Chinese pharma finds partner in India

With a fast-growing and lucrative domestic market, most Chinese pharmaceutical companies have spurned the costs and complexities required to sell their drugs abroad, but Desano has more global ambitions with the help of an unusual foreign backer.

Founded in 1996, the Shanghai-based company expanded rapidly in the production of active pharmaceutical ingredients, the raw materials of drugs, with much of its sales going to Cipla of India for the manufacture of anti-retroviral medicines for HIV and anti-malarials.

That helped establish Desano as a producer of the finished drugs for the domestic market, while the know-how provided by Cipla has helped it win supply contracts with other companies and certification of its plants by the US Food & Drug Administration.

Now, with Cipla funding and support, it is building factories to produce far more complex biological drugs, with the aim of selling cut-price versions of such cancer treatments such as Avastin and Herceptin in developing countries.

The Indian connection is unusual. “You very seldom have partnerships, but mainly trading relationships,” says Zhengping Wang, chief executive of the pharmaceutical arm of the group, who worked in the US and joined after a stint in the Beijing office of a German company. “I received a lower salary but felt I had more challenges.”

More generally, Indian companies have struggled to gain a foothold in China. Ranbaxy, one of India’s largest generic companies that was bought in 2008 by Daiichi Sankyo of Japan, sold out of its Chinese joint venture at the end of last year.

“There’s a cultural tension between the Chinese and the Indians,” says one western pharmaceutical executive based in Shanghai. “Their prices are very low and they don’t have the contacts.”

Until recently, India’s drug companies have been more integrated into the global economy, expanding their sales of low-cost generic medicines around the world. But the shift to China of the lower margin chemical drug ingredients business is now kindling interest in the growth in higher value activities, from biological production and even gradually towards more basic research that could threaten over time to usurp India.