One of the fastest growing sectors in China that is often overlooked by investors is the healthcare market. One reason for this is that very little information is publicly available about the Chinese healthcare industry. CLSA Asia Pacific Markets took an unprecedented look into the healthcare market and has published a 300+ page comprehensive report titled “China pharma almanac.” The research report was based on interviews with over 500 middle class consumers, hospital drug purchasers, pharmacies, physicians and cosmetic surgery centers.
Some of the key takeaways from the report are:
- China’s healthcare expenditure is projected to grow 20% annually and by 2014 it could reach $304.0B, providing universal healthcare to its entire population of 1.3 billion.
- Hospitals derive 40-50% of total income from medicine sales.
- 43% of China’s population live in urban areas which allows for greater access to healthcare services and technologies.
- Cardiovascular disease, obesity and other diseases are projected to increase with growing affluence and lifestyle changes.
- The prevalence of tuberculosis (TB) and other infectious diseases in China offers potential for vaccine makers to prosper.
- Double-digit rise in patient traffic is boosting drug purchases especially for the treatment of chronic diseases including heart disease, cerebrovascular disease (or stroke), diabetes and hypertension.
- Healthcare consumers ranked the U.S. as the top country for producing the highest-quality products while Japan was ranked at No.4.
- Demand for cosmetic surgeries and procedures such as liposuction, wrinkle removal and blepharoplasty (eyelid surgery) is growing.
- Patients still revere traditional Chinese medicines as they believe that these medicines addresses the root cause of a disease whereas western medicines just suppress the symptoms. However, doctors and hospital drug purchases prefer western drugs.
- There are 55 companies Chinese healthcare companies with market caps over US$1.0B and more than 20 companies have market caps in excess of US$2.0B.
The opportunity for healthcare in China is significant and investors can take advantage of it. One way to invest in Chinese healthcare is to go with western drug companies that have strong presence in the Chinese market. In a survey conducted as part of this study, Beijing Tongrentang, Pfizer (PFE) and Yunnan Baiyao were ranked as the top three pharmaceutical brands. Local drug firm Beijing Tongrengtang is a maker of traditional Chinese medicines.
The top five foreign brands by quality are Pfizer, Glaxo (owned by Glaxo SmithKline (GSK)), Novartis (NVS), AstraZeneca (AZN) and Johnson & Johnson (JNJ). UK-based GlaxoSmithKline has a 5.07% dividend yield. Johnson & Johnson is a consistent long-term performer.