Transnational pharmaceutical enterprise experienced mixed feelings in the first half of 2017: on the one hand, the price reduction and cost controlling become a normal of the pharmaceutical industry, the original drugs lost the advantage of high premium, and price for volume negotiations failed to achieve desired results, however, on the other hand, the lifting of the clinical trial rules and the accelerated approval of imported drugs brought new opportunities for innovative drugs to rapidly enter the Chinese market.

According to incomplete statistics, there have been 7 transnational pharmaceutical enterprises releasing their performance in the first half year in the Chinese market so far, all of which obtained great achievements in China, wherein, Bayer, Pfizer and Sanofi achieved double-digit rapid growth in China, and Novo Nordisk and AZ also achieved good single-digit growth, and their growth in the Chinese market was all higher than their global performance growth in the same period. Pfizer, Novartis and AstraZeneca achieved good growth in China, despite the unsatisfactory performance in the world.

Overall, the main reasons for the growth of the transnational pharmaceutical enterprises in China were product innovation, business model innovation, and coverage of local R&D needs. Transnational pharmaceutical enterprises are ushering in the critical period of transition in the context of the new round of medical reform in China, and it becomes very important for them to make themselves irreplaceable and select a suitable market strategy. In this process, Pfizer, AstraZeneca and Novartis, etc. are focusing on product innovation, and Bayer and Sanofi, etc. are pursuing business model innovation.

Pfizer: The product innovation mainly contributing to the growth

In the second quarter and first half year, Pfizer’s global performance slightly declined as affected by ICU Medical’s acquisition of its Hospira Infusion Systems business, however, it achieved good results in the Chinese market, with the revenue in China growing by 13% in Q2.

Innovative drugs have become a bottleneck for the growth of transnational pharmaceutical enterprises. From the achievements of the pharmaceutical enterprises in the first half of 2017, their growth was mostly driven by new drugs; despite the rich product lines, Pfizer’s products with good performance were mainly: the anticoagulant Eliquis (51%), breast cancer drug Ibrance (63%), and rheumatoid arthritis drug Xeljanz (42%), while the marketing and promotion of some drugs in emerging markets boosted its performance, for example, the pneumococcal vaccine Prevnar was approved for marketing in China and contributed 4% growth in the first half year.

According to the analysis report of Deloitte, an important strategy for transnational pharmaceutical enterprises to win in the Chinese market is to conduct localized production and R&D, to reduce the production cost and better meet and adapt to the Chinese market requirements, under the pressure of cost controlling, price reduction and replacement of imported drugs with Chinese drug, etc. in the Chinese market. Pfizer spent USD 350 million on establishing in China its third biotechnology center globally and the first in Asia in 2016, which was the largest overseas investment of Pfizer outside the U.S. in recent 8 years, showing that the rapid growth in the Chinese market has attracted its sufficient attention and that the product innovation is its main growth potential in the Chinese market in the future.

Bayer: Fastest in growth

Bayer’s pharmaceutical business had gratifying performance in the Chinese market in 2017Q2, with growth of 13.4%. Bayer is currently "the company with the fastest growth among transnational pharmaceutical enterprises" in the Chinese market, according to IMS data.

Bayer’s prescription drug business has been keeping solid growth in China, with the sales of the prescription drug business reaching RMB 13 billion in China in 2016, growing by 10% year on year, above the marker average, thanks to Bayer’s total solution in the chronic disease management field and new business model exploration, as well as the high investment in R&D innovation.

With patients getting increasingly concerned about curative effects, transnational pharmaceutical enterprises may explore new business models, and transit to the overall health solutions, besides focusing on the pharmaceutical product innovation, wherein, the exploration of the total solutions for chronic disease management has become a key territory for the differentiated competition of transnational pharmaceutical enterprises. Products are at the core of the business model innovation, Bayer has products in the cardiovascular and diabetes chronic disease fields such as Bayaspirin, Adalat and Glucobay, and it has joined the chronic disease management field via the cooperation with the diabetes management platform Datangyi. All those products have made important contributions to the growth of Bayer’s prescription drug business in China.

