Focus on China

Focus on China

“China is a complex market, and it takes a long, long time to establish a company.”

-Dr. Blobel, BioWorld Today, November 13, 2013

“A big part of the growth comes from health care reform that brings many more people into the system. For these new kind of patients, you don't need the latest monoclonal and directed therapy, you need solid, well-proven drugs.”

-Dr. Blobel on evolving China pharma market, BioWorld Asia, December 24, 2014

“We are convinced that differentiated drugs that have positive outcomes for patients will in the end be successful.”

-Dr. Blobel on best therapeutics for China market, BioWorld Asia, June 3, 2015

A key driver of the growth in the China pharmaceuticals market is the Chinese government’s healthcare reform initiative which is expanding healthcare access for a greater portion of the country’s population. The implications of this expansion are significant for pharmaceutical companies, as it is estimated that today’s $80 billion drug market will grow to $200 billion by 2020, making China the world’s second largest pharmaceutical market.

The dynamics of this market are continuing to evolve. While healthcare reform is succeeding in increasing access to healthcare products and services, it is also creating the need to rein in rising costs. There are various pilot programs ongoing – at both the national and provincial levels – that are affecting all aspects of pharmaceutical R&D, including drug approval and regulatory processes and timelines, pricing and competition. Some of these programs appear to be leading toward a more market-based approach, rather than a centralized, government-controlled system. Despite aggressive efforts on the government’s part, it is expected to take an extended period of time for all of this to sort out.

Our perspective is that the movement toward a more open market with a more level playing field will ultimately be beneficial. The government’s support for growing a more innovation-based pharmaceutical industry that can become an exporter of pharma products, not just an importer, is a critical and positive change. Innovation requires a more open, competitive market, and a regulatory process designed to encourage innovative companies by providing a clearer and more predictable regulatory process. Another key aspect of encouraging innovation involves enhancing enforcement of intellectual property protection.

We believe that SciClone is well positioned to benefit from the evolving China pharma market. By building a portfolio of high quality, differentiated products in established therapeutic classes that represent diseases and conditions that are most prevalent in China, we intend to continue to offer differentiated, premium-priced options that physicians favor, and that patients will pay for out-of-pocket regardless of their level of reimbursement.

Our “wider and deeper” strategy for ZADAXIN has been a response to social and economic changes which opened up second and third-tier markets for our products. It has also enabled us to penetrate more deeply into additional hospital departments to reach new prescribers. Similarly, as the market continues to open up, we are implementing new marketing tools and strategies to promote and sell our products.

We are implementing and expanding a number of strategies designed to directly reach patients and physicians through the retail pharmacy network. We anticipate that there will be opportunities, including e-commerce, to directly reach out to patients who want to take more responsibility for their healthcare, and want to exercise choice. Over time these changes could bring about a more Western-type structure in which there could be several payors, rather than just one. We believe that a more competitive environment that is based on quality and outcomes, rather than just price, would be positive for the pharmaceutical industry, and for SciClone.

We are continuing to pursue business development strategies to secure opportunities to bolster our marketed product portfolio in the near term, as well as drive longer-term growth. Among our key assets are our unwavering commitment to high-quality compliance, and our reputation as a partner-of-choice for companies that may want to participate in the market’s growth, but reduce their risk exposure. We believe that our commercial and regulatory capabilities, market knowledge and experience and strong focus on compliance will continue to be partnering assets.

Finally, our strong cash flow and cash balance, and operating efficiencies should continue to provide us with the strength and flexibility to manage the challenges and embrace the opportunities of the evolving China pharma market.

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