Is China The New Frontier For Indian Generics?

China, the world’s second-largest pharma market, is expected to be the next growth driver for Indian drugmakers amid a slowdown in the U.S.Sun Pharmaceutical Industries Ltd. is looking for a partner in China to scale up its business over the next six to nine months, Dilip Shanghvi, controlling shareholder and managing director, told Bloomberg in an interview. That, according to him, will create a significant revenue stream which he said analysts have not valued in for his company.And India’s largest drugmaker is not alone. Peers, including Dr. Reddy’s Laboratories Ltd., Aurobindo Pharma Ltd., Natco Pharma Ltd. and Alembic Pharmaceuticals Ltd. that already have a presence in the Chinese market have increased their focus.The optimism follows China’s new rules allowing companies to seek nod to launch the drugs approved by the U.S. Food and Drugs Administration. Moreover, 11 provinces in China have set up group purchasing organisations to buy generics in bulk at lower prices for state-run healthcare system. The nation’s pharma market, according to IQVIA, is expected to grow at an annualised rate of 5.5 percent in five years through 2022 to 1,081.2 billion renminbi or $156 billion (at current exchange rate).Competition to provide cheaper generics has hurt margins of Indian drugmakers in the U.S., one of their largest markets. That forced them to focus on the domestic market and hunt for other growth opportunities. And China offers a perfect opportunity because Indian drugmakers are among the biggest winners of approvals in the U.S. Their share in abbreviated new drug applications, according to a February report by IQVIA, stood at 38 percent in 2017.China is undergoing market-friendly reforms which will expedite generic approval timelines, Edelweiss analyst Deepak Malik said in a report. “Earlier, approval timelines in China were delayed. It would typically take almost seven to eight years for registration of new molecules with the Chinese FDA,” Malik said, adding that China’s leadership recognised the widening gap and appointed a new chief of China Food and Drug Administration to oversee the issues.Amey Chalke, securities analyst at HDFC, sees Chinese hospital market as a big opportunity for Indian generics. “Before the reforms, only multinationals had the advantage but now the doors are open to Indian players also,” he told BloombergQuint.A large chunk of Dr. Reddy’s U.S. portfolio meets the new Chinese regulations and allows the company to sell drugs to China, Chief Operating Officer Erez Israeli told BloombergQuint, adding that the company is investing to build capacity. “China will be an important market for the company along with the U.S. and India.”Dr. Reddy’s received the approval for Clopidogrel—a drug used for reducing the risk of heart disease and stroke—in China. That, according to Edelweiss, is the company’s biggest product in China with its market size pegged at $1.6 billion.The company, in its post-earnings conference call, said it has identified 70 products from the U.S.-approved portfolio for the Chinese market. The upside, according to Credit Suisse Analyst Anubhav Aggarwal, will be visible from financial year 2021-22 considering the product approval timeline of 1.5-2 years.Agreed CLSA’s Alok Dalal. Dr. Reddy’s, he said, has renewed its focus on India, China, and emerging markets and is well-positioned to improve performance in these markets in FY21.Lupin, in its post-earnings press conference, said that the Chinese market cannot be ignored. The company said it is planning to introduce either generics or specialty drugs.Alembic Pharma, in a conference call about fourth-quarter earnings, said it’s working on the product pipeline to be registered for the China market where it would make drugs and its partner would distribute them.Natco Pharma, according to Edelweiss, aims to market its products in developed agricultural markets such as the U.S., Europe and China.Aurobindo Pharma’s portfolio is likely to give it a significant advantage, Jatin Kotian, pharma analyst at CIMB, wrote in a report. The company already has a plant under construction in China, with a separate joint venture for pursuing opportunities in inhalers, he said.China has become a high-priority market for several international pharma companies given the opportunity landscape after the regulatory changes, Vivek Kumar, analyst at BOB Capital Markets Ltd., wrote in a note. The success rate of strategic investment from new players should remain high in the foreseeable future, he said..China's War on Healthcare Costs Lures India's Biggest Drugmaker

Is China The New Frontier For Indian Generics?

China’s new rules allow pharma companies to file for drugs approved by the U.S. FDA.

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