Jones Lang LaSalle report sees life sciences sector place greater emphasis on Asia as a market, manufacturing and R&D location
Pharmaceutical multinationals are reinforcing their presence in Asia, according to Jones Lang LaSalle’s latest Global Life Sciences Cluster Report. Widening patient pools and increasing consumer demand in emerging markets is driving the growth of sales offices, manufacturing operations as well as research and development (R&D) facilities around Asia.
“Beyond the cost of developing new drugs and treatments, facility and real estate costs are among the highest expenses for life sciences companies and such firms are optimising their real estate and location strategies to capture market opportunity in Asia,” said David Wilton, Asia Pacific Regional Director for Industrial and Logistics at Jones Lang LaSalle. “It is also apparent that the industry is becoming more strategic with regards to site selection, choosing locations with rich industry resources, capital and a higher propensity for discovery and innovation.”
“India is actively working to attract more funding into the biotechnology sector,” says Nirav Kothary, Head – Industrial Services, Jones Lang LaSalle India. “The Indian Government is in discussion with export finance institution, Exim Bank, to set up an INR 2,000.0 crore ($365.6 million) venture capital fund to invest in pharmaceutical R&D.”
“There are indications that the country will again welcome outside investments in the domestic pharmaceutical sector, with the Indian finance ministry approving roughly INR 180.0 crore ($333.0 million) in investments by foreign companies,” says Nirav Kothary. “This came on the heels of a Government decision to permit foreign investors to own up to 49%t of established Indian firms. Significant foreign deals include Abbott Laboratories buying Mumbai-based Piramal Healthcare’s Indian business for INR 20,348.4 crore ($3.7 billion) in 2010 and Daiichi Sankyo gaining controlling interest of giant generics manufacturer Ranbaxy Laboratories for INR 22,974.0 ($4.2 billion) in 2008.”
The current rules allow foreign investors to start a company in India once they have obtained approval to get a share of a domestic drug company on conditions that they won’t stop making the cheap drugs they currently produce, and that they will keep investing in R&D with Indian partners for five years.
Highlights from the report include:
- Whilst in most mature markets, portfolio optimisation has been focused on ‘right sizing’ due to waning sales and duplicate facilities on the back of extensive M&A activity; in emerging markets, life science companies are strategically growing in order to capture market share and savings opportunities.
- Four of the largest global pharmaceutical companies – Pfizer, Novartis, Sanofi and GlaxoSmithKline – already earn a third of their revenues outside of their traditional markets.
- Domestic pharmaceutical companies in Asia are consolidating and expanding outside their home bases, competing with Western multinationals for space in the region’s most dynamic life sciences clusters.
- Although emerging clusters in Asia have been an industry choice for outsourced manufacturing, they are now focusing on strengthening their R&D capabilities and infrastructure based on increased local demand and potential economic upsides.
- In recent years, India, China and Singapore have dedicated resources towards funding intellectual capital, business parks and incubator centres while remaining cost effective as a R&D destination.
- India and China are launching initiatives to encourage domestic start-ups and the protection of intellectual property, while promoting the return of Western-trained scientists to help spark domestic economic development. The Chinese government is providing US$1.6 billion in funding to stimulate domestic R&D drug research programs, along with stronger intellectual property protection, to seed future domestic life sciences innovation.
- Japanese firms have engaged in intense acquisition activity in Asia and globally in recent years. Japan ranks second globally in terms of prescription drug sales and has the region’s second highest total health expenditure.
- By 2016, China is expected to leapfrog Japan to become the world’s second largest pharmaceuticals market with sales of around US$160 billion. Despite its eroding cost advantage through rising wages, currency appreciation and inflation, China is emerging as a prime candidate for R&D investment due to its talent pool and strong government support.
- Fuelled by a large population base and an expanding middle class, the life sciences industry in India has achieved double-digit growth in many areas and the country has the potential to become a major pharmaceutical hub and lucrative destination for clinical trials.
- Another double-digit growth market, Indonesia, is anticipated to rank as the sixth largest pharmaceutical market in the region by 2016. Changes in legislation will boost the country’s attractiveness and tap into increasing outsourcing opportunities from Western countries.
- Already housing contract research and manufacturing activities, Singapore’s life sciences clusters are focusing on the high-tech aspects of research and innovation. Supported by strong intellectual property protection laws, stable political structures and favourable tax policies, growth in the industry is expected to continue.