Multinational drug producer Bristol-Myers Squibb Co is to invest $20 million in China to expand manufacturing capacity and further strengthen its research and development status via more cooperation with local partners.
Chief Executive Officer Lamberto Andreotti said on Tuesday that the moves aim to provide more "innovative and high-quality" medicines to Chinese patients and drive BMS' continuous robust development in China.
Analysts said that the US-based company, one of the world's top 10 biopharmaceutical companies, is moving to reduce its operating costs in China amid price-cut pressure from the central government.
BMS, which entered China in 1982, has one manufacturing and supply center in the Shanghai Minhang High-Tech Park, covering 55,000 square meters and employing more than 400 people.
The center handles non-cephalosporin and oral anti-hepatitis drug production. Diabetes medicine manufacturing capacity will be added with the new investment.
The company also said it has set up a strategic partnership with Tsinghua University to focus on research, especially in oncology, immunoscience and structural biology. This is BMS' first very early-stage R&D cooperation project in China.
During the past five years, at a cost of $48 million, the company established R&D cooperation arrangements with local counterparts, such as Wuxi AppTec Co and Simcere Pharmaceutical Co.
"Manufacturing capacity expansion on the one hand reflects demand for the company's products in China is rising.
"On the other hand, it implies (the company) is reducing costs via manufacturing localization, preparing for possible price cuts" as the government seeks to lower medicine prices, said Liao Wanguo, an analyst at domestic brokerage Hua Chuang Securities Co.
He added that few multinational companies had invested in manufacturing facilities expansion from 2010.
"R&D cooperation with local partners allows foreign companies to develop local tailored products and makes them easier to get industry registration and approval, which mean increasing commercial efficiency and declining administration costs," said Ji Xuwo at CITIC Securities Co. Many international drugmakers adopted a similar strategy.
Yu Mingde, president of the China Pharmaceutical Enterprises Association, said that multinational companies face strong pressure to cut drug prices in China.
The National Development and Reform Commission has cut drug prices 28 times since 1997. The latest round came in May, as the government lowered the retail price ceilings on 53 types of medicine by an average of 17 percent.
That move is expected to ease patient costs by 3 billion yuan ($474 million) every year.
Chinese consumers have criticized the high price of drugs made by foreign companies and urged the government to cancel the independent pricing rights of off-patent medicines.
Andreotti said that BMS has been "concentrating on quality and innovation" instead of price, which is "the value of BMS products".
China is BMS' fifth-largest market, with sales up by double-digit rates annually over the past five years.
Jean-Christophe Pointeau, president of BMS China, said he believes the company will maintain that momentum.
Liao said that none of the multinational drugmakers want to lose market share in China, given the size and potential. "If they want to develop well here, price cuts (will come) sooner or later," he said.
According to IMS Health Inc, an international medical care research firm, China is the world's fourth-largest pharmaceutical market, with sales at $46 billion last year.
It predicted the market will grow by an average annual rate of 20.1 percent to reach $110 billion by 2015, making it the world's second-largest market.
