A deep dive of the Chinese pharmaceutical industry in 2017 -The three major tiers are formed

A deep dive of the Chinese pharmaceutical industry in 2017 -The three major tiers are formed

A deep dive of the Chinese pharmaceutical industry in 2017

Once again, it is the time to do a deep dive of the Chinese pharmaceutical industry in 2017. Recently, East Money Information has published their latest Chinese top 500 company list for the past year. Among them, 42 pharmaceutical companies have the honor to join the rank and arranged into three distinctive tiers. Who is the winner and who lost big last year? Let us take a closer look!

After carefully reviewing nearly 300 listed pharmaceutical companies in China, Liang5 yungang has stood out among the competition and exceeded Beijing, Shanghai, and Shenzhen, becoming the capital of the Chinese pharmaceutical industry. A large number of Chinese pharma giants has settled there, including Hengrui (~$27 billion), Chiata Tianqing (~$13 billion), Jiangsu Kanion (~$1.3 billion), etc.

In 2017, Hengri has maintained its lead position and closed the year with a total of $27 billion. Compared to 2016, its market value nearly doubled, increased up to 81.92% compared to the same period of last year. However, the fastest growing champion is not Hengri. Instead, Beigene holds the crown, with a rise of 318.24% and a market value of $4.5 billion.

The three tiers of the Chinese pharmaceutical industry were formed

In 2017, the three tiers of Chinese pharmaceutical companies are basically formed.

The first tier consists of companies with a market value of more than $15 billion (¥$100 billion), including Hengri, Kangmei, Fosun, Yunnan Baiyao, etc.

Hengri has been taking the lead position in the 15 billion-dollar club. On 3 November 2017, it has reached a market value of $30 billion, becoming the first Chinese pharmaceutical company exceeding the $30 billion mark. This news has sent shockwaves across the spectrum of the pharmaceutical industry. On another note, it came as no surprise. Combining innovation, internationalization, and biosimilars development, Hengri has a clear leg up on its competitors, no matter in product line, R&D capabilities, or cash flow.

Following right after is Kangmei Pharmaceutical, taking the second place. On 19 May 2017, it has exceeded the $15 billion capital mark, becoming the third A-share pharma company breaking this line.  As the leader in the traditional Chinese medicine sector, Kangmei has obtained a full control over both the upstream and downstream, from material to sale circulation to back-end hospitals and pharmacies, etc.

On the heels of Kangmei’s entry, Yunnan Baiyao has also joined the 15 billion-dollar club on 13 June 2017. This is shortly after its internal restructuring and reorganization, which has ended with the high-profile entry of Newhuadu Industrial Group and the massive capital injection from Jiangsu Yuyue.

The fourth is Shanghai Fosun, which has grown rapidly in the past year. In the end of 2016, its valuation is mere $7.8 billion. However, when the time came to the end of 2017, this number nearly doubled, reaching a total of $16 billion. Indeed, Shanghai Fosun has carried out a series of strategic moves last year. Its deal with Gland, a generic drug marker in India, has finally begun to take off and made substantial progress; additionally, collaborated with Kite Pharma, the CAR-T industry leader, Fosun has initiated Fosun Kite, officially kicked off the industrialization of CAR-T product in China. This investment focused company is catching up fast in 2017.

On the flip side, the story is not all rosy; it is not an easy job to maintain one’s position in the 15 billion-dollar club. 14 November 2017, with a $15.1 billion valuation, Beijing Genomics Institute has officially become a member of the $15 billion club. But it did not last long. Within a few days, Beijing Genomics Institute entered a shakeout period.   As of the end of this survey, its market value has dropped to $12 billion. The same is true for Shanghai Raas Blood Product. In the past few years, it has grown rapidly through mergers and acquisitions. For a long period of time, it has lingered around the edge of the $15 billion-dollar club. However, due to the controversy restructuring and reorganization, Shanghai Raas Blood Product’s market performance has slipped down significantly since the beginning of 2017, and eventually dropped out the $15 billion-dollar club. Compared to 2016, its market value has fallen 13.95%, ended the year of 2017 with $14.1 billion.

The same is true for Shanghai Raas Blood Product. In the past few years, it has grown rapidly through mergers and acquisitions. For a long period of time, it has lingered around the edge of the $15 billion-dollar club. However, due to the controversy restructuring and reorganization, Shanghai Raas Blood Product’s market performance has slipped down significantly since the beginning of 2017, and eventually dropped out the $15 billion-dollar club. Compared to 2016, its market value has fallen 13.95%, ended the year of 2017 with $14.1 billion.

The second tier consists of 9 companies valued around $8 billion (¥50 billion) to $15 billion (¥100 billion), including evergreen brands like Baiyun Mountain, Sino Biopharma, new rising stars such as Beijing Genomics Institute, and circulation giants, Sino Pharm, Shanghai Pharma, etc.

Worth noting is that these companies are the mainstay of the development of China’s pharmaceutical industry today. The next $15 billion company are most likely to raise among them. As mentioned above, both Shanghai Raas and Beijing Genomics Institute have hit the rank of the $15 billion club before.

The third tier consists of companies with a valuation between $4 billion (¥25 billion) and $8 billion (¥50 billion). Last year, Beta Pharma was ranked at 499 with a $4 billion valuation, marking the entry point to the whole industry top 500 list.

