I would agree that the scenarios for Elite are two-fold: partnership or buyout. Certain things will play out and decide that direction. Nonetheless, I would concur with many who believe that Humanwell offers an excellent avenue into the Chinese market. If we put aside the US FDA issues and focus solely on China for a moment, we can see some significant facts that would lead one to believe Elite could use the Humanwell (Epic) partnership to an advantage in China and here are a range of facts I collected that suggest why that is true...
The Chinese market is largely generic, with little R&D investment by local firms, as the bigger global firms have the largest R&D spending. This is moving the Chinese market toward more internal consolidation (M&A).
If you're a biotech or Big Pharma company, your world is not only growing, it's standing on its head. According to the Institute for Healthcare Informatics, worldwide spending for prescription branded drugs and generic medicines will jump 30% from 2013-2018 -- a compound annual growth rate of over 5% -- leading to a jaw-dropping $1.3 trillion in annual global drug sales.
The market is also radically shifting position, with traditional strongholds, such as Japan and Europe, flipping over, and emerging markets, such as China, becoming the head. The result is that healthcare investors need a new strategy; they need a way to keep an eye on emerging markets so they aren't left in the lurch because they don't understand the true engines for growth in their holdings.
China, total pharmaceutical sales in 2013: $86.8 billion?China accounts for 20% of the world's population. Assuming the country's goal of universal coverage for its 1.35 billion citizens by 2020 stays on track, China should make up 34% of the global growth in medication spending over the next five years. In fact, many believe China is destined to become the world's biggest pharmaceutical market.
Both Chinese and foreign companies have been hurt as all drug manufacturers must compete in local bidding to sell their medicines in public hospitals.
Drugs that failed to make it to the market in the U.S. and elsewhere are finding new life in China.
In 2013, Bristol-Myers Squibb Co. stopped global trials of a first-line liver-cancer drug after it failed to outperform a rival. Instead, the company licensed the drug, brivanib, to a Chinese startup.
The startup, Shanghai-based Zai Lab Ltd., sees high potential for brivanib in China because its rival—sorafenib, developed by Bayer AG and Onyx Pharmaceuticals Inc.—costs around $7,500 for one month of treatment and isn’t covered by national insurance.
“We hope to give the Chinese patients a more reasonable price,” said Samantha Du, founder of Zai Lab, one of several Chinese firms joining forces with Western pharmaceuticals over partially developed drugs in China. They’re chasing a market where the best new global drugs face long delays while regulators clear a speedier path for Chinese medications.
For one thing, in China a drug doesn’t have to prove superiority over existing drugs—a major hurdle in the U.S., where 90% of candidates get dropped in the clinical-trial process. By finding local partners in China, global drugmakers have a second chance to make money on drugs that have fallen short elsewhere. Beijing, which wants to build a competitive domestic pharmaceutical market, welcomes such partnerships.
The government in China knows it needs to allow doctors to prescribe more painkilling drugs to patients, especially those with cancer. China accounts for 22 percent of new cancer cases worldwide, and total cancer deaths in the country increased 74 percent from 2006 to 2015. “As people’s quality of life improves, they won’t just suffer through the pain,” says Dr. Huang Bing, a pain specialist at Jiaxing City First Hospital in Zhejiang province. “They naturally want to buy better service and pain-free health care.”
I would conclude with one final point…Imagine the following in the USA…China has long tried to clean up drug approvals. In 2007, it executed Zheng Xiaoyu, who had helped create the Chinese FDA, but who as the head of it was accused of accepting bribes from drugmakers trying to win approvals.
