10 Companies That Will Make A Fortune From China Getting Older

Old Chinese Men

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The effects of China’s one-child policy are starting to show in the country’s demographics. And the effect is that the Chinese are getting old. Fast.According to The Economist, By 2050 the country will have 2.2 working aged people for every person aged 65.

At the same time, a richer, more Westernized China is experiencing higher incidents of ailments like diabetes and heart disease. So China is also getting sick, but luckily people are getting wealthy enough to pay for their care. And the rising middle class especially, wants the best.

In a recent report, Citigroup has pointed out that  the government is noticing this, and providing some serious tailwinds to the healthcare industry. In 2009, they launched a $133.2 billion project to expand healthcare to rural China, and overall, it is expected to become the 2nd largest healthcare market in the world by 2015, worth $100 to $170 billion.

Specifically, Citigroup projects U.S. pharmaceutical group sales alone to grow more than 20% in the next 5 years.

There are, however, some high barriers to entry into the market. Reimbursement for drugs and devices can take 2 to 4 years because it requires the Ministry of Health to update the country’s essential drug list. They are supposed to meet every 2 to 3 years, but they don’t have a fixed schedule.

Also, it should be noted that companies with a manufacturing presence in the country are heavily favoured by the government. In other words, gaining ground here takes time.

Novo Nordisk (NVO)

Here's why:

Diabetes. In 2010 The New England Journal of Medicine estimated that 92 million Chinese adults had diabetes, and 150 million more are showing early symptoms. Novo Nordisk first marketed insulin for commercial use in 1923, invented the first insulin pen, and now has a comprehensive line of insulin products.

Medtronic (MDT)

Here's why:

Medtronic is a humongous medical technology world wide, and they've been in China since 1989. In F2011 they made $500 million in sales there. The company manufactures pacemakers, spinal hardware, endovascular grafts and more. Right now, 4% of their sales are in China and they're seeing 25% growth there.

Eli Lilly (LLY)

Here's why:

Expansion, expansion, expansion. Eli Lilly currently sustains a compound annual growth rate of 25% in the Chinese market and has doubled its sales force in the country to 2500. It also now reaches 200 cities.

Celgene (CELG)

Here's why:

Patent protection. For a number of its products, Celgene has already filed for method of use patents that could last the company from between 2023 to 2027.

Santen (TYO:4536)

Here's why:

Santen got in early, and has always focused on European and Asian markets. It tried to enter the U.S. in the 1990s but failed. Currently, has 36% of the opthomology market share in its native Japan, and 25% in China. In the latter it hopes to reach 35%.

Microport Scientific Corporation (HKG:0853)

Here's why:

Microport is China's leading manufacturer and marketer of interventional cardiovascular products. This is another company that has won by being first, specifically in the drug-eluted stent market. It now accounts for abotu 75% of market share.

Merck (MRK)

Here's why:

Since it purchased Schering-Plough, Merck has wanted to increase its sales in emerging markets from 18% to 25% by 2013. In 2010, posted $610 million in sales, and Citigroup estimates that by 2015 that number will reach $1.05 billion. The company has achieved this growth, in part, by partnering with local Chinese companies and cross-selling its products.

Pfizer (PFE)

Here's why:

Of all the multi-national corporations, Pfizer has the most of China's pharmaceutical market share (2.1%) by 2020 it expects that it can take 2.5% of the $200 billion market. This year, it announced a joint venture with China's Hisun Pharmaceuticals to manufacture and market generic pharmaceuticals. It will also cross sell with Hisun.

Bristol Meyers Squibb (BMY)

Here's why:

Bristol Meyers Squibb hasn't partnered with any local manufacturers, nor does it plan to push generics. What it wants to do is innovate for the Chinese market, so Citigroup estimates that it will see substanital growth in the latter half of this decade, especially as it focuses on medicine for type-2 diabetes.

Bayer (PINK:BAYRY)

Here's why:

China is already really important to Bayer. It's the companies 3rd largest market and in 2010 its sales there grew by 30%. Ther company projects that by 2015 that by 2015 its sales will reach $8.2