Eli Lilly invests $200 million in Suzhou to prepare for growth in the Chinese market.
On October 11, Eli Lilly announced plans to expand the production of its Suzhou factory, which will produce its blockbuster diabetes and weight-loss drugs. "Demand for Eli Lilly's products from Chinese patients is strong and growing." Eli Lilly's management said.
Eli Lilly is one of the companies that is feeling the momentum of China's growth, as are Merck and AstraZeneca. These are three of the world's most important pharmaceutical companies. Eli Lilly is currently the world's largest pharmaceutical company by market capitalization, AstraZeneca was once China's largest multinational pharmaceutical company in terms of sales, and Merck & Co., Ltd. holds K drugs with sales of more than 100 billion yuan. Now they all see growth potential in the Chinese market.
Over the past five years, the pandemic has disrupted supply chains, and China's pharmaceutical policies and markets have undergone drastic changes. Now that the new rules are becoming clearer, multinational companies have weathered the turmoil and adapted to the new rules. They redeploy and prioritize. The new man has replaced the old man, the new medicine has replaced the old drug, and now it is a new game.
They are growing
Eli Lilly is making a global stride.
Eli Lilly China's only factory in China is in Suzhou, and it announced that it will invest approximately $200 million to upgrade the capacity of its Suzhou plant and expand the production of Eli Lilly's innovative drugs for type 2 diabetes and obesity in China.
Edgardo Hernandez, Executive Vice President and President of Manufacturing Operations at Eli Lilly, said at the launch ceremony of the Suzhou capacity upgrade that Eli Lilly is carrying out the most ambitious production expansion plan in 150 years by building new factories or expanding the capacity of existing factories. The Suzhou plant is an important part of the global production network.
Eli Lilly has factories in 9 countries and R&D centers in 7 countries. Eli Lilly's Suzhou plant produces diabetes-related products such as insulin, which are exported to Europe as well as to China.
In May, Eli Lilly announced an additional $5.3 billion to expand its Indiana facility. Since 2020, Eli Lilly has announced a cumulative $16 billion investment plan to expand manufacturing facilities in Ireland, Germany and the United States.
This ambitious willingness to invest stems from the fact that demand for its blockbuster drugs outstrips supply. Since 2022, Eli Lilly has doubled its global production capacity for incretin injectables for the treatment of type 2 diabetes and obesity.
This demand is also strong in China. There are many diabetic patients in China. Between 2011 and 2021, the number of people living with diabetes increased from 90 million to 140 million. Overweight and obesity are important factors in the rising prevalence of diabetes.
In May this year, Eli Lilly's tirpatide injection was approved by the National Medical Products Administration (NMPA) for adults with type 2 diabetes who are still poorly controlled with metformin and/or sulfonylureas on the basis of diet control and exercise. In July, the drug was approved in China for weight management.
"Demand for Eli Lilly's products from Chinese patients is strong and growing." Eli Lilly's management said.
Eli Lilly is currently the world's largest pharmaceutical company by market capitalization. Merck holds a global sales volume of more than $25 billion. However, in the Chinese market, Merck has attracted the most attention for its HPV vaccine. This product was hard to find for a long time. In 2023, Merck will surpass AstraZeneca to become the largest multinational pharmaceutical company in China in terms of revenue by virtue of the performance of the HPV vaccine in the Chinese market.
AstraZeneca is also a core multinational pharmaceutical company in the Chinese market.
AstraZeneca has long been the largest multinational pharmaceutical company in the Chinese market in terms of sales. However, the company's sales in China declined in 2022. Fortunately, AstraZeneca will regain growth in the Chinese market in 2023 and the first half of 2024. In the first half of 2024, AstraZeneca's revenue in the Chinese market was US$3.378 billion, a year-on-year increase of 15%. AstraZeneca's business in China has sunk deeper than most multinational companies, and it has deployed more power in the county market.
Zhang Cheng, the business leader of a multinational company, told the first financial reporter that the reason why the company's business scale in China is not as large as AstraZeneca's is that it has entered municipal cities at most, while AstraZeneca has penetrated into China's counties.
Wang Lei, AstraZeneca's Global Executive Vice President, Chairman of International Business and President of AstraZeneca, is also an active bull in the Chinese market. During last year's CIIE, he told Yicai: "In the whole industry, we value the same things more. We think the certainty is simple: China's market is the largest, China's supply chain is the best, and China has the world's best manufacturing and scientists. ”
Adaptation and evolution
"We should say keep up with the times, not just adapt." Zhang Cheng said when talking about the reform of China's market policy.
In recent years, China's policy reforms in medical insurance and medicine have been drastic. The main direction of these policies is to shape an inclusive healthcare system that is affordable for health care and patient spending, while maintaining the motivation of domestic and international pharmaceutical companies. These policies are intensively introduced, and not always they are just right. For example, the pace of drug marketing approvals has accelerated, and the frequency of updating the medical insurance catalogue has increased, which has made multinational companies happy. The soul bargaining of medical insurance negotiations has put a lot of pressure on multinational pharmaceutical companies.
