The Patent Cliff Window Opens Up: the Industrial Upgrading to be Promoted by Integration of Generic Drugs and Reference Listed Drugs

发布日期:2015-03-18访问次数: 信息来源:21st Century Business Herald字号:[ ]


Favored by both the government and social capital, the biopharmaceutical industry, which is popularly known as the “golden industry in the 21st century” has gained vitality of development as the gold diggers are found to have been on the road in various areas.

According to incomplete statistics, starting from 2012, the Chinese patents of over 600 drugs around the world would expire one after another, making a so-called “patent cliff term”. By 2020, the drugs worth about US$ 259 billion would face patent expirations. That brings about an excellent opportunity of development to the Chinese market, where the generic drugs of Western medicine play a dominant role.

In September of this year, the domestic “Viagra” produced by Guangzhou Pharmaceutical Holdings Limited got officially approved, while the Chinese patent of the Viagra produced by the US-based Pfizer Pharmaceutical Inc. has expired in May of this year.

In the capital market, the biopharmaceutical sector is deemed to be a “gold mine” for investment among the investors. The data released by Zero2IPO indicate that in 2012, the number of the PE/VC cases that have invested in the bio-tech/healthcare sectors have amounted up to 188 in China, which involve up to US$ 1.898 billion, or roughly RMB 11.8 billion.

Moreover, there’s been an escalating fever of acquisitions in the global biopharmaceutical industry. The Bloomberg statistics indicate that by August of this year, the total amount of the announced acquisitions in the pharmaceutical, bio-tech and medical product industries around the world has hit US$ 354.7 billion, creating a new record high in history with a year-on-year growth of over 5 times.

The 21st Century Macro-Economy Research Institute observes that a golden era of industrial development has come and the domestic biopharmaceutical companies should clearly understand the current status of industrial development both at home and abroad and look for the best modes that are suitable for their own development, so that they can make contributions to making China a powerful country in the pharmaceutical area.

I. A Market Scale of RMB 600-800 Billion Expected

The 21st Century Macro-Economy Research Institute observes that the present development of the pharmaceutical industry is apparently affected by external forces, especially the industrial policies. Therefore, it’s advisable to analyze the market potentials of the biopharmaceutical industry by taking into account the market demands on the one hand and analyzing by reference to the relevant industrial policies on the other.

There’ve been growing market demands for the biopharmaceutical products in China along with population aging and enhancement of health awareness. In recent years, the incidence rates of chronic diseases, including cardiovascular diseases and diabetes, have risen up drastically. Taking diabetes for example, the number of diabetes patients was about 92 million in 2012 and 40 million more patients will have emerged by 2030.

There’s huge market potential yet to be explored by the domestic biopharmaceutical industry in China. The statistics indicate that in terms of medical expenditure, the per capita medical expenditure is US$ 139 in China, while that in Japan is 22 times, and that in the UK is 30 times, higher than China. It is forecasted that by 2020, the biopharmaceutical market sector in China will have turned out to be the world’s second largest biopharmaceutical market sector, next only to the US.

Fu Zhongming, Executive President of China Association of Pharmaceutical Commerce, made a forecast at the 69th PHARMCHINA that the biopharmaceutical industry will be able to form a market of RMB 600 – 800 billion in the future.

Regarding the market segments, the new vaccines may produce a market scale of up to RMB 100-150 billion; the bio-technical drugs, including antibody drugs and protein drugs, may produce a market scale of up to RMB 300-500 billion in the future; the serious disease diagnosis and testing products will form a market scale of up to about RMB 50 billion; the personalized therapeutic drugs are expected to form a market scale of up to about 100 billion; the regeneration medical techniques, such as the cases of organ missing, will form at least a market scale of RMB 50 billion of regeneration treatment and rehabilitation.

In terms of the room for industrial development, according to the IMS data, the percentages held by the biopharmaceutical industry in the GDP in various countries are 11% in the UK, 12% in Germany, 17% in the US and only 4% in China. There’s huge room for development of the biopharmaceutical industry in China.

At present, it is expected that the growth rate of the global biopharmaceutical industry ranges between 4% - 7%. Since 2011, the growth rate of the biopharmaceutical products’ sales revenues in China has maintained around 20%, despite certain sluggishness, and been much higher than the average growth rate of the global biopharmaceutical industry.


It is proposed in the Development Planning of the Bio-Industry (hereinafter referred to as “Planning”) issued by the State Council, that the average annual growth rate of the output value of the bio-industry shall be maintained to be 20% minimum during the period from 2013 to 2015. By 2015, the percentage held by the added value of the bio-industry in the GDP shall be doubled compared with year 2010 and the industrial added value rate shall be apparently enhanced.

According to the Planning, the biopharmaceutical industry shall account for about 8% of the GDP in 2015, which suggests huge room for industrial development.

II. Barriers against the Development of the Biopharmaceutical Industry in China

A strategic emerging industry, the biopharmaceutical industry bears the significance in boosting the industrial structure upgrading and exploring the new economic growth points in China. Such policies as the “Development Planning of Medical Technology during the 12th Five-Year Plan Period” and the “Development Planning of Biological Technology during the 12th Five-Year Plan Period” have been promulgated one after another.

The biopharmaceutical industry in China started later than the developed countries in Europe and North America. Despite a higher growth rate, the domestic biopharmaceutical industry is “big but less powerful” as there still is considerable room for improvement in terms of global market share and product competitiveness etc. compared with the developed countries.