In addition, Bayer has been keeping high investment in R&D innovation, and it had many new drugs or indications in the oncology field approved in China in the first half of 2017, including sorafenib for thyroid cancer and regorafenib for metastatic colorectal cancer and gastrointestinal stromal tumor.

AstraZeneca: Strong product lines

AstraZeneca, that also did not have satisfactory performance globally, achieved year-on-year growth of 8% in China in the first half year, reaching RMB 9.46 billion, and grew even more in the second quarter, with year-on-year growth of 10%.

The main reason for the strong growth of AstraZeneca in China was the good performance of many of its products. The year-on-year growth of its 7 products exceeded 10%, for example, its cardiometabolic product group: Brilinta grew by 49% year on year, and oncology product group: Zoladex grew by 38% year on year.

It’s worth mentioning that the non-small cell lung cancer (NSCLC) drug Iressa had shown the falling tendency after entering China’s medical insurance catalog upon price reduction negotiation last year, however, it eventually reversed the tide in 2017 Q2, achieving 11% year-on-year growth, with sales reaching RMB 500 million; and its third-generation EGFR-TKI Tagrisso that was approved by CFDA just in March this year and started to be marketed in China in April had better performance than expected.

AstraZeneca also had 2 new drugs approved for marketing in China in the first half year, and its 5 products were included in China’s national medical insurance catalog in succession, which will further promote its performance growth in China.

Novartis: Growth driven by innovation

Novartis had excellent performance across the emerging markets in the first half of this year, with the sales growing by 8% year on year, wherein, it achieved 10% year-on-year growth in the Chinese market.

The high volume of innovative drugs was the main driver of Novartis’ global performance growth, and its biggest competitiveness in the Chinese market. Novartis attaches great importance to introducing innovative drugs into the Chinese market, and focuses on the unmet treatment needs.

According to statistics, Novartis has marketed 60 innovative drugs in total in China, with the product lines covering cardiovascular, endocrine, anti-infection and oncology fields, etc., wherein, 7 had global sales exceeding USD 1 billion. Take the oncology field of Novartis for instance, its Votrient for renal cell carcinoma, anti-cancer JAK1/2 inhibitor Jakavi, pazopanib, a first-line therapy for advanced renal cancer, and ruxolitinib phosphate for myelofibrosis were successively approved in China in the first half year. Novartis Oncology said that they would introduce 1-3 new products or indications to China every year, with the R&D investment in China reaching USD 1 billion/year.

This March, CFDA lifted the imported drug clinical trial rules to accelerate the imported drug approval, which would greatly shorten the time for transnational pharmaceutical enterprises’ new drugs to enter China, and further accelerate Novartis’ introduction of new drugs to China. Novartis’ many drugs including the NSCLC drug ceritinib, etc. also have been listed in priority review and approval in the Chinese market.

Roche: Accelerated growth in the diagnosis business

Roche’s overall business achieved 5% year-on-year growth worldwide in the first half year, wherein, the Chinese market was an important part of its growth. Roche did not disclose the specific performance situation of its pharmaceutical business in the Chinese market, however, its diagnosis business achieved 20% strong growth in China in the first half year.

Roche Diagnostics is the well-deserved IVD giant in the world, with the global revenue of RMB 76.68 billion in 2016, ranking first in the global IVD market; China is the second largest market of Roche Diagnostics in the world, second only to the U.S. Thanks to the "Accelerated Growth Plan" (AGP) launched by Roche in China, Roche Diagnostics basically maintains an average annual growth rate of 25% in the Chinese market, which is the main reason driving its global strong growth. Its biochemistry and immunology business had the most stable growth while its molecular diagnostics business had the fastest growth.

Roche Diagnostics follows closely the medical reform of China, and has divided three target markets for its sales team, separately the hospital market, private hospital market, and third-party independent testing centers, under the tendency of hierarchical diagnosis and treatment. Roche Diagnostics launched the AGP in China in 2009, to implement the compound high bonus coefficient plan rare in the whole industry, bringing rapid growth for consecutive years to it.

From: Healthcare Executive, by Yang Xinyuan