Chinese API makers look to move up the value chain

Print 05 October 2016
Eric Palmer / Fierce Pharma

China’s pharma industry is best known for being the low-cost generic API producer to the world. But companies there, large and small, are looking for ways to move up the value chain, including doing deals targeted at the U.S. market.

According to a report by Bloomberg, Chinese companies this year announced more than $5.2 billion of overseas healthcare acquisitions. One of the big ones was Shanghai Fosun Pharmaceutical Group’s $1.3 billion deal to buy India-based sterile drugmaker Gland Pharma, in which it picked up factories that supply to the U.S. Another was a $550 million deal by the PuraCap unit of Humanwell Healthcare Group, a Chinese maker of anesthetics and contraceptives, to buy U.S. generic drug maker Epic Pharma.

The news service points out that Chinese companies are often outbid by larger, better financed Western drugmakers, but they still have ambitions to compete. It points to Chongqing-based Porton Fine Chemicals, which has about 1,600 people and had about $162 million in revenue last year. It primarily produces APIs for HIV and hepatitis drugs worldwide, with its two largest clients being Johnson & Johnson and Gilead Sciences.

Ju Nianfeng, chairman and co-founder of Porton, hopes to buy some established manufacturers of pharmaceutical ingredients in Europe and the U.S. that can help it move into higher margin ingredients for new meds, not just generics. "Clients prefer to source from Western companies which already have better track records," Ju told Bloomberg. "It will take us time to build such trust and track records."

Chinese drugmakers also have to overcome a perception that their products often lack the quality of Western producers. With oversight by Chinese regulators falling short, the U.S. has stepped up its own checks on production quality there and has found plenty of problems.

Just last week the FDA issued a warning letter for Chinese biologics drugmaker Hebei Yuxing Bio-Engineering, after putting the company on its import alert list on July 8. It was one in a string of warning letters recently for Chinese drugmakers including Zhejiang Hisoar Pharmaceutical, in Taizhou City, one of China’s largest drugmakers.

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