Review of the Chinese veterinary drug industry in 2017—data

The market size of the Chinese veterinary drug industry has grown steadily in recent years driven by the sustained growth of China’s population and its demands for food. China has become the second largest veterinary drug producer after the U.S. According to data, there were about 2,000 veterinary drug manufacturers in China by the end of 2017, the GDP of veterinary drugs in China grew from the RMB 21.171 billion in 2008 to RMB 41.357 billion in 2015, and China’s veterinary drug market even reached about RMB 52 billion in 2017. China’s veterinary drug industry has broad prospects for development based on the strong demand from downstream industries and support from relevant policies of China. In 2017 alone, 59 new veterinary drugs were registered in China, including 4 Class I, 13 Class II, 29 Class III, 4 Class IV, and 9 Class V. The veterinary drug industry flourishes in China, and the veterinary drug sales are expected to reach RMB 63 billion in China in 2022.

According to the classification standard of the Veterinary Drug Industry Development Report of China Veterinary Drug Association, the veterinary drug products are divided into biological product, API, chemical drug preparation, and TCM in China, wherein, the chemical drug preparations have the highest proportion, followed by biological products and APIs. Sales of chemical drug preparations averagely account for 43.62% of the total sales of veterinary drugs in China. TCM veterinary drugs have become a highlight among veterinary drugs in recent years due to no drug resistance and no drug residue, and are called green veterinary drugs, with rapid development, however, because of this, the TCM veterinary drugs have become the hardest-hit area of substandard veterinary drugs, as shown in the following figure:

We can see from the above figure that the veterinary biological products had the highest acceptance rate, reaching 100%, while the acceptance rate of TCM products was far lower than the rest, with the reason for the substandardness mainly because of factors like production process and quality control.

The Chinese government’s regulation on veterinary drugs has become increasingly strict as the public’s attention to food safety is growing. In 2017, over 4,200 law breaking cases were investigated and treated, 8 veterinary drug production licenses were revoked, 160 veterinary drug business licenses were revoked, and 182 units operating without license were banned by veterinary departments at different places in China. The internet veterinary drug anti-counterfeiting was promoted, and many cases of illegal operation of veterinary drugs by using internet platforms such as Taobao were investigated and treated, with 7 criminal suspects arrested. The comprehensive management of the veterinary antibiotics was deepened, the risk of excessive veterinary drug residues was effectively prevented, and the veterinary antimicrobial resistance was effectively curtained, leading to positive results. According to monitoring of the Ministry of Agriculture of China, currently, the overall acceptance rate of residues of veterinary drugs in major livestock and poultry products including pork and chicken, etc. maintains at 99% in China. To guarantee food safety, the Ministry of Agriculture of China has revised and issued the Specification for the Safe Use of Feed Additives to include important varieties in categories like antioxidants into the scope of administration and expand the 73 varieties in 4 categories of the original Specification to currently 120 varieties in 8 categories. It also has prepared the 5-year work program for pesticide residue standard system, and formulated 2,087 standards for residue limits of veterinary drugs, to basically cover the common pesticide and veterinary drug varieties and major edible agricultural products of China.

China has always been the most potential market for the competition of world veterinary drug enterprises. The industry development has showed signs of slowing in recent years, however, China’s veterinary drug industry still has good development space due to market rigidity and strengthening of external environmental trend of large-scale development of China’s livestock industry, implementation of China’s Belt and Road Initiative, and increasingly frequent international trade of animals and animal products. And guided by the market demand and China’s national policy, the safe, efficient, and low-residue veterinary drugs will gradually take market shares of veterinary drugs that have poor safety, low conversion rate, and high residual rate, be largely promoted and used in livestock industry and feed industry, and become mainstream products of the veterinary drug market in the future.

Review of the Chinese veterinary drug industry in 2017—events

Currently, the competition situation of global veterinary drug industry shows oligopoly, and large veterinary drug enterprises constantly expand own competitive advantages and improve market positions through M&A and restructuring, etc., with the market shares of the world’s top 5 veterinary drug companies represented by Zoetis having exceeded 60%. In China, more and more veterinary drug enterprises also constantly strengthen own advantages and make up for own weaknesses through acquisition, restructuring, and merger. In 2017, CEVA merged and acquired EBVAC, Jinyu acquired 46.96% equity of Liaoning Yikang, Tech-Bank acquired 20.4% equity of China Animal Healthcare. Those three M&A and restructuring events in the veterinary drug industry aroused particular attention of people, making the competition in the veterinary drug industry fiercer.

The "environmental protection storm" swept over China in 2017, and the tide of production restriction, production halt, rectification, and closure happened to every walk of life, leading to serious imbalance of market supply-demand relationship and continuous soaring of prices of many raw materials. This also happened to the veterinary drug industry of China.

