Q1 2019 Financial Reports: Foreign Pharma Giants Shine in China's Evolving Pharmaceutical Market

Source: WeChat Official Account “PharmaCube”

Foreign pharmaceutical companies have always been important participants in the Chinese pharmaceutical market, ranking high in sales volume, especially in therapeutic drugs. Currently, most foreign pharmaceutical companies have disclosed their Q1 2019 reports, and this article summarizes the disclosed sales figures and descriptions for the China region.

AstraZeneca (AZN.US)

AstraZeneca was very likely the sales champion in China’s large hospital market in 2018 and continued to deliver strong performance in the first quarter of 2019. Excluding exchange rate fluctuations, sales in China grew by 28% to $1.242 billion (approximately RMB 8.4 billion). Among these, oncology drugs saw a 51% increase to $284 million (approximately RMB 1.9 billion), while respiratory drugs rose by 31% to $400 million (approximately RMB 2.7 billion).

Pfizer (PFE.US)

Although Pfizer did not disclose specific sales figures for its China region, it noted that the 25% growth of its Upjohn division was primarily driven by China. It is highly likely that more than half of the division’s $1.152 billion (approximately RMB 7.8 billion) in sales came from China.

The last column in the table is emerging markets:

Pfizer did not provide specific details on the performance of its innovative drugs in China, but it mentioned strong growth for Eliquis (apixaban), Ibrance (palbociclib), Prevnar 13/Prevenar 13 (13-valent pneumococcal polysaccharide conjugate vaccine), and Xeljanz (tofacitinib).

Review the emerging market revenue and growth for these products; they have indeed performed well, likely driven primarily by China.

Pfizer’s “Emerging Markets” refers to, but is not limited to, Asia (excluding Japan and South Korea), Latin America, Eastern Europe, the Middle East, Africa, Central Europe, and Turkey.

Sanofi (SNY.US)

Sanofi’s Q1 sales in China reached €798 million (approximately RMB 6 billion), a year-on-year increase of 22.3%. Strong growth was reported in China for the oncology drugs Thymoglobulin (rabbit anti-human thymocyte immunoglobulin), Eloxatin (oxaliplatin), and Taxotere (docetaxel); the prescription drugs Plavix (clopidogrel) and Avapro (irbesartan); and Pentaxim (combined diphtheria, tetanus, pertussis, inactivated poliovirus, and Haemophilus influenzae type b [conjugate] vaccine).

Bayer (BAYRY.US)

According to the conference call minutes of Bayer's Q1 2019 report, the revenue of its pharmaceutical division in China reached €776 million (approximately RMB 5.9 billion), a year-on-year increase of 24%, and it aims for its annual revenue to exceed €3 billion by 2022.

Xarelto (rivaroxaban) generated €75 million in revenue, representing a 100% increase. Legacy drugs acarbose, Adalat (nifedipine), and Avelox (moxifloxacin) continued to grow.

Roche (RHHBY.US)

Roche Delivers Stunning Performance in China with 63% Year-on-Year Growth, but Does Not Disclose Specific Q1 Revenue Figures. The Growth Is Primarily Driven by Its Oncology and Biologic Drugs, Such as Alecensa (Alectinib), Avastin (Bevacizumab), Herceptin (Trastuzumab), and Perjeta (Pertuzumab).

In 2018, its pharmaceutical sales in China amounted to CHF 2.307 billion (approximately RMB 15.5 billion), representing a 27% increase.

Novartis (NVS.US)

Novartis’ Q1 Report: Emerging Markets Revenue Reaches $2.2 Billion (Approximately RMB 15 Billion), Up 12% Year-on-Year Excluding Exchange Rate Effects, Driven by Double-Digit Growth in China; However, Novartis Did Not Provide a Detailed Breakdown of the High-Growth Products in China. Novartis defines emerging markets as all countries excluding the United States, Canada, Western Europe, Japan, Australia, and New Zealand.

Merck & Co. (MRK.US)

Merck & Co. is also one of the foreign enterprises with outstanding performance in China. Excluding exchange rate fluctuations, its pharmaceutical sales in China grew by 67% year-on-year in the first quarter, reaching $725 million (approximately RMB 4.8 billion). The main drivers were vaccines and oncology drugs.

