Market Trends of China Pharmaceutical Warehousing Industry
Increase In Cold Chain Warehouse Development
In the first half of 2024, the volume of cold chain logistics hit 220 million tons, a rise of 4.4%. Concurrently, revenue from cold chain logistics climbed to CNY 277.9 billion (USD 38.9 billion), reflecting a 3.4% uptick compared to the same timeframe last year.
By June 2024, China's cold storage capacity expanded to 237 million cubic meters, showcasing a year-on-year growth of 7.73%. This year alone saw the addition of 9.42 million cubic meters in new cold storage capacity. In the first half of 2024, the leasing volume for cold storage across the nation surpassed 29 million cubic meters, marking an increase of over 8%.
The rising production and consumption of temperature-sensitive items, such as biologics, vaccines, and specialty drugs, underscore the need for expansive cold storage facilities. Biologics, unlike conventional drugs, are intricate substances sourced from biological entities, including humans and animals. These biological products encompass a wide spectrum, from vaccines to blood components.
Frequently utilized in advanced treatments, biologics exhibit heightened sensitivity to even minor fluctuations in their physical environment. Consequently, to cater to the surging demand for these products, pharmaceutical and healthcare firms must emphasize swift and dependable supply chain solutions.
In October 2024, the China National Medical Products Administration (NMPA) unveiled a pilot initiative permitting non-end-to-end manufacturing of biologics. Historically, the NMPA mandated that biologics undergo end-to-end production at a singular manufacturing site.
Essentially, this means both the drug substance and its corresponding product should ideally be produced within the same facility. However, the domestic biopharmaceutical sector has been pushing for a relaxation of this rule, particularly in light of the fact that foreign biologics manufacturers have been granted the leeway to produce the drug substance and its product at distinct locations.
The significant increase in cold chain warehouse development highlights the growing importance of efficient pharmaceutical warehousing in China. As the demand for temperature-sensitive products continues to rise, the expansion of cold storage facilities will play a crucial role in ensuring the integrity and availability of these critical products. This trend underscores the need for ongoing investment and innovation in cold chain logistics to support the pharmaceutical industry's evolving requirements.
Increase in Development of Pharmaceutical Manufactures
Chinese policymakers are actively working to attract foreign investment by relaxing regulations, a move aimed at fostering innovation. This marks a departure from their previous stance, which imposed restrictions on cross-border research and development. Notably, the government spotlighted "innovative drugs" in its work report for the first time this year. In 2023 alone, there were over 220 licensing and partnership deals for innovative drugs, amounting to a substantial RMB 266 billion (approximately USD 37 billion).
The Chinese government has rolled out several initiatives to bolster the healthcare sector and promote international collaboration. International players in the CGT arena are eyeing opportunities and considering actions like investments, establishing new entities, mergers, and acquisitions, or even relocating to four designated FTZs. These ventures span a wide array of CGT-related domains, from iPSCs and CAR-T to mRNA, gene sequencing, and in vitro diagnostics (IVD/LDT).
Thanks to the new Circular, biopharmaceutical firms in China can now directly draw foreign investments. By setting up or moving subsidiaries to the four FTZs, they sidestep the previously mandatory variable interest entity (VIE) structure.
In a significant move, an Indianapolis-based firm is set to invest a whopping USD 212 million in November 2024, expanding its Suzhou plant. This expansion will elevate its cumulative investment in Suzhou since 1996 to a staggering 15 billion yuan (USD 2.1 billion). This decision follows China's green light for its major weight loss drug, Zepbound, in July 2024. Shortly after, the firm launched a medical innovation center in Beijing and announced plans for a Gateway Labs, marking its inaugural innovation incubator outside the U.S.
In September 2024, Bayer, the German pharmaceutical giant, inaugurated a life science incubator in Shanghai, lauding China's innovation prowess as "among the world’s top two." Just a month earlier, Roche Diagnostics, a Swiss behemoth's division, unveiled a massive USD 420 million project — its largest investment to date — to enhance its manufacturing facility in Suzhou.
These strategic investments shine a light on a unique opportunity within the Chinese market. Despite challenges like an economic slowdown, stiff domestic competition, and geopolitical strains causing hesitance in sectors from tech to automotive, the pharmaceutical realm remains a beacon. Many foreign entities still perceive avenues for profit and fruitful collaborations with local biotechs.
Part of Beijing's initiative to liberalize the healthcare sector is driven by a desire to ensure its aging populace has access to premier global medicines. This liberalization has also spurred an increase in the development of pharmaceutical manufacturing facilities, significantly impacting the Chinese pharmaceutical warehousing market.