The last two decades has witnessed strong growth of China’s biopharma industry as it has moved into position as the world’s second largest pharmaceuticals market. This is driven by economic growth, urbanization, a large aging population, as well as greater access to the national healthcare insurance programs.
But tapping into this market for most Western bioprocess suppliers has been daunting to many. Regulations as well as political uncertainty are just two of the current challenges. Many bioprocess suppliers rely on distributors to enter this market. However, an underlying factor in managing distributors in any growing segment is ensuring your products get the attention they deserve, especially when your distribution partner is also potentially representing dozens of other suppliers at the same time.
According to our recently released Top 60 Distributors of Bioprocessing Supplies in China, China is by far the biggest emerging market for pharmaceuticals, with growth expected to reach USD $175 billion by 2022 as healthcare total expenditures grow at double digit rates.1 The structure of China’s pharmaceutical consumption trends toward a greater market share of biological therapeutics, especially mAb therapeutics, with the current wave of biosimilar/biogeneric mAb development by domestic developers as well as mAb therapeutics from multinational companies entering China. Table 1. shows that the pace of mAb launches by domestic developers has accelerated in recent years, though the peak has not arrived yet.
Opportunities for Western bioprocessing vendors
The wave of the mAb pipeline growth by domestic developers has created unprecedented market demand for bioprocessing equipment, consumables, and instruments. With a population of 1.38 billion, the China bioprocess instruments market alone was estimated at USD $1.18 billion in 2016 and is expected to sustain robust growth of around 20%.
This round of market growth of bioprocessing equipment will benefit Western vendors to a greater extent than their domestic peers as the latter starts from a relatively low baseline. As a result, Western bioprocessing vendors are seeing an increase in their presence and investment in China.
- In November 2019, Thermo Fisher opened its Pharma and Biopharma Customer Solution Center in Shanghai. This is another strategic move after the company upgraded its clinical trial (Suzhou) facility earlier that year. The center will dedicate its efforts in chromatography and mass spectrometry-based analysis process and solutions to facilitate speedy drug development and clinical translation. It will also provide technical support and training services for clients.3
- In July 2019, Sartorius opened its China Bioprocessing Tech Support Center in Zhangjiang, Shanghai. The company planned this tech support center for half a year as its bioprocessing business has grown robustly in recent years with the gradual commercialization of biopharma projects in China.4
- In December 2019, Avantor also opened an innovation and customer support center in Shanghai, China. The new Avantor® laboratory will focus on enhancing industry capabilities in the development and manufacture of safe and effective biological medicines such as mAbs and cell and gene therapy by helping biopharma companies optimize their mAbs purification processes and accelerate their capabilities in raw material testing and qualification for cell and gene therapy.5
But the vast majority of bioprocess suppliers will not invest in brick-and-mortar R&D facilities and labs in China. Rather, they will partner with distributors already located in China or Singapore to enter this rapidly growing market. This entry strategy has many up-sides. But to develop an effective partnership with a distributor in China requires planning, investment, and time. It is never enough, in any region, to simply plan to drop-ship orders made by a distributor. Expecting top performance from a distributor without supporting them is a recipe for long-term problems.
Finding committed distribution partners
While the big names in the bioprocessing supplies industry, such as Pall, Thermo Fisher, Sartorius, have long established their strongholds in China, many relatively smaller vendors are also finding China indispensable for their future growth. Normally, this starts with seeking local distributor representation. Distribution channels provide access to end-users, facilitate delivery, and provide technical support.
A distributor in China is also indispensable for Western vendors in many situations:
- Domestic Chinese companies have a reputation for delayed payments, which makes collection of account receivables a time-consuming effort. Many Western companies rely on their distributors in China for such tasks. When a purchase order is processed, the distributor deposits the amount to the vendor before it gets the payment from the client.
- Some companies also use their distributors to process certain transactions that if processed by their own company may cause problems with compliance.
- The key function of a traditional distributor in China is business development, collection of account receivables, as well as storage and delivery of products to end-users.
However, it is not easy for Western bioprocessing exporters, especially for new companies and brands with limited brand awareness, to find good and committed Chinese distributors. Although there are many Chinese distributors available, establishing a strong distributor relationship can require guidance.
