Chinese contract manufacturers to benefit from downturn

pharmafile | February 2, 2009 | News story | Manufacturing and Production CMO, China 

China's contract manufacturing organisation market was valued at more than $70 billion in 2007, with pharmaceuticals comfortably the largest contributor, according to a new report from consultancy firm Frost & Sullivan.

And while China's overall outsourcing market will see the impact of the economic downturn in some sectors, notably electronics, pharmaceutical suppliers will weather the storm and could even benefit from the situation.

"The impact…on pharmaceuticals is considered to be limited, as demand in this sector is basically rigid," commented Julia Zhu, Frost & Sullivan's China Manager for Chemicals, Material & Food Practice.

Chinese companies have become strong players in contract manufacturing of starting materials, such as active pharmaceutical ingredients (APIs), excipients and intermediates. And despite recent concerns about the quality of Chinese-made ingredients in the wake of the contaminated heparin case last year, F&S believes the drug industry will continue to tap China as a major supplier of raw materials.

"Due to cost concerns, more outsourcing is expected to happen as China has obvious cost advantage compared with developed countries," she said. "Pharmaceutical companies are going to face heavy cost pressures [and will] increase the contract manufacturing organisation (CMO) purchase in developed countries to lower the manufacturing cost," continued Zhu.

She predicted that rather than suffering from the downturn, the Chinese CMO sector will in fact benefit, with suppliers manufacturing patent-protected materials and higher value-added products – such as fluorinated compounds – standing to benefit the most. Fluorinated compounds are widely used in pharmaceuticals and have been growing 20% a year, outstripping the broader CMO market, according to Frost & Sullivan.

But China needs to continue its momentum or it faces losing out to India, according to Zhu.

In broad terms, China has developed as a primary raw materials producer while India has focused more on secondary manufacturing and, more recently, development services.

It is notable that China is now starting to move more and more into secondary manufacturing, while India has been developing plans to boost its own primary manufacturing sector.

India's pharma manufacturing industry was hit in the build-up to the Olympics last year by rocketing prices of basic chemicals as well as difficulty in accessing some materials as the Chinese authorities closed factories in order to meet pollution targets.

Related Content

China rejects a second WHO probe into COVID outbreak origin

China has rejected WHO plans for a second investigation into the origin of the coronavirus …

Positive phase III results achieved for dialysis drug in China

Vifor Fresenius Medical Care Renal Pharma (VFMCRP) today announced positive results from a phase-III study …


UAE rolls out Sinopharm COVID-19 vaccine amid conflicting reports of efficacy

The United Arab Emirates has begun rolling out Sinopharm’s COVID-19 vaccine in its capital Abu …

Latest content