Novo Nordisk (NVO.US)

Novo Nordisk’s China region reported Q1 revenue of DKK 3.375 billion (approximately RMB 3.4 billion), representing a 9% year-on-year growth excluding exchange rate fluctuations, primarily driven by the growth of third-generation insulin and GLP-1 products.

GlaxoSmithKline (GSK.US)

GlaxoSmithKline disclosed only its international market revenue excluding the United States and Europe, which amounted to £1.466 billion (approximately RMB 13 billion) in the first quarter, representing a mere 2% growth when excluding exchange rate fluctuations. During the analyst conference call, management did not provide specific figures in response to analysts’ questions, expressing optimism solely about the Chinese market and hoping to promote its products Seretide (Salmeterol and Fluticasone Propionate Powder for Inhalation) and Cervarix (Bivalent Human Papillomavirus Vaccine [Adsorbed]).

In fact, as Merck’s 9-valent HPV vaccine has already been launched in China, the market space for bivalent HPV vaccines is relatively limited. Furthermore, following certain incidents involving GlaxoSmithKline in China in 2013, the company’s promotional efforts have consistently faced challenges.

Summary

Overall, foreign pharmaceutical companies have experienced rapid growth in China, achieving high sales growth on a large base. Companies with blockbuster drugs, such as Merck & Co. and Roche, recorded astonishing growth rates exceeding 60%, while AstraZeneca, which has deeply cultivated the Chinese market, achieved sales revenue of over RMB 8 billion in a single quarter. By comparison, Hengrui Medicine, frequently mentioned in discussions about domestic innovative drugs, reported operating revenue of RMB 4.967 billion in the first quarter of 2019, representing a year-on-year increase of 28.77%.

In terms of therapeutic areas, oncology drugs were the biggest highlight, with most multinational pharmaceutical companies achieving robust sales growth in this segment. Additionally, vaccines and respiratory medications also served as significant growth drivers.

The growth rate of China's pharmaceutical market will decline to 3–6%.

Previously, IQVIA predicted in its report “The Global Use of Medicine in 2019 and Outlook to 2023” that the growth rate of China’s pharmaceutical market would decline to 3–6%, whereas the overall growth rate of foreign companies in the first quarter of 2019 was significantly higher than this range, possibly due to the following reasons:

The rapid inclusion of innovative drugs in the national medical insurance has reduced patients' financial burden and increased demand, significantly benefiting foreign pharmaceutical companies;

The new generation of consumers has a higher awareness and acceptance of innovative drugs, as well as sufficient purchasing power, which is prominently reflected in self-paid vaccines;

The remarkable efficacy of next-generation anti-tumor drugs, coupled with a significant increase in the financial capacity of patients and their families, has enabled out-of-pocket oncology medications to rapidly expand their sales volume. Trend Outlook

Amid the broader context of healthcare insurance cost containment, eliminating expenditures on ineffective drugs to meet patient demand for therapeutic medications has become a key focus of the National Healthcare Security Administration. Suppliers of therapeutic drugs will benefit from this process. In addition to the overall sales growth rate of foreign companies being significantly higher than the industry average, large domestic pharmaceutical enterprises have also performed well overall, clearly demonstrating that the “Matthew Effect” in the pharmaceutical industry is taking shape.

Individuals born in the 1960s in China are approaching the age of 60. Both this cohort and those born in the 1970s have benefited from the economic prosperity following the reform and opening-up policy, resulting in strong purchasing power. Meanwhile, the majority of this generation are proficient in internet usage and demonstrate high levels of awareness and acceptance of innovative drugs. These factors collectively facilitate the promotion of innovative pharmaceuticals.

Overall, therapeutic drugs and innovative medicines have become the key development focus of China’s pharmaceutical market, and foreign pharmaceutical companies have already benefited from this trend due to the advantages of their product portfolios. We hope that domestic pharmaceutical companies will promptly adjust their product structures, develop innovative drugs with clinical advantages, seize industry trends, and achieve healthy growth. (Editor: Liu Rui)