Big medicine soars in China

11:11, March 25, 2010      

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Pharmaceutical companies have reported better-than-expected profits in the past year due to China's medical system reform, but the drought in southwest China could make for a difficult year for herbal medicine companies.

Hong Kong-listed Shandong Luoxin Pharmacy announced Wednesday that its turnover increased by 35.9 percent to 907.45 million yuan ($132.94 million) in 2009, and its profit attributable to shareholders grew by 46.6 percent to approximately 268.55 million yuan ($39.34 million).

Liu Baoqi, chairman of Luoxin Pharma, said in a statement that the company, which focuses on antibiotics and specialized medicines, continued to "capture the market opportunities arising from China's medical system reform."

A total of 790,000 tons of medicine was produced in January and February, a 65.8 percent increase year-on-year, and the output of herbal drugs grew 14.2 percent to 290,000 tons during the period, according to figures released by the Ministry of Industry and Information Technology Wednesday.

China is poised to become the world's third-largest pharmaceutical market after the US and Japan in 2011.
The country will see an additional $40 billion in annual sales by 2013, according to a study by IMS Health released last week.

Most of the growth in China will continue to come from branded generic products manufactured and marketed by established domestic companies, according to the study.

Demand for innovative products from multinational companies is also rising in the country's leading urban centers, the study said.

IMS Health said Novartis, Pfizer and AstraZeneca's business grew fastest among other multinationals in the Chinese market last year.

The China division of Novartis had a sales growth of 36 percent last year, according to Yi Min, president of Novartis China.

Among 135 Chinese pharmaceutical companies listed on the Shanghai and Shenzhen stock exchanges, 41 companies had released annual results as of March 18, reporting an average gross profit rate of 45.65 percent, up from 43.57 percent a year earlier, according to figures from WIND.

"Herbal medicine and vaccine companies performed better in 2009, due to the national medical reform, which requires doctors to use chemical and herbal drugs equally when treating common diseases, as well as the spread of the A (H1N1) flue," Guo Fanli, a medical industry analyst at Shenzhen Zhongzhe Investment Consulting, said Wednesday.

He expected the pharmaceutical industry's average profit might slightly decrease this year, due to the increasing cost of raw materials and the promotion of basic drugs with low profit margins.

The drought in southwest China has brought up the market prices of herbs such as notoginseng root (Sanqi) and honeysuckle. Sanqi prices soared to 500 yuan ($73.25) per kilogram recently from 70 yuan ($10.26) in August.

Guo said almost 1,000 herbal medicine producers use Sanqi as a raw material.

"Listed companies such as Yunnan Baiyao, Kunming Pharmaceutical and Tasly will be impacted hard," he said.

"They can raise their drugs' prices to maintain profits, but it will affect consumers' demand."

Source: Global Times
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