Cost Benefits and Considerable Scientific Expertise Provide China Strategic Advantage for Drug Discovery Outsourcing

New analysis from Frost & Sullivan

21-Oct-2010 - China

With fast-paced advancements in genomics, combinatorial chemistry, and high-throughput screening, China has emerged as a major location to which drug discovery is being outsourced. China has the advantages of scientific expertise and comprehensive infrastructure, which are critical for drug discovery activities. Apart from India, China is also regarded as a lucrative market able to help pharmaceutical companies to improve drug discovery at a reasonable cost. The rise of overhead costs in the United States and European countries has led companies to opt for outsourcing of drug discovery to low-cost countries, such as India and China. New analysis from Frost & Sullivan, Drug Discovery Outsourcing Market in China, finds that the market reached $315.0 million in 2009 and is expected to grow at a compound annual growth rate (CAGR) of 23.0 percent from 2009 to 2016. “Expired patents and the rise in diseases are expected to fuel the growth of the Chinese drug discovery market,” says Frost & Sullivan Research Analyst Amritpall Singh. “China offers a large talent pool in the field of pharmaceutical research and development, including an increasing number of western-educated graduates or researchers having international working experience.” The Chinese Government has been providing strong incentives to nurture the domestic pharmaceutical and biopharmaceutical industries. The R&D sector in China has largely benefited from these initiatives, which include tax relief, direct funding opportunities, and development of numerous technology/biotechnology parks, especially in Shanghai. Although the prospects for the market look upbeat, there are some challenges clouding its landscape. With economic reforms and the expected inflation in China, labor and raw material cost is increasing. The impact is not likely to be felt immediately. However, in the near future, cost is bound to witness a hike. Companies are expected to be scouting around for alternative locations that can offer more cost-effective options. Apart from this, data security and intellectual property (IP) protection in China have caused some angst for large international pharmaceutical and biotechnology companies. The Government is stepping up efforts to address IP issues; however, it is likely to take a while before these problems are ironed out. Pharmaceutical companies have displayed a preference for a single outsourcing company instead of multiple providers for a project. This helps eliminate dealings with numerous outsourcing companies and enables optimal leverage of the knowledge obtained during the early stages of R&D process within the same organization. As the environment encourages companies to conduct vigorous R&D in this space, they must strive to move up the value chain and attain global standards at par with large western pharmaceutical companies. “Multinational companies as well as local sponsors perceive overall service quality as the uppermost priority in the selection of an outsourcing partner,” says Singh. “In addition, factors such as price, ability to recruit trial participants, speed of project turnaround, as well as reputation of the drug discovery firm are also the major decisive factors.” Companies that have capitalized on the available resources for drug discovery are also keen to broaden their business horizons and build up sales in the Chinese market. Thus, new opportunities are unfolding for the development of drugs especially relevant for the Chinese market.

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