NEW YORK, April 15, 2009 (GLOBE NEWSWIRE) -- Pharmaceutical (pharma) multinationals continue to show great interest in China, according to a new report released today by PricewaterhouseCoopers LLP (PwC). Entitled Investing in China's Pharmaceutical Industry, the report says that M&A activity in China's pharma industry reached record levels, with 111 deals accounting for $2.1 billion in the sector in 2007. And, while 2007 may prove to be a high point, the upward trend shown in recent years continued into the first half of 2008, when 53 deals, valued at $1.1 billion were announced, although the global economic downturn will most certainly reduce the number of deals in the last quarter of 2008 and into 2009.
"The opportunities in the pharmaceutical industry in China stretch far and wide," said Michael Keech, director, PricewaterhouseCoopers global pharmaceutical and life sciences industry group. "Impending healthcare reform, the commitment to innovation by the Chinese government, and numerous tax incentives among other things are making China a much bigger player in the global pharmaceutical industry. And, given the tremendous growth in this market along with continuing pressure to control costs, pharma multinationals have ample opportunity to expand by investing in China."
The report, Investing in China's Pharmaceutical Industry, is the second edition of a paper published by PricewaterhouseCoopers looking into the current pharmaceutical market conditions in China. It covers various subjects that are considered to be of concern to the pharmaceutical industry and/or investors in the pharmaceutical industry in China. Highlights of the report include:
. China's R&D expenditure ranked third worldwide in 2006, pursuant to the goal announced by the Chinese President, Hu Jintao, to build an innovation-oriented country by 2020. A growing number of multinational pharmaceutical companies have set up R&D centres in China, and new tax regulations, established by the central government, provide key income tax incentives for companies conducting or considering carrying out R&D in China. . China has clearly outlined its intent to fight bribery and corruption, emphasizing the need to expand the use of an on-line drug procurement system in hospitals designed to curtail corrupt practices and investigating over 1,000 bribery cases in the health sector in 2007 alone. . Contract Manufacturing Organisations (CMO) have been established longer than Contract Research Organisations (CRO) in China, but both are growing at a rapid pace. The growth of the former is due to an increased commitment to international standards, the growth of the latter because outsourcing is moving up the value chain. . Intellectual Property Protection (IPP) has been a major concern for foreign companies operating in China. However, recent developments have influenced the level of confidence of foreign firms in the protection of intellectual property in China, including an amendment to the Chinese Patent Law passed in December of 2008 that strengthens Patent Law and increases the ceiling on monetary penalties for IP infringement. . The market opportunities in China expand beyond the pharmaceutical market as evidenced by the significant growth of the medical device sector in China. Over the past several years, the size of the medical device market has increased 13 percent, presenting a viable business opportunity for both domestic and multinational companies. In 2007 the market size for medical devices in China was estimated at $11.2 billion and is forecasted to nearly double, reaching $20.6 billion by 2012. . New medical reforms introduced in September 2006, intended to create nationwide healthcare coverage initiatives for over 600 million in rural areas, created an increased demand for medicine and healthcare services. This tremendous growth potential has attracted more and more investors to this sector. Accordingly, a record number of M&A deals were closed in 2007 (111 deals), representing nearly a 30 percent jump from the prior year. . While public companies in China are required to adopt Chinese Accounting Standards (CAS), this was not a requirement of private companies. Accordingly, when investors plan to invest in a private Chinese domestic pharmaceutical company, the accounting policies and records of the target company will need to be converted to and aligned with the investor's group policies and guidelines. Consequently, a comprehensive set of accounting standards is required.
Over the last three years, the pharmaceutical/ life sciences landscape has changed rapidly in China, and the landscape is going to be altered again in the coming years given the direction of the healthcare reform plan announced by the Chinese government in October 2008. Although the plan gives only high level trends, the changes are expected to be significant and should have a major impact on multiple aspects of China's pharmaceutical industry in the coming years.
A full copy of the report is available for download at www.pwc.com/pharma.
About PricewaterhouseCoopers' Pharmaceutical and Life Sciences Industry Group
PricewaterhouseCoopers' Pharmaceutical and Life Sciences Industry Group (www.pwc.com/pharma) provides clients with audit, tax and advisory services. The firm has extensive experience in delivering solutions on a wide range of strategic, financial and operational issues. The firm has also developed industry-specific services in the areas of strategy, operations performance improvement, regulatory compliance, and IT and financial effectiveness. The Pharmaceutical and Life Sciences Industry Group is part of PricewaterhouseCoopers' larger initiative for the health-related industries that brings together expertise and allows collaboration across all sectors in the health continuum.
About PricewaterhouseCoopers
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