Philippe Malecki, Ethypharm China
Release Date: 2009-06-11
Ethypharm is present in two major developing markets, India and China. Both countries have large domestic markets with huge potential and local companies attempting to move up the value chain. How would you compare the Chinese subsidiary to the Indian operation?Ethypharm’s subsidiary in China is the largest in the group, contributing more than 10% of overall revenue. The operation here is somewhat atypical. The Ethypharm group has its core business in B2B R&D. The company does not develop its own molecules, but rather integrates its own technology platforms, and develop value added formulation before a patent expires. It then launches a reformulation with added value such as extended release or oral dispersible bioavailability improvement. Everywhere else in the world outside of China, Ethypharm is contracting with multinational pharmaceutical companies, producing bulk half finished products that then get packaged and branded by the multinational firms. In China, Ethypharm is a fully integrated pharmaceutical laboratory. The company is working with a different business model, the main activity is specialty pharma, finished products fully integrated from R&D to production, including regulatory activities all in house. There is also promotion and marketing both in China as well as South East Asia and Korea with our own sales force team.
Why is Ethypharm conducting a different strategy in China?
The strategy shift occurred around the year 2000, and China had already become an obvious strategic destination. Ethypharm has been working to increase legitimacy and excellence in its field of expertise, as it is a small company compared to the big names in the pharmaceutical industry. Thus the company chose to build its pharmaceutical plant from scratch in China. On the other hand, most of the big names began with import licenses allowing them to import drugs from the home factory, but Ethypharm did things differently. We started at the industrial level in China and now we are moving toward specialty products.
The Chinese government has been pushing for a consolidation in the pharmaceutical industry, closing thousands of small companies that weren’t complying with GMP standards. How do you see continuing consolidation affecting the market and your position in it?
Ethypharm sees any strengthening in the market including regulation, controls, implementation, and upgrades as very beneficial to the company. We established our presence in China according to EU GMP standards and it absolutely necessary to be at the very top of the market in terms of excellence. China has not yet transcended the generic market and Ethypharm is not in generics but rather generics plus and princeps. It is extremely important for the company to be a step ahead of the local players. Thus, any change in regulation from SFDA or MOH towards improved quality and transparency, is beneficial to the firm’s activities.
The biotech sector has been experiencing significant growth and government incentives, but the Chinese market is still well behind Western standards. How are you positioning your products to capture market share in the emerging Chinese biotech market?
The company’s number one therapeutic area is cardiovascular by far. Cardiovascular diseases and complications are the number one growing health issues for the population in this part of the world. Last year the growth in specialty cardiovascular products was up 43% with global growth in revenue for Ethypharm China at +30%. Right now the focus is not so much on a particular specific strategy as the company is fairly small, but rather to deliver according ambitious and high set goals, to implement efficiently, and to deploy over the territory with cost efficacy. Real growth is occurring in this market, it is immediate, and we believe it will continue for many years.
How is the R&D partnership with Conba going to help Ethypharm establish itself as a market leader in Chinese Traditional Medicines? How are you using the technologies developed at the Shanghai R&D center to open opportunities that would have otherwise been closed?
Ethypharm has a global approach on this subject, meaning manufacturing is not just intended for the Asian markets, but Ethypharm China will also be exporting to Europe. The company is involved in various governmental programs between France, the EU and China, and the goal is to maximize the value added we provide with our platforms from a pharmaceutical and food supplement point of view. This includes either the SR pellets in a capsule, or the oral dispersible tablet using extracts from traditional Chinese medicine. The major barrier at this stage is regulatory, but we are still quite optimistic with seven products at the clinical license stage with at least two that will hopefully get a green light from federal agencies for manufacturing.
What is the challenge involved in getting these traditional medicine based systems approved?
When you are dealing with traditional Chinese medicine, you are talking about an association of active ingredients from different plants. Thus when you get into registration it is necessary to trace several actives, usually from different plants, and this is where the difficulty lies. These registration rules may need some amendment, especially on the European side.
Ethypharm India is now entering the US market with products developed in India. Are you looking to market herbal and traditional medicine or biotech DDS platforms that you develop here in other markets?
Our Chinese operation today involves exporting across South East Asia and Korea. We have excellent commercial activities in Malaysia, Thailand, Philippines, and Indonesia, which represents 25% of the company’s top line revenues. There is still room to grow and expand, but so far, the export team is currently dedicated to the Asia Pacific region. Thus we are focused on expanding and consolidate operations in this region before moving further internationally.
You have worked in Asia for a number of years at a range of health care sector firms. Now Asian firms are finally starting to move up the value chain, and the DDS segment is starting to expand extremely rapidly. How do you feel about this great responsibility and what do you personally hope to accomplish?
We are focusing on deploying all our resources with fully integrated operations. We have achieved the number one position in Asia in DDS, and now is the right time to build a strong legitimacy. We hope that the growth will be sustainable.
What are your goals and ambitions for the next 3-5 years in China, aside from organic growth?
In three years we will double the size of the organization. Growth will be mostly driven through adding medical reps and regional offices. We are especially interested in strengthening our position in certain South Asian countries and we are considering various options.
| Company: | Ethypharm China |
| Position: | General Manager |
| Country: | China |