The Path for the Chinese API Industry to be Synonymous with International Standards: It’s Necessary to Choose the Right Varieties

China is a big country in the pharmaceutical industry and has an important place on the global pharmaceutical industry chain, however, China’s pharmaceutical industry has been playing the role of API supplier on the global pharmaceutical industry chain in recent 15 years.

APIs account for 80% of China’s pharmaceutical export at present, with the situation of huge capacity, fierce price competition, and generally low profits, while downstream preparations only account for 10% of the export.

Positive changes have been happening to the situation in recent 5 years, especially in recent two years, as more and more Chinese pharmaceutical enterprises join the internationalization, strengthen registration and certification on international regulated markets and construction of market channel, and sell preparation products in a large scale overseas.

The number of the U.S. ANDA received by Chinese enterprises has largely increased from single digits to 75 over the 5 years, and export of products of Chinese pharmaceutical enterprises to the European and American regulated markets has achieved rapid growth.

Xu Ming, Vice President of CCCMHPIE, said, "From the perspective of trend, the transformation of APIs to preparations is a new direction of internationalization, but preparation export cannot replace API export at present in China due to the large scale, large volume, and difficult transformation of APIs. API enterprises should look for own road of characteristic development."

From APIs to high-end preparations

In 2016, the amount of China’s export of Western medicine reached USD 31.483 billion, accounting for 56.8% of China’s pharmaceutical product export; China’s overseas pharmaceutical M&A reached 25, with the M&A amount exceeding USD 5.5 billion; the number of the U.S. ANDA received reached 75.

From the perspective of trend, Chinese pharmaceutical enterprises are walking on the road that India has walked to start the industrial upgrading: the path of APIs→ characteristic APIs→ generic drugs→ innovative drugs becomes increasingly clear, the international core competence of China’s Western medicine significantly improves, and the pharmaceutical industry internationalization starts the new journey.

From the perspective of export region, Africa and Asia were the biggest markets for China’s preparation export in 2012, accounting for 64.63% in total of its export, while in 2016, this figure declined to 54.3%, and the proportion of the U.S. and EU rose from 15.87% to 28.9%, showing product level improvement of China’s preparation export, and changing of enterprise ideas to focus more on regulated pharmaceutical markets to obtain higher profits.

Despite the quick progress in internationalization, Chinese enterprises are confronted with huge challenges in the face of the current industry situation. On the one hand, the traditional API enterprises upgrade products, increase R&D investment, and form closer strategic cooperation with multinational pharmaceutical enterprises; on the other hand, the "patent cliff" and R&D cost growth in recent years have accelerated the outsourcing of global large pharmaceutical enterprises.

A consensus has been formed by insiders: APIs are the foundation of preparation development, and preparation production capacity cannot do without strong API production capacity.

For example, Qilu Pharmaceutical has been unswervingly pushing the internationalization strategy, and during the continuous deep involvement in the division of labor in international pharmaceutical industry, its position constantly rises, leaping to the top of the value chain of international pharmaceutical industry, with product export expanded from APIs to preparations.

Especially in recent years, the company’s high-end preparations have been achieved breakthroughs in export to high-end markets including the U.S., UK, Germany, and Japan, etc.

Looking for advantageous varieties

The market shares of many products of Qilu Pharmaceutical have now exceeded 50% on the U.S., Japan, Australia, and New Zealand markets, etc. Take the U.S. market for instance, Qilu Pharmaceutical has successively achieved export of 7 products to the U.S. starting with the export of the 4.40 million Ondansetron Hydrochloride Injections in March 2016, to cover oncology and anti-infection fields.

Wherein, 5 products are added this year, with the quantity and amount showing blowout growth. In terms of amount of export, it has approached USD 9 million so far, and this figure will exceed USD 10 million in the whole year, with the year-on-year growth exceeding 500%.

It is very crucial to look for appropriate products as seen from the experience of the successful companies. Xu Yifu, Deputy General Manager of Hengrui Medicine, said, "In the first half year, our company will continue to increase efforts in implementing the internationalization strategy to explore the international market; our products like Cisatracurium Besylate Injection and Caspofungin Acetate for Injection have been approved to be marketed overseas, and Cyclophosphamide for Injection and other products have achieved stable sales growth; projects are being conducted registration and application as planned on the European, American, and Japanese regulated markets."

Yuanda Shuyang has formed the product system of 8 varieties of 23 specifications for blood products, taken the lead in realizing export while serving the Chinese market, and has now completed the export registration in 9 countries and achieved export and sales to 7 countries.

Jiang Dexi, the General Manager of Yuanda Shuyang, said, "The key to exploring the international market is finding the strategic convergence and market high ground. There are industry blanks of blood products in many countries, except the European and American developed countries.

Chinese enterprises have the conditions and capacity to achieve product export, talent export and technology export, to not only open the blue ocean market, but also improve medical health guarantee efforts, and improve and consolidate China’s partnership with those countries."

Liang Qing, President of A.H.A International, felt the same way, and emphasized, "What’s important is the driving by featured products: develop featured products to strengthen competitiveness of core products, and extending of the service platform: the overseas companies provide localization services for the target markets; in terms of preparation internalization, establish pharmaceutical companies in the Europe to conduct OTC and high-end generic drug registration and application, expand business space, and continue to increase R&D investment."

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