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Indian and Chinese drugmakers dominate Asia power ranking

World's most populous countries and growing incomes fuel growth

Sun Pharmaceutical Industries' research and development facility.   © Reuters

TOKYO -- Indian and Chinese drug companies are rapidly increasing their presence in Asia.

Indian names, including Sun Pharmaceutical Industries, dominate the top spots of the sales ranking of Asian pharmaceutical companies. They are leading the competition by actively entering overseas markets such as the U.S. through mergers and acquisitions.

Chinese companies are growing their sales mostly in their domestic market, which has been expanding thanks to an aging population and rising incomes. There are now four Chinese drugmakers with market capitalization of over $10 billion. Five fiscal years ago, there were none.

Asia's drug market has been expanding fast thanks to the world's most populous countries and growing incomes. Both its size and the speed of expansion are attracting much attention. According to Quintiles IMS Holdings, an American consultancy specializing in the pharmaceutical industry, China last year overtook Japan as the world's second largest drug market, worth $116.7 billion, after the U.S. India climbed two places from 2011 to 11th. Both the Chinese and Indian drug markets are growing at an average 12% annually whereas markets in leading Western countries are growing at a single-digit rate.

Sun Pharmaceutical, which topped the sales ranking, made $4.6 billion in sales in the year to March. The company's sales grew 2.8-fold in the past five fiscal years thanks to a series of acquisitions, including that of domestic rival Ranbaxy Laboratories in 2014. As a maker of generic or patent-expired drugs, the company is now one of the world's top five drugmakers.

Sun Pharmaceutical makes 70% of its sales overseas. Taiki Motoda of Mizuho Bank's industry research department said: "Generic drugs all have the same effect, and it's a battle of cost. [Sun Pharmaceutical] took advantage of low labor costs at home and boosted its overseas presence." India's Lupin, in third place, and Cipla, in fifth, also grew by acquiring rivals.

But life may become difficult for Indian companies operating in the U.S., the largest drug market in the world. Price competition has been intensifying in the U.S. since last year's presidential election, in which lowering drug prices became a key campaign issues. Sun Pharmaceutical struggled in the U.S. in the 12 months to March.

Chinese drugmakers held six of the top 10 spots in the sales ranking for Asia, pressuring Indian rivals. Their sales are growing at a faster rate than those of their Indian rivals. Some, such as Shanghai Fosun Pharmaceutical (Group), in fourth, and Guangzhou Baiyunshan Pharmaceutical Holdings, in second, saw their sales more than double and even triple in the past five years.

Four Chinese drugmakers, including Shanghai Fosun Pharmaceutical (Group), Jiangsu Hengrui Medicine and Shanghai RAAS Blood Products, which was ranked 60th by sales, had a market capitalization of over $10 billion. They may be eclipsed by major Western and Japanese rivals in terms of sales but are nonetheless given high valuations by investors.

"Chinese pharmaceutical companies are doing well chiefly thanks to their own expanding market," Mizuho's Motoda pointed out. On top of rising income levels and an aging population, they are benefiting from the Chinese government's efforts to reform the industry, such as simplifying the process of approving new drugs. The Chinese market is expected to grow further. Although most major Chinese drugmakers make less than 10% of their sales overseas, their domestic market guarantees growth.

While the sales ranking is mostly dominated by Indian and Chinese names, Indonesia's Kalbe Farma came in 11th place with $1.4 billion. Kalbe Farma is Indonesia's largest drugmaker and is the largest listed drugmaker in Southeast Asia. It also sells health foods.

South Korean companies are increasing their presence, too. The ranking included Green Cross Holdings, 17th, Yuhan, 18th, and Daewoong Pharmaceutical, 20th. Celltrion, despite being below 30th place, has launched various new drugs in developed countries, including a rheumatoid arthritis drug in the U.S. and a blood cancer drug in the U.K. and Germany.

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