Much of the current situation is “new territory,” as well. Before 2002, foreign vendors either sold their products via Hong Kong distributors or domestic distributors with export/import permission. This led to a cluster of relatively few, but big channels with safe profit margins.
However, in 2002, China decentralized the approval process for export/import permission, paving the way for smaller private channels to open up. Today the scenario of distribution in China’s biopharma industry tends to involve a very low concentration ratio. Many small distributors work in this sector with an opportunistic attitude, unwilling to make a commitment to vendors.
For example, passive marketing is common. Chinese distributors will form a collaboration with a Western vendor, put the brand name on their website, and wait for purchasing orders without much proactive selling. Besides business development, brand promotion and technical support is also in high demand, but only very committed distributors are willing to meet this critical requirement. Therefore, identification of and collaboration with distribution partners fully committed to the product is a key to success both before and after a vendor establishes its own subsidiary in China.
Distributors are in the driver’s seat
Due to the demand for committed distributors with strong performance, and network in the industry, distributors in China are becoming more selective. They want to see products that have already made an impact in China, and whose brand names are not completely new to end-users.
The good news is that many returnee scientists are playing an important role in bioprocessing industry in today’s China, so Western vendors whose products have already been in widely use in the United States and the EU will have better chances to find committed distributors.
It’s also important that Western vendors participate in the marketing of their products in China, show product selling points relative to the Chinese market, and generally support their distributors in training, technical support.
A key selling point for Western bioprocessing vendors is quality image. And U.S./EU GMP certification is critical to this heavily regulated market. Many bioprocessing end-users have aspirations to export their biologics within the next decade.6 To win commitment from one’s distributors, Western vendors also need to show commitment to the partnership themselves, usually by allocating resources for promotion of the products, working with distributors in their strategic planning for the China market.
Distributor research and selection
China is a large market with a business culture very different from that of the West. Careful distributor research and selection is a must for any Western vendor. Some vendors try to find committed distributors via trade shows and conferences, which gives them the opportunity of face-to-face interaction with potential partners. But this process does not provide many selection options. Others find government organizations with branches offices in China helpful in the process, yet more often than not chambers of commerce, and others do not focus on the biopharma/bioprocessing industry in China. This makes it difficult for them to provide the necessary support for identification of an ideal partner.
Knowledge of this segment is not broadly available. Simply finding a listing of bioprocess distributors in China has been a daunting challenge, and is the main reason we prepared the Top 60 Distributors of Bioprocessing Supplies in China study. We recommend doing the necessary market research to find a committed distribution partner in China.1 By doing this “homework” you are demonstrating to your distribution partner that you are committed to the market, are willing to invest the time and resources to succeed, and recognize the long-term opportunities. China’s bioprocessing market has strong growth potential with many effective distributors working in the field, each with its own strength and weakness. Knowing which of these can best support your unique products will prove to be cost-effective in the long run.
1. Top 60 Distributors of Bioprocessing Supplies in China, BioPlan Associates, June 2020.
2. Growth of Biopharmaceutical Contract Manufacturing Organizations in China, BioPlan Associates, June 2020.
3. BioPlan China Newsletter, 2019 Q4, see bioplanassociates.com
4. BioPlan China Newsletter, 2019 Q3
5. BioPlan China Newsletter, 2020 Q1
6. China’s Advances in Global Biopharma and Bioprocessing: A 10-year projection in need for innovation and quality improvements; January 2017, White Paper Survey of 50 Chinese Biopharmaceutical Executives, BioPlan Associates, Inc. Rockville MD.
Vicky Qing XIA, project director, BioPlan Associates, received her MS in biology from University of Texas-Houston and MBA from University of Pittsburgh. She has experience in consulting, business development, as well as alliance management in China’s biopharmaceutical industry. Her expertise includes developing research and analysis on multiple global market segments, and has managed a team of industry experts, and projects.
Leo Cai Yang, project manager, BioPlan Associates, has business development experience in biotech and pharma segments and 10 years in market research. He graduated from East China Normal University with a bachelor’s degree in biotechnology in 2006, and has worked with equipment manufacturers in pharmaceutical and medical device industries, in Switzerland, Austria, and Germany. He has also project managed studies involving new biopharmaceutical technology applications in China including analysis and strategy development.