Pharma MNCs are keen to extend their reach, said Alex Zuo, communications manager for the RD-based Pharmaceutical Association Committee (RDPAC), part of the China Association of Enterprises with Foreign Investment. "In coming years, MNCs' investment in China will increasingly focus on research and development (RD) and employee training," Zuo told Interfax on Jan. 28..
RDPAC, a China-based industry association for large research-oriented MNCs, says that its 37 members injected more than RMB 20 billion ($3.03 billion) into China operations from 2006 to 2010, one third of which went towards RD.
Global health consultancy IMS Health estimates that pharma MNCs will recruit a total of 20,000 sales representatives in China from 2010 to 2012, and each company will have 3,500 to 5,000 sales reps in the country within the next two or three years.
"Sales representatives of RDPAC members are required to pass the Medical Representative Certification examinations which are set by the association. By end-2010, 34,000 sales reps had passed the examinations, and together they accounted for approximately 80 percent of MNCs' total China sales," Zuo said.
Strong demand continues to fuel rapid growth for pharma MNCs in China. According to domestic media, U.S. giant Pfizer has estimated that its China revenue grew at least 25 percent year-on-year in 2010. It will have a total of 3,200 sales reps in 250 Chinese cities in 2011, compared with 2,300 sales reps in 180 cities in 2010.
Meanwhile, France's Ethypharm S.A., which specializes in drug delivery systems (DDS), has forecast annual growth of 30 percent for 2010, with profits up 160 percent.
"China's uncertain regulatory environment and in particular unexpected price cuts remain some of the biggest headaches for foreign companies," Zuo said.
- KZ