2017 environmental protection measures and influences thereof

Affected by the "environmental protection storm", prices of many principal raw materials and packaging materials of the veterinary drug industry largely increased in China, enterprises had growing pressure in operating costs, many pharmaceutical enterprises were closed down or conducted off-peak production, and the escalation of the environmental protection efforts led to volatility of veterinary drug market, which was one of the important inducements of large increase of veterinary drug prices in 2017.

The M&A and restructuring in the veterinary drug industry can help improve enterprises’ R&D innovation capacity, and enable them to constantly improve product process and technical level upon own financial strength and strong product R&D capacity, to launch a large number of products with high technical content and high value added. We can expect that the market concentration of China’s veterinary drug industry will be further improved as the industry competition is growing and requirements for technology and environmental protection, etc. are gradually rising. Furthermore, China is a big producer of chemical APIs, especially it is at the world’s forefront in terms of capacity and output of fermentation drug products; the API production generates a large amount of "three-waste", with the waste having complex components and serious pollution hazards, causing the realities of the pharmaceutical environmental protection to be severe; the "environmental protection storm" escalation resulted in API enterprises to directly face the life-or-death test, and environmental protection requirements raised the technical barriers of the API industry. Enterprises must improve core competence through environmental protection technology and process. The "environmental protection storm" may reversely force the elimination of small API enterprises and transformation and upgrading of large-scale API enterprises.

Review of the Chinese veterinary drug industry in 2017—policies

The 3.15 Evening Party in 2017 exposed the event of farmers’ abuse of medical feed additives like olaquindox, to push such medical feed additives to the forefront, and cause the safe use of veterinary drugs to suddenly become a focus of people in China. Regarding this, the regulator has taken a series of measures to guarantee safety of people’s food.

Laws and regulations involving the veterinary drug industry in 2017

Among the four types of prominent food safety problem, the one closest to the livestock industry is the abuse and drug residue of veterinary drug products. The abuse of veterinary drug products during the breeding will bring hidden dangers to human health, especially the abuse of antibiotics is easy to expedite "superbugs", which has caused great concern. Therefore, the innovation of the veterinary drug quality safety regulation means shall continue to implement the traceability management system by veterinary drug "QR codes", further advance GMP certification and GSP pilot work, strengthen quality regulation from links like veterinary drug random inspection and unannounced inspection of manufacturers, constantly improve regulations, effectively solve problems of veterinary drug counterfeiting and abuse, etc. by combining different methods, and improve management ability in veterinary drug quality and residue problems and guarantee ability in animal-derived food safety, to guarantee safety of people’s food.

Summary

We can see from the series of changes of the Chinese veterinary drug industry in 2017 that with the vigorous advance of the green cultivation idea, China will increase efforts in banning and controlling chemical drugs, the public will focus more on food safety, laws and regulations of the veterinary drug industry will be improved more, and the precision, specialization, and large scale of veterinary drug enterprises will be constantly improved. The sound development of the veterinary drug industry cannot do without guidance of relevant systems and policies, and requires the involvement of the government department, systematic solution of problems encountered during veterinary drug industry development, strategic planning of development of the veterinary drug industry, promotion of survival of the fittest and merger and integration, and encouragement of Chinese veterinary drug manufacturers to strengthen technology and product R&D, find pulse of the era, and systematically solve problems encouraged during veterinary drug industry development; in terms of food residue, the efficient, safe, low-residue, and cost-effective drugs will be much favored in the veterinary drug industry. With such form, the TCM veterinary drugs will become a new favorite of the veterinary drug industry, and TCM veterinary drug additives will be widely applied in prevention and treatment of diseases of livestock and poultry, or replace antibiotics as feed additives; moreover, the environmental issues caused by the pharmaceutical industry have become a matter of life and death to pharmaceutical enterprises. With the increasingly strict environmental protection requirements, environmental protection has become the key for the success of pharmaceutical enterprises’ transformation and upgrading. Pharmaceutical enterprises must actively practice green production and environmental protection first, so that the pharmaceutical industry will obtain more development opportunities.

In a word, with the rapid development of China’s livestock industry and growing of output value of livestock industry, China’s veterinary drug industry will face a rapidly-expanding market, and market sales of veterinary drugs will continue to grow. The market decides the supply. Changes of the market demand promote changes of veterinary drug enterprises. Not only should veterinary drug enterprises meet the shift of customer demand from single disease treatment to the direction of systematic prevention and healthcare, they should also constantly strengthen breadth and depth of technical services to develop new veterinary drug varieties to deal with the complex and changeable diseases. China’s veterinary drug industry is expected to achieve good development, thanks to the strong demand from downstream industry chain and support from relevant policies of China.

http://www.shouyao.com/news_view.aspx?TypeId=5&Id=654&Fid=t2:5:2

Source: xinm123.com, http://www.shouyao.com/news_view.aspx?TypeId=5&Id=654&Fid=t2:5:2

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