China and India prepare for massive expansion

01 December 2003 00:00  [Source: ICB]

China and India will more than double their share of the pharmaceutical fine chemicals outsourcing market in the next three years, according to Enrico Polastro, senior vice-president at the Brussels practice of consultancy Arthur D Little.

Polastro told ECN’s Fine Chemicals Conference in Amsterdam that the growth in the market share of Asian companies comes as pharmaceutical firms are increasingly looking to hammer down their suppliers on price.

Polastro said the share of the outsourcing business undertaken by Chinese and Indian companies is currently 10% but by 2006 it could grow to 25%.

‘Pharmaceutical companies’ expectations of substantial cost savings are starting to offset the fears associated with intellectual property leakage or of uneven quality,’ he said. ‘Price is becoming the main criteria applied by pharmaceutical companies in their sourcing decisions.

‘Pharmaceutical companies are not hesitating to pressure their suppliers for the last penny,’ Polastro continued, highlighting the example of one industry major having recently pressured a contract manufacturer into making a 10% price reduction for an intermediate accounting for less than 0.1% of the end-product price.

Polastro said that in addition to western drugs firms facing stiff price competition from new market entrants from Asia, there were other key issues too, such as the flow of new chemical intermediate introductions ‘having reduced to a trickle’.

This has left many in the industry to challenge the ultimate financial returns associated with the surging investments undertaken by the pharmaceutical industry in new technology, he added. The growth of generics was another key battleground for the fine chemicals sector. ‘Products representing over 30% of total US branded drugs sales are expected to lose their patent protection between 2002-07,’ Polastro said.

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