The pandemic once disrupted the global supply chain of multinational pharmaceutical companies. These factors are superimposed, and it can be said that in the past five years, multinational pharmaceutical companies and even all multinational companies have experienced a period of shock. Now that the epidemic has passed, policy adjustments are gradually in place, and enterprises are gradually adapting to the new normal. Some multinational companies such as Eli Lilly, Merck and AstraZeneca have achieved growth again through innovative drugs and new local strategies.
According to Eli Lilly executives, since 2018, Eli Lilly has had 40 drugs (or new indications) approved in China, of which more than 20 have been included in the national medical insurance.
"We feel that not only adaptation, but also the opportunity to work with the government or policymakers to create some policies that are better for patients, or related support initiatives." Zhang Cheng said.
China has a large number of patients with various diseases and has always been an important demander for innovative drugs. Moreover, some policies to promote foreign investment and innovation are also being introduced.
"The government's series of policies to support innovation, coupled with the abundant local talent resources, have laid a solid foundation for Eli Lilly's continued development in China. Eli Lilly has about 3,200 employees in China.
De Herland is the first female head of Eli Lilly China, and she will take office in early 2024. Like Dehran, many multinational pharmaceutical companies have recently adjusted their management teams in China.
From 2024 alone, this change is obvious.
Earlier this year, Hui Ming Yu took over as General Manager of GSK China, following the promotion of Qi Xin, General Manager of GSK China, to Vice President and Head of Vaccines for Greater China and Intercontinental Region. After Zhang Ying was transferred to the position of Chief Commercial Officer of Novartis International Business Division, Leo Lee, President of Novartis Japan, took over as President of China. In January this year, Zhao Ping became the first female head of Astellas in China.
If we broaden our horizon to the field of medical devices, the top management of multinational companies in China will change more frequently. In July, Philips announced that Liu Ling was appointed President of Philips Greater China, replacing the retired He Guowei. In February, Illumina, the world's leading genetic testing equipment company, announced that Zheng Lei was appointed as global senior vice president and general manager of Greater China, replacing the departing Li Qing, who jumped to Waters Corporation as vice president and general manager of Greater China. If it is relaxed to after 2020, the list of top management changes of multinational pharmaceutical and medical device companies will be longer.
A generation of new people for the old shows the changes that the Chinese market is undergoing and the Chinese market is entering a new era.
Tough bones
Not all multinational pharma companies can find the right way to open the Chinese market.
Bristol-Myers Squibb is one of the world's top 10 multinational pharmaceutical companies, and its failure in the Chinese market is particularly evident in its well-known O drug. Drug O is the first PD-1 inhibitor marketed in the world and the first PD-1 inhibitor marketed in China, and is currently one of the standard drugs used for the treatment of cancer in the world. It was approved by the National Medical Products Administration in June 2018, ahead of Merck's K drug, and has so far obtained nine indications in the Chinese market, including lung cancer and gastric cancer.
In 2023, the global sales of O drugs will exceed 10 billion US dollars, and K drugs will exceed 25 billion US dollars in one fell swoop, becoming the world's largest single drug sales. However, in the Chinese market, O drug lacks a sense of presence, but is submerged in similar products developed by many Chinese pharmaceutical companies.
Although both K and O drugs are blockbuster drugs in the world, their sales in the Chinese market account for a low proportion of their global sales. This is especially true of Bristol-Myers Squibb.
With the failure of O Pharmaceutical in the Chinese market, the future of Bristol-Myers Squibb's business in China is also uncertain, despite the fact that it has previously formulated and tried to advance the "China 2030 Strategy".
"He won't spend a lot of effort to lay out," a CEO of a Chinese pharmaceutical company told reporters, adding that Bristol-Myers Squibb may go with the flow in the Chinese market and not invest more financial and material resources.
Bristol-Myers Squibb officially denied this claim to CBN. "We are firmly implementing the company's 'China 2030 Strategy' and accelerating the introduction of innovative drugs into China."
Bristol-Myers Squibb's case shows that the Chinese market is indeed a tough nut to crack.
China is the world's second-largest pharmaceutical market after United States, but not all large multinational pharmaceutical companies have benefited much. From the pricing of drugs to the intensity of competition in the market, the two markets are also very different.
The size and future potential of the market are closely related to the willingness of multinational pharmaceutical companies to invest and innovate in China. The larger the market China can offer to multinational pharmaceutical companies, and the clearer the market rules, the more attractive they will be to invest in manufacturing, and even early-stage R&D and innovation.
So far, Eli Lilly's total planned investment in Suzhou has approached 15 billion yuan. Eli Lilly revealed that the new investment in Suzhou is expected to create about 120 high-quality jobs and consolidate Eli Lilly's innovation and production capacity in China's pharmaceutical field.
AstraZeneca has always been a major investor in China, with sales in the Chinese market accounting for a significant proportion of its revenue. Earlier this year, AstraZeneca also announced that it would invest $475 million in a new small molecule drug plant in Wuxi High-tech Zone.
The investment of these multinational pharmaceutical companies in China is not only aimed at the Chinese market. Eli Lilly's expanded Suzhou plant will meet both the needs of exporting to the European market and supplying domestic drugs, and AstraZeneca's Wuxi plant will also supply specific small molecule drugs to domestic and foreign markets.
(At the request of the interviewee, Zhang Cheng is a pseudonym)
(This article is from Yicai)