China is the world price of bulk drug prices

Which varieties in the world market have occupied the position of the main suppliers. It is no exaggeration to say that china is the world price of bulk drug prices.However, although China took advantage of strong market share and price control in the international API market position is reflected only in the number. A simple data is to November 2007 bulk drugs produced in China increased 23 percent, but the value increased by only 16%, pharmaceutical raw materials that China is still mainly based on simple price war. The consequences of a direct result of domestic raw material drug companies generally do not exceed 20% of the gross profit level, the core competitive advantage is low cost, growth pattern is produced by expanding the product to get on the scale of the expansion. Low-level domestic competition among enterprises lead expansion - cost reduction - product prices - expansion - cost reduction - the cycle of falling prices cycle, business growth well below the output growth rate.One of the things we need to consider is that China's raw material drugs in a comprehensive cost is rising process. In the long run, constitute factors of production raw material costs, land costs, construction costs, rising labor costs is not checked, China's manufacturing enterprises of widespread low-margin business fierce price war risks continue to accumulate, raw material drug companies no exceptions. In fact, Resveratrol the consequences of excessive competition is also reflected in these two years, the export tax rebate rate cut, the RMB appreciation, rising raw material costs have significantly reduced the profitability of many raw material drug companies, drug companies and even some raw materials can not survive.However, China's raw material drugs industry is engaged in a quiet revolution, VC, VE and other bulk drug substance appeared in the past 10 years, bulk drugs industry has never been a long boom. At the same time, other bulk drugs industries such as penicillin, vitamin B2, Docetaxel, etc. The course price is only short-lived. Explore in depth the reasons behind can be found, the competition pattern of China is driving changes in raw material drug companies to explore how the bitter price war by the primary competing mature relationship. The VE, for example, we can see that climate change is being driven by competing rational alternative to traditional price war, to bring new growth business model.After years of competition, the VE global manufacturers in Zhejiang medicine, a new synthesis, DSM and BASF in the hands of their total production capacity to about 6 million tons, the actual needs of the international community about 4 million to 5 million tons, the demand to maintain an annual growth rate of around 5%, therefore, a simple supply and demand can not fully explain the long cycle of boom VE. In the past to rely on a simple price competition makes the four companies of the VE level of profitability over the past decade to maintain a low level. In another round of expansion - cost reduction - product prices - expansion - cost reduction - the cycle of falling prices, the companies did not benefit from cost reduction, while the over-expansion led to an overall production capacity exceeds demand. The cost reduction is not unlimited. When the upstream price changes driven cost increases can not be digested, we saw the first half of 2007 with the loss of all VE companies. In this simple price war due to existence under the pressure of competing rational became a natural thing. Followed by a reasonable margin in the context of cooperation to promote business growth into the market growth - rising demand - increased production - the growth of earnings growth model.As the main challenges of this business model of investment from external impulse, so the key is how to determine a reasonable profit margin through the market in order to circumvent the new entrants. When the product gross margin is too high, foreign investors will enter the slice. Thus, investment costs, market size, exit costs, technical barriers, policy barriers will be to determine the product key factor in a reasonable profit margin. VE production line of the huge investment-ton production line needs 700 million yuan of funds; many technical aspects of production, Irinotecan synthetic route up to ten steps, technical complexity; national environmental standards to improve the barrier leading to increased investment in plant. In the role of these combination of factors, VE new entrants has not yet appeared. Of course, existing up to 60% of the gross profit margin is reasonable still need to test the market, but up to a year to maintain the existing high boom has prompted changes in the patterns of competing enterprises better able to grow. Source:http://www.cospcn.com