Processing Magazine

Asia offers big business opportunities to pharma companies

February 12, 2013

Asia is emerging as a strategically important location for global pharmaceutical companies that are looking to take advantage of the opportunities available in terms of R&D, manufacturing and market, according to a new report from Jones Lang LaSalle.

The latest Global Life Sciences Cluster Report shows that pharmaceutical multinationals are looking to establish a more prominent presence in Asia, as the continent provides a huge customer base and rising demand in emerging markets. This is leading to a growth in manufacturing operations and a surge in research and development facilities, making Asia an attractive location for businesses, Arabian Gazette says.

Asia presents immense opportunities for creating and selling new drugs, explained David Wilton, Asia Pacific regional director for industrial and logistics at Jones Lang LaSalle. Pharma companies have to optimize costs, especially those related to facility and real estate costs, so naturally, when a significant part of production is intended for the Asian markets, businesses look to establish their own base there, relying on strategic site selection, with easy access to industry resources and favorable innovation and expansion conditions, he added in the report.

RELATED: Pharmaceutical industry in strategic crisis

One of the most thriving markets and among the fastest growing economies globally is India and many biotechnology companies have been shifting their focus toward it, commented Nirav Kothary, head of industrial services at Jones Lang LaSalle India. The Indian government is planning to launch a venture capital fund and to invest more than $365 million in R&D in the pharmaceutical industry. The Indian finance ministry has already approved about $333 million of investment in the sector from foreign companies, thus opening up for international businesses, Kothary said.

Meanwhile, the report also reveals that companies have adopted different approaches so that they can adapt to various market conditions. For instance, in mature markets pharma companies have been focusing on "right sizing," whereas in emerging markets the emphasis is placed on growth in an effort to snatch market share. For some of the biggest players on the market -- such as Novartis, Sanofi, Pfizer and GlaxoSmithKline -- emerging markets already account for more than a third of their total revenues.

As a response to global companies invading the continent, local pharmaceutical companies in Asia are consolidating, trying to compete with the bigger manufacturers, forming a number of life sciences clusters. Such clusters have traditionally focused on outsourced manufacturing but are now prioritizing R&D and infrastructure, Jones Lang LaSalle noted.

Over the next few years, China is predicted to become the second largest pharmaceuticals market in the world, with sales estimated to reach $160 billion by 2016. It is very likely that multinational companies will invest in R&D in China because the country not only provides huge market opportunities but is a significant talent pool.

Indonesia is also emerging as an important location, with double-digit market growth that is set to make the country the sixth-biggest pharmaceutical market in the region by 2016. The local government has been very supportive of the industry and this is a key factor for international pharma companies eyeing the country as a potential strategic location for business development.