R&D spend driving China pharma co’s

Companies are narrowing the gap

China is not a powerhouse of innovation, yet, but it is certainly trying to pay its way into that particular status. This willingness to spend in R&D – to pay to talent, buy innovative companies and seek out new technologies – is particularly visible in the pharmaceutical and biotechnology space. And it is working.

A story in BioWorld Today (paywall) this week points out that Chinese pharmaceutical companies “are more focused on R&D than ever before”. Serena Chao, a health care analyst at CLSA, made it clear that in the last decade pharmaceutical companies in China have been transformed. Once upon a time, China’s pharmaceutical companies did little more than manufacture the simplest active pharmaceutical ingredients (APIs). Now, they make everything, up to the most complex biologics.

Research spending is rising faster in China than just about anywhere else. In 2009, Chinese companies spent an average of 3.9% of their revenue on R&D. In 2014, that average ratio had jumped up to 6.9%. Obviously, some companies spend more than others. The R&D spend at Shanghai Fosun Pharmaceutical jumped 51% last year.

Even with all this extra spending China as a whole still has a long way to go before it catches up with the powerhouses in North America or Europe but the gap is narrowing and for some, it is narrowing fast.

Multinational corporations are helping. They are not only investing in their own research in China but also working with Chinese companies through partnership deals, development and marketing agreements and joint ventures. The expertise they bring to the country is key.

The next challenge may be one of attitude. As Shao said: “The single biggest challenge for Chinese companies to go international is the mindset.”

 

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