China API sourcing: the way forward

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China API sourcing: the way forward

Home/Pharma News | Posted 21/01/2010 0 Post your comment

According to an analysis by Robert Kennedy, Manager of Industry Research for Thomson Reuters API Intelligence, as published in Scrip News of 9 December 2009, a striking number of Chinese companies are gearing up to supply pharmaceutical ingredients to the regulated markets of the west.

The author discusses the breakdown of companies across several countries according to their manufacturing capabilities. Although China has fewer established companies than other markets, it has roughly the same number of less established companies as India. What is striking, is the large number of potential future companies located in China. The pool of companies that are interested in entering regulated markets is almost double that of India.

According to him, there is no doubt that over the coming years, with help from overseas partners, additional Chinese companies will advance from the potential future category to the less established and then the established categories.

Most companies in China are locally-focused and reluctant to spend money to improve their processes, invest in equipment or facility upgrades and adhere to international GMP regulations when they can make a profit within the large domestic market.

The author predicts that many Chinese companies will find that the local market continues to be more profitable, especially in light of pricing pressures in the US and European generic sectors.

However, those Chinese manufacturers that want to ascend the supply chain must gain the trust of major global players; this will require a high level of business sophistication, excellent communication skills and a well-developed, well-managed organisation.

According to him, costs remain a significant consideration when doing business in China. If China's cost differential decreases or disappears altogether, it will likely make sense for companies in regulated markets to manufacture some products closer to home.

Can China retain its API sourcing appeal?

Robert Kennedy concludes that China's response to rising salaries and energy costs and its adherence to environmental regulations, international GMP requirements and IP rights are factors that will determine how long its API sourcing market retains its appeal. (see also Can China retain its API sourcing appeal?, China's appeal of the Chinese API sourcing market, Sourcing APIs from China, Establishing an API manufacturing base in China and China is not the low-cost option in every category)

Reference:

Robert Kennedy. Can China retain its API sourcing appeal? Scrip News. 2009 December 9 / 2010 Scrip 100.

Source: Scrip News