An Executive Country Review: South East Asia An ... - EC Reviews

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Local manufacturers who cannot comply will have to look for contract manufacturing. allow them to better compete domestically, regionally, and even beyond. Roy Lembong is for instance considering that Novell is positioning itself on a par with central and eastern European manufacturers in terms of quality ambitions, and taping developed markets such as Australia, or southern Europe. For Mensa, a group built from an API trading and distribution company that also manufactures and distributes pharmaceutical finish forms, the challenges of the environment bring countless opportunities and it is up to the fittest to survive and thrive. “Those who cannot comply will have to look for contract manufacturing. Local GMP was the first stage of challenge for the local manufacturers, CGMP was the second, and we, in our company are already thinking about the third stage to be able to service US and European markets. There will be opportunities for those serious in this business,” explains Jimmy Sudharta, President Director of Mensa Group. Indeed, he highlights a point that many across the region like to put forward: The sector across the ASEAN region is facing radical transformation movement: the cost of compliance and the ever-increasing standards of quality throughout the life sciences industry pushes out of the game many medium to small size players who have been reacting too little or too late. And, the sector will concentrate and change its shape in the next half decade: This will also press forward for a concentration movement that is likely to affect many, and present local and foreign pharmaceutical players with acquisition opportunities. Malaysia and Singapore: beyond PICs Both members of the pharmaceutical inspection Cooperation scheme (PICs), Malaysia and Singapore are the only Asian representatives of the club. Therefore, they are considered like the quality heralds of the region, adopting CGMP standards ahead of the rest of Southeast Asia. For Singapore, host to mainly international original drug makers, the membership is a natural step. Singapore’s pharmaceutical industry is driven by the multinationals that have brought in their seamless standards before the country even joined PICs. There are only two noticeable local generic companies that try to find a place in the sun, and the health system is meant to favor originators. With a total market of $350 million, the cake isn’t as appetizing as Indonesia or Thailand, yet Big Pharma investment is very steady. 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 82 Pharmaceutical Technology SEPTEMBER 2006 www.pharmtech.com
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 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. 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 cuttingedge 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. In the Philippines, too, reform is on the way and the business conditions are evolving fast. As a local medium-size player, you stand a chance to gain benefits from these reshufflings, as your local knowledge will always prime. Indeed, companies like United Laboratories, a leader in the Philippines, have grown from modest players to giants with increasingly global outlooks. And, all these companies conserve the benefits of market recognition and local knowledge that are indispensable to succeed in challenging markets such as Southeast Asia’s. The changing shape and business conditions in the Southeast Asian pharmaceutical industry should in turn open avenues of cooperation between US or European companies and Asian players. Amongst similar companies by size and profiles, there are plenty of synergies to be developed. With local companies often being able to tap into consumer pools ranging from 25 to 220 million people for one country, and up to potentially 520 million consumers across the region, market prospects are appealing, even when considering the low disposable-income levels. Should a western company be the holder of an innovative technology that can be easily transposed in Asia, and many success stories could blossom and thrive. The ethos and business abilities of local players, from the leaders through to the challengers, are very convincing. Their faith in the market is genuine and their will to succeed is fundamental. Like-minded business people from across the world always find subjects of common interests. At the time of over-focus on China and India, it is well worth to step back, take some prospective, and see the opportunities waiting to be realized in Indonesia, Malaysia, Thailand, the Philippines, and Singapore. Pharmaceutical Technology SEPTEMBER 2006 83
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