Fierce Biotech this morning reports on the top 10 Big Pharma companies investing in China. Clearly, these companies are jockeying for position to be able to exploit commercial opportunities in the BIG Chinese market. In many cases, these is seen as essential to future company growth and survival given some of the issues with patent cliffs, and stagnant growth in many of the traditional Western markets.
Pharma investments are aimed at gaining market access and in particular gaining face time with health budget decision makers. Investment in China is certainly seen by the government to be a "good thing" and goes a long way toward establishing credibility. Hooking up with local drug companies and developers is a good way to enter the market. Alliances with local players may ultimately be a necessity for the Western companies to crack this market -- and many have established early relationships accordingly.
This is interesting to me in that many of these same companies right now are trying to eliminate China-produced raw materials from their supply chains. Yet, if their goal is to crack the Chinese market and to partner with local developers and manufacturers to do so, then how can they eliminate Chinese suppliers in the long-term? They can't. You will want to source locally for manufacturing support -- maybe not some specialty items but bulk of raws will likely come from local sources. The economic drivers and incentives are just too great in my view -- and local goverment will expect it.
So time is now to start qualifying the best local suppliers, and to educate and incentivize them to continually improve their quality systems in anticipation of them being integral to a long-term supply chain. It only makes sense.
Posted by Bruce Lehr Nov 19th 2012