drug Archives ~ Business China : news for investors in China

Shanghai Street View: Delevering Drug Use

By newsdoug on December 14, 2015

Shanghai weans hospitals off unnecessary drugs

This week we’ll take a break from the taxi wars and bike promotions shaking up the streets of Shanghai and turn instead to our city’s health care system, where a quieter revolution is taking place in our hospitals. This particular campaign has seen Shanghai’s scores of hospitals and clinics aggressively cut back on their use of antibiotics, in response to growing global concerns that over-prescription of such drugs could lead to the rise of a new generation of superbugs.

This particular campaign is long overdue, and reflects a broader Asian fascination that gives drugs an almost god-like status with the ability to cure anything from minor sniffles to far more serious ailments like chronic pain. That view contrasts sharply with the US, where drugs are revered for their ability to cure many ailments but are also seen as limited in their ability to combat more ordinary conditions like common colds and body aches. Read Full Post…

China Closes Book On GSK Case With Record Fine

By newsdoug on September 22, 2014

GSK criminal probe ends with record fine

One of the highest profile cases in a recent series of probes against multinationals in China has reached an emphatic but reasonably just conclusion, with word that Beijing has fined British drugmaker GlaxoSmithKline (London: GSK) nearly half a billion dollars and handed several of its top local executives suspended jail sentences. I was never a big fan of this investigation, which saw GSK pursued for bribing doctors and other medical professionals to buy its drugs. That’s not because I think GSK was innocent in this case, but rather because I think the company was unfairly singled out for punishment for corrupt practices that are widespread in China’s business culture. Read Full Post…

Simcere Suffers Side Effects of Health Care Reform

By newsdoug on August 10, 2011

China health reform serves up rewards, but also tough medicine I’ve generally been quite bullish on China’s ongoing overhaul of its healthcare system and the huge potential it offers drug makers, but Simcere Pharmaceutical’s (NYSE: SCR) latest results show that like everything else, health care reform also has its downside. Simcere reported its revenue was nearly flat in the second quarter this year versus a year earlier, even as profit from operations grew a more respectable 27 percent. (company announcement) It attributed the anemic top line growth to changes in government pricing policies, a not-so-subtle reference to the fact that Beijing is asking for big price concessions from drug suppliers in exchange for including their products in its new system to provide affordable basic health care throughout the country. Such price squeezing will affect everyone, from Simcere to larger firms like Hisun Pharmaceutical (Shanghai: 600267) and Sinopharm (HKEx:1099), which shouldn’t come as a surprise to anyone but could cool revenue growth for many of these firms over the next 1-2 years as reform is implemented. Once that pricing pressure is factored in, I would expect to see top line growth for Simcere and its peers return to healthier levels. To combat low margins from drugs sold in the reform program, I also like Simcere’s initiative to focus on developing its own new drugs, which typically command a much better profit margin than the generic drugs that use formulas whose patents have expired and therefore are available for anyone to manufacture. Simcere’s new joint venture with Merck (NYSE: MRK) (previous post) should help in its new drug development efforts, though again, don’t look for any major contributions on that front for at least the next 2-3 years, which is typically the shortest possible period for new drug development.

Bottom line: Simcere and other Chinese drugmakers will see slow top-line growth in the next 1-2 years, as China squeezes them for price concessions.

Taobao Mall Takes Hit with Drug Sale Ban 中国规范网络售药或重创淘宝商城

By newsdoug on July 22, 2011

Alibaba’s Taobao Mall, the B2C portion of Taobao that was split off into a separate entity under a restructuring last month (previous post) looks set to take a hit, as China moves to clean up its unruly pharmaceuticals industry by banning the sale of drugs online. (English article) The campaign looks very much like similar ones that Beijing has launched from time to time, and in particular resembles a drive a few years back to stop hospitals from making bogus claims through advertisements. That campaign saw traditional and new media companies like Focus Media (Nasdaq: FMCN) and Sina (Nasdaq: SINA) suffer as hospitals and clinics, in search of more revenue as they were freed from state support, had become some of the biggest buyers of advertisements at the time. It’s hard to say how big the impact will be on Taobao from this latest drive to regulate drug sales, but I’m guessing such sales probably comprise a fair share of its transaction volume, probably somewhere in the 5-10 percent range. The loss of commissions from such sales won’t be devastating, but will certainly deal the company a setback, especially as it prepares for in IPO which I expect will come in the next year as Taobao investors, most notably Japan’s Softbank, clamor for some return on their investment. The ban could also have an impact on some other e-commerce sites, though many of the big ones, such as Dangdang (NYSE: DANG) and Vancl, seem to be steering clear of the drug sector and focusing on less controversial products like books and clothing. Still, this latest ban is just the latest reminder that nothing in China is certain, either online or offline, and these kinds of periodic “clean-ups” can hit just about anyone at any time.

Bottom line: Alibaba’s Taobao Mall will take a hit with China’s latest crackdown on online drug sales, taking away some of the company’s momentum as it prepares for an IPO as soon as next year.

中国正对网上售药进行治理，以规范药品行业，阿里巴巴旗下的淘宝商城料将受到影响。这与中国政府以往不时推出的行动很像，尤其是几年前，因为医院和诊所改制，不再得到国家资金支持，为寻找创收渠道，部分医院诊所成为广告商最大客户之一，而当时，政府发起禁止医院打广告夸大药效的行动，让分众传媒（Focus Media）<FMCN.O>和新浪<SINA.O>等媒体公司遭重创。很难说这次规范药品行业销售行动对淘宝的影响有多大，但我猜测，淘宝的交易额将受到一定影响，比例可能在5-10%左右。此类销售的佣金损失不会是毁灭性的，但肯定对淘宝商城不利，尤其是该公司正准备上市。我预计，由於淘宝投资者，尤其是日本软银，急於获取投资回报，公司将在明年上市。这一禁令也可能影响到其他电子商务网站，但当当网<DANG.N>和凡客诚品等许多大型平台正清除售药类别，重点发展图书和服饰等争议较小的产品。但此事提醒我们，在中国没有什麽是确定的，无论是线上还是线下，这些不时进行的“严打行动”可能在任何时间，影响到任何人。

一句话：中国近期严打网络售药，阿里巴巴旗下的淘宝商城或受创，在公司准备进行IPO之际，可能对其造成一定影响。