Between Rocks and Hard Places: The Southeast Asian Pharmaceutical Industry at a Juncture - Pharmaceutical Technology

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Between Rocks and Hard Places: The Southeast Asian Pharmaceutical Industry at a Juncture


Pharmaceutical Technology


Recently, GlaxoSmithKline announced the development of a $190-million vaccine plant, the company's largest investment of this kind in Asia. "Most companies have set up not only their manufacturing units here but also their distribution centers. This place is a hub for the industry and this has attracted many foreign talents here," explains Fok Tai Hung, Executive Director of the Singapore Association of Pharmaceutical Industries (SAPI). "Singapore is the place to be if you want to develop products" he adds. Though Singapore previously only had Hong Kong as a direct competitive threat, it finds itself unchallenged today, as Hong Kong lost a large part of its appeal when it joined the Chinese realm back in 1997.

Malaysia presents a different picture: the largest market, it is also structured in a radically different way than state-backed company, Pharmaniaga. This company is leading the sector and creates a very strong vacuum around it: exclusive concessionaire for hospital supplies. The company is enjoying the benefits of a captive market while making its presence strongly felt on the rest of the market. While most players are rather critical of this monopolistic competitor, they also have benefited from its quality leadership and have had to eliminate all forms of complacency to survive in such an extra challenging environment.

Some companies like Hovid (one of the top 3 players on the market) have spread their market risk widely. Exporting to 35 countries, the company generates 60% of its turnover outside of Malaysia and expects that figure to grow. It is also working on niche products such as tocotrienols and other vitamin E derivatives. With a large number of products pending registration abroad and a strong R&D culture, the company displays one type of strategy for Malaysian companies. Simply illustrated by Managing Director David Ho: "If we were depending only on the Malaysian market, the picture would be gloomy."

Meanwhile, others are trying their ways in the shadows of Pharmaniaga: while companies like Duopharma may very soon feel the blow of Pharmaniaga's investments in manufacturing capabilities and face an onslaught of similar products, like small-volume injectable, others choose a nondirect confrontation and work on their niche strengths. Kotra pharma is focusing on developing its dietary supplements in parallel to its prescription drugs and is putting emphasis on brand-building in the region.

Apex Healthcare has sold it historical retail business to two of the region's leading retail outlet chains in Singapore and Malaysia and has undertaken a thorough strategic reshuffling. The boldest move is the company's venturing into China through Apex's equity participation in a regional pharmaceutical company in the Fujian province that has recently added a manufacturing component to its existing distribution and retail business across the Fujian region.

For Dr. Kee Kirk Chin, the company's Managing Director, "focusing purely on manufacturing issues is a wrong calculation, despite the fact that there will always be a niche for contract manufacturing here." In this case, new markets exit and stepping up in the big Chinese game are the keystones of the company's strategy. Others are trying to develop foreign cooperations alongside different lines.

For example, the Antah Healthcare Group has in-licensed nanotechnology products from US companies and is very confident about the future of these cutting-edge products on the regional markets. YSP Industries, a Malaysian company with a sister company in Taiwan has for its part chosen the path of regional development. Following the 1997 financial crisis, the company established local marketing outlets working to register its products across the Southeast Asian region. Also benefiting from factories in Malaysia, Taiwan, China and the United States, the company displays a versatility that allows it to be confident despite the piling challenges.

Strength in adversity

Thailand's very specific market organization, here again dominated by a state-controlled entity, has helped create a sector that has resilience and a strong fighting spirit. With ever-increasing pressure on the health system, and the pressure being in part vented out over the manufacturers, local players have learned to control costs and look for product opportunities. Their hunger for new innovative technology is genuine and the market has the capacity to absorb it. The real challenge will be for local manufacturers to pass through this testing time with their eyes cast abroad.


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