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Pharmaceutical Sales in China Rise 30% in First Five Months of Year
15 Jul 08
China's National Development and Reform Commission (NDRC) has revealed that the country's pharmaceutical industry generated sales of 271.78 billion yuan (US$39.8 billion) in the first five months of 2008, representing a year-on-year (y/y) increase of 29.43%.
Global Insight Perspective | | Significance | Statistics from China's NDRC have revealed that the country's pharmaceutical industry's sales rose by 29.43% and its profits shot up by 57.02% in the first five months of 2008. | Implications | Despite the overall picture of health in the chemical drugs sector, which saw sales up by 27.38% and profits up by 43.71%, over 25% of companies in this sector actually suffered losses. | Outlook | Prospects for growth remain healthy, although many smaller privately owned companies are struggling to find the resources to comply with the government's tighter enforcement of regulatory controls. |
The National Development and Reform Commission's (NDRC) statistics, reported in Interfax, also revealed that the industry's total profits soared by 45.12% to 26.04 billion yuan over the same period. The statistics divided the industry into four sectors: chemical drugs and active pharmaceutical ingredients (APIs), finished traditional Chinese medicines (TCM), biological drugs, and medical devices. With sales of 151.56 billion yuan (+29.51%), chemical drugs and APIs was comfortably the largest sector. As may be seen from the table below, profits in this sector were also very high, rising by 57.02% y/y to reach 14.89 billion yuan. China: Pharmaceutical Industry Sales and Profits, January–May 2008 | Sector | Sales (bil. yuan) | % Growth Y/Y | Profit (bil. yuan) | % Growth Y/Y | Chemical Drugs and API | 151.56 | 29.51 | 14.89 | 57.02 | Finished TCM | 57.81 | 24.24 | 5.46 | 16.16 | Biological Drugs | 25.43 | 29.62 | 3.15 | 57.00 | Medical Device | 25.39 | 31.78 | 2.66 | 32.47 | Total Industry | 271.78 | 29.43 | 26.04 | 45.12 | Source: NDRC, Interfax |
Separate statistics published by Healthoo.com—but probably also ultimately derived from the NDRC—revealed that sales of chemical drugs alone rose by 27.38% y/y in the first five months of the year to reach 82.52 billion yuan, and that profits in this sector were up by 43.71% y/y to reach 9.26 billion yuan. Healthoo.com noted that the sharp rise in chemical drug sales could probably be attributed to increased consumption in hospitals and to the expansion of urban community health centres (CHCs) and rural medical institutions. Despite the sharp overall rise in sales and profits, 300 out of a total of 1,173 chemical drug companies suffered losses amounting to a cumulative total of 479.88 million yuan during the first five months of the year. Outlook and Implications Looking at the pharmaceutical industry as a whole, the huge increase in profits was driven by a sharp increase in the price of APIs. However, rising prices for TCM raw materials severely dented profits in this sector, and they are likely to continue rising during the remainder of the year. Meanwhile, the fortunes of the chemical drugs sector mirror those of the API sector, in that a high proportion of companies have been suffering losses in spite of the strong overall increase in profits: earlier this month, it was reported that 218 API manufacturers (21.12% of the total) had experienced combined losses of 418.83 million yuan in the five months, despite booming sales (see China: 3 July 2008: Chinese API Industry Experiences Tough Start to Year). Tough times are likely to lie ahead for smaller privately held companies that lack the resources to invest in new environmental controls, and which are unable keep up with the government's new stricter approach to the enforcement of regulations.
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