Asia Pacific to Replace United States and Europe as Pharmaceutical Industry Powerhouse, Finds PricewaterhouseCoopers

Government Incentives Fuel Growth, But Intellectual Property Risk Remains a Concern

NEW YORK, Aug. 7, 2007 (PRIME NEWSWIRE) -- Asia Pacific is taking the lead in the race to win the largest share of the global pharmaceutical industry, according to analysis published by PricewaterhouseCoopers (PwC), which finds that the center of gravity for the industry is shifting from the United States and Europe to Asia Pacific In addition to becoming the largest market in the world for drugs, led by growth in China, India and Singapore, Asia Pacific is seeing an influx of multinational companies and its own pharmaceutical companies are bulking up by acquiring international market share.

In its report entitled "Gearing up for a Global Gravity Shift: Growth, Risk and Learning in the Asia Pharmaceutical Market," PwC finds that competition among countries to attract international pharmaceutical players is intensifying as Asian entities offer grants, incentives and infrastructure support. However, operational risks continue to be a concern despite progress in strengthening regulatory standards and intellectual property protections across Asia. In fact, growth in the region may be tempered by ongoing industry concerns about intellectual property rights, corruption and pricing.

"The pendulum for the pharmaceutical industry is shifting from the West to the East," said Dan Bartholomew, senior managing director, PricewaterhouseCoopers Pharmaceutical and Life Sciences Practice. "This means that if US-based companies want to have part of that market, they are going to need to be present in the region and learn to navigate the risks. It's not that US-based pharmaceutical companies will leave the states altogether, but they will restructure just as the textile, electronics and automobile industries have done."

The report is based on in-depth interviews with 185 senior pharmaceutical executives, including and 92 Asian-based domestic companies and 93 multinational companies with operations across nine different territories in the region: China, India, Malaysia, Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam. Highlights include:

* Among all executives surveyed from multinational pharmaceutical companies, nearly six in ten (58 percent) said they agreed that the center of gravity for the global pharmaceutical market is shifting to Asia Pacific. Asia's domestic company executives were even more certain. Of those, 62 percent agreed.

* Three-quarters of executives from multinational companies surveyed said they are worried about intellectual property rights and legal risks, and concern about intellectual property protections is cited by them as the biggest reason to consider leaving Asia Pacific.

* Nearly three-quarters (74 percent) of multinational companies and almost eight in ten (79 percent) of Asia's domestic companies reporting saw an improvement in intellectual property right protections during the past five years, primarily as a result of the introduction of new IP laws, underpinned by a stronger government emphasis on IP protection and more rigorous application of existing laws.

Path to Growth for the Asia Pharmaceutical Industry

Growth is at the top of the agenda for many domestic companies seeking to go global and multinational companies extending their presence in the region. Sixty-five percent of Asia's domestic companies report that increased global market share is important for their companies. A third of multinational companies have immediate 12 month plans to further expand within the region through acquisitions or developing their own newly built sites.

More than a third (34 percent) of Asian-based domestic companies is looking to acquire pharmaceutical companies. More than half (52 percent) of these companies is seeking to acquire international market share. At present, fewer than half (45 percent) of the domestic companies surveyed had an international presence but international growth is high on their agenda.

"Looking ahead, the pharmaceutical landscape for both multinational companies and Asian-based domestic companies in Asia will look radically different," said Bartholomew. "The Big Pharma business model is in transition. Right now, a lot of these companies are still focused on sales and marketing while they outsource other activities. However, there is a dearth of innovation that plagues the pharmaceutical industry, and R&D must become a greater focus. Not surprisingly, as the industry moves to this future model, strategic partnerships or long-term partnerships are a preferred route, favored by 82 percent of the multinational pharmaceutical companies we surveyed who outsource."

A thirst for funding

Capital constraints can be a significant hindrance to growth for many Asia-based pharmaceutical companies. Given the risks, it has been very difficult to obtain funding, even if there is an abundance of it. Around half of all the Asia-based domestic pharmaceutical companies surveyed in the region indicated they might seek deals if funding obstacles can be overcome.

There are few specialized venture capital funds to support start-up biopharmaceutical companies in Asia. These companies don't have access to a supportive stock market environment, such as in a junior market like London's Alternative Investment Market (AIM). While domestic pharmaceutical companies in the region are hungry for investment, particularly in R&D, just more than a third (36 percent) of them would consider selling all or part of their company to foreign investors to raise funds. Many are also looking at going public as a fundraising route; with 36 percent having plans to raise capital from foreign capital markets.

A changing pharmaceutical business model

For multinational companies, competition from generics and pricing pressures in the healthcare market continue to create pressures for reduction in costs in all parts of the pharmaceutical value chain. Outsourcing to lower cost but highly effective companies in Asia has become a common response to these pressures. A majority of both the Asian-based domestic and multinational companies interviewed (56 percent) thought that most of the industry still does not see outsourcing in a sufficiently dynamic way and is missing opportunities for shared development, learning and improvement. So far much of the focus has been on outsourcing drug manufacturing but increasingly, companies are turning their attention to R&D and clinical trials.

About PricewaterhouseCoopers

PricewaterhouseCoopers (www.pwc.com) provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 140,000 people in 149 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice.

"PricewaterhouseCoopers" refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity.

About PricewaterhouseCoopers Global Pharmaceutical & Life Sciences Industry Group

As a global leader serving pharmaceutical and life sciences companies, PricewaterhouseCoopers has extensive experience working with organizations across the industry, including: proprietary and generic drug manufacturers, specialty drug makers, medical device and diagnostics suppliers, biotechnology companies, wholesalers, pharmacy benefit managers, contract research organizations, and industry associations. We offer clients specialized capabilities in performance improvement, regulatory compliance and risk management. For more information, visit www.pwc.com/pharma

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