The geographical distribution of Pharma companies in China

A large number of pharma companies in the top 500 list are gathered around major metropolitan cities, with Beijing, Shanghai, and Guangdong leading the pack. Among them, Guangdong has won out the competition and took the top spot. It has a total of 6 companies, including Beijing Genomics Institute, Livzon Pharma, Baiyun Mountain, Kangmei, China National Accord, and China Resources Sanjiu. Shanghai is following right after,

Among them, Guangdong has won out the competition and took the top spot. It has a total of 6 companies, including Beijing Genomics Institute, Livzon Pharma, Baiyun Mountain, Kangmei, China National Accord, and China Resources Sanjiu. Shanghai is following right after, taken the second spot with 5 companies, including Shanghai Fosun, Shanghai Pharma, Sinopharma Group, and Meinian Health. Beijing comes in the third place and has four companies — Beigene, Lepu Medical Technology, China Meheco, and Tong Ren Tang.

The advantages of major metropolitans are obvious; policy, talent, and transportation all make a play, when it comes to deciding the company location. However, this is not the whole story. It is not uncommon to find pharma giants in smaller scale cities. Among the four companies in the $15 billion club, other than Shanghai Fosun, the rest are all not located in major metropolitans. Hengri is settled in Lianyungang, with a range of other famous

However, this is not the whole story. It is not uncommon to find pharma giants in smaller scale cities. Among the four companies in the $15 billion club, other than Shanghai Fosun, the rest are all not located in major metropolitans. Hengri is settled in Lianyungang, with a range of other famous biopharmas, such as Hansoh, Chiatai Tianqing; the headquarter of Kangmei is in Puning; whereas Yunnan Baiyao is in Kunming.

The highest market value increase: 318.24%!

In 2017, Beigene, valued at 4.3 billion with an increase of 318.24% compared to the same period of last year, has taken the crown of the highest market value increase.

Drilling down the root, its soaring value is undoubtedly related to a series of good news in 2017. In September of last year, Beigene has officially initiated its global strategic collaboration with the pharma giant Celgene in the field of immunoncology. The estimated valuation of this program reached a total of $1.393 billion, setting a new record for the highest single product technology and right transfer deal in China. In the meantime, Beigene has established its first medicine production campus in Suzhou. Currently, two small molecule drugs are already put into operation, including BGB-3111 for lymphoma and BGB-290 for solid tumor. In 2017, Beigene has officially become a full industry chain pharmaceutical company, completed its leap from R&D to production and market.

In the meantime, Beigene has established its first medicine production campus in Suzhou. Currently, two small molecule drugs are already put into operation, including BGB-3111 for lymphoma and BGB-290 for solid tumor. In 2017, Beigene has officially become a full industry chain pharmaceutical company, completed its leap from R&D to production and market.

Worth noting is that as one of the US-listed Chinese pharmaceutical companies, the dramatic increase of Beigene’s market value proves that Chinese innovative pharma companies are gradually gaining the attention and recognition in the global market. Following the footsteps of Beigene, Zai Lab has also successfully made its way into Nasdaq. What is more, rumors are swirling that Hua Medicine and Innovent Bio are both planning their IPOs. Unavoidably, Chinese innovative pharma companies are slated to make more voices around the globe.

For the Chinese pharmaceutical industry, 2017 is a year full of joy and achievement. Its total market value has raised 137.22% compared to the same period of last year; pharmaceutical products in all sectors have exceeded $150 million in sales; the R&D investment in 2017 has fully blossomed; in the third quarter of last year, 8 products have received their production approvals, and 17 were greenlighted for clinical trials.

And there is more to come in 2018. Viread is expected to be approved for Hepatitis B indications; innovative biologics TQB2450 injection (anti-PD-L1 monoclonal antibody) is slated to receive a go-ahead nod from CFDA to move into clinical trials; Anlotinib, Lenalidomide, Bendamustine, and Gefitinib are on the track to score the CFDA approval in 2018 the earliest.

The worst market shrink: 46.63%

Although the majority of pharma companies in the top 500 list increased their market value in 2017, there are 7 companies have taken a hit. Among them, Buchang Pharma suffered the most, reaching a total of 46.63% lost.

On 30 December 2016, Buchang Pharma has reached its peak, with $13.6 per share, amounting to a total market value of $9.3 billion. However, it did not last long. Just after one year, its share dwindled down to $7.2 per share; the company value has shrunk more than $4.3 billion. Drilling down to the root, the huge inherent risks associated with its product layout undoubtedly played an important role. Buchang Pharma has long relied on its three pillar products, Naoxintong Capsule, Wenxin Granule, and Danhong Injection. Under the current environment where the monitoring of auxiliary drugs has been strengthened, their market performance is indeed in a relatively embarrassing place.

Drilling down to the root, the huge inherent risks associated with its product layout undoubtedly played an important role. Buchang Pharma has long relied on its three pillar products, Naoxintong Capsule, Wenxin Granule, and Danhong Injection. Under the current environment where the monitoring of auxiliary drugs has been strengthened, their market performance is indeed in a relatively embarrassing place.

Another rising star Beta pharma’s falling market value has also grabbed industrial wide attentions last year. Back then, in the face of Gefitinib, it was successfully listed in the A share market. However, compared to nearly $4.3 billion market value in 2016, Beta pharma has dropped for 14.24% to $3.6 billion. And the reason is Gefitinib has dominated the product portfolio and contributed almost 100% of Beta Pharma’s revenue. Overreliance on a single product is always a very risky behavior. At present, Beta Pharma has stepped up its efforts in R&D and M&A.

The article was originally published on Pharma Exec.

About the author

New progress in the biopharmaceutical industry of 2017

One Reply to “A deep dive of the Chinese pharmaceutical industry in 2017 -The three major tiers are formed”

Leave a Reply

Your email address will not be published. Required fields are marked *