The statistics indicate that the biopharmaceutical enterprises in the United States and EU hold over 95% of the global market shares, while the other countries, including China, hold less than 5%. The US biopharmaceutical industry has the annual sales volumes that account for about 50% of the sales volumes of the global drug market.

The biopharmaceutical industry has such characteristics as high technology, high investment, high risk and high yield plus long cycle.

In general, it takes about 2 to 3 years for a new drug to recover all of the investment made therein once it is launched. The biggest advantage of the biopharmaceutical industry lies in the fact that a super high ROI of 10 times and up will be available as soon as an advantage of technical monopoly has taken shape.

In terms of high technology, as a knowledge-intensive emerging industry, and by virtue of the high technological content, the biopharmaceutical industry raises a higher demand for the innovation capabilities in the enterprises. In terms of high investment and long cycle, a popular summary shared in the industry is “a decade plus one billion US dollars”. Most of the new drugs are accomplished through a R&D period of a decade and even longer with the cost of one billion US dollars at least. The high risk refers to the product development risks, as evidenced by the fact that only 0.02% of the developed products can be eventually launched successfully in the market, on the one hand, and the risks of fierce market competition on the other. Chongqing Beer, for example, began to be engaged in the R&D of hepatitis B vaccine in 1998 and has recently announced a termination to the R&D project, which suggests the 16-year-long R&D efforts will result in nothing.

The statistics indicate that the annual R&D expenditure made by Pfizer, the international pharmaceutical giant, alone exceeds the total amount of the R&D expenditures afforded by all of the domestic biopharmaceutical enterprises. None of the Top 100 biopharmaceutical enterprises in the world today is a Chinese enterprise.

In this sector which demands both capital and patience, there still is a very long road for the domestic biopharmaceutical enterprises to go.

III. Exploration of the Road of Building a Powerful Country in the Pharmaceutical Area: Integration of Duplication and Innovation

The 21st Century Macro-Economy Research Institute observes that as a big country of generic drugs, China remains to be confined by the high hurdles of fund and technology in the biopharmaceutical area and, with the technological foundation as accumulated under the pattern of CRO, to expand, and then further strengthen, the business scale of generic drugs will be a road that domestic enterprises must go through in order to survive and develop themselves.

According to the R&D characteristics, the drugs in the biopharmaceutical area may be classified into such two categories as patent drugs (reference listed drugs) and non-patent drugs (generic drugs). The former demands large amount of investment in the R&D phase and enjoys patent protection once launched successfully. The patent protection will in general last for 20 years, during which period no other pharmaceutical company should attempt to make any replica. Generic drugs refer to those that are launched after the patent expirations of the reference listed drugs sharing the identical chemical ingredients.

The reference listed drugs raise higher demands for fund and time during the stages of R&D, application for approval and bulk production. After the patent expirations of the reference listed drugs, the manufacturers of the generic drugs may conduct the R&D taking advantage of the available patented technologies, so as to shorten the R&D process, improve the success rate and reduce the risks. Therefore, the domestic biopharmaceutical enterprises, which in general appear to be weaker in the scientific research and innovation ability and limited in the financial investment, are mostly engaged in the production of generic drugs. According to the statistics, of nearly 5,000 pharmaceutical companies in China, over 90% are engaged in the production of generic drugs. 95% of the domestic drugs are generic drugs.

It is estimated that by 2020 the pharmaceutical products that value up to US$ 259 billion will face the “patent cliff”, which will render an excellent opportunity for the generic drug manufacturers in China.

However, in the area of generic drugs, the domestic manufacturers suffer from excess capacities of low-end drugs and over-competition, as evidenced by the fact that dozens of the domestic pharmaceutical companies apply for production of the generic drugs of the same type.

According to the market law, the prices of generic drugs will go down along with the increase in the number of generic drug manufacturers, while the profit margins of generic drugs will shrink as a result of the extensive repetition of the manufacturing process in a rush.

On the other hand, the multinational pharmaceutical giants have entered the generic drug market in China one after another by way of merger, acquisition or joint-venture development programs. In February 2012, Pfizer began to explore the generic drug market in China by setting up Hisun -Pfizer Pharmaceutical Co., Ltd. through a joint-venture program with Hisun Pharmaceutical. Hisun Pharmaceutical holds 51%, and Pfizer holds 49%, of the equity stock in the joint-venture company.

As of reference, in 2013, India, another big country of generic drugs, had reportedly accomplished a total export volume of US$ 13 -14 billion and has become the second biggest source country of generic drugs imported by the United States. Meanwhile, India has successfully established its business presence in the overseas markets, including the EU. Over a period of 4 decades, the Indian pharmaceutical industry has grown up from obscurity to a shining star in the emerging markets.

The 21st Century Macro-Economy Research Institute observes that if we seek reference from the Indian counterparts who have set up their layouts in the biopharmaceutical area, make bigger investment in the R&D, accumulate the experience in seeking business success in terms of the R&D of reference listed drugs while manufacturing generic drugs, and, in the meantime, consolidate the resources in an ordered manner and accomplish the business transformations with the help of the governmental guidance so as to realize gradually the integration of duplication and innovation and improve the enterprises’ innovation capabilities in nature, the domestic biopharmaceutical enterprises will be able to change the current status and go global in a real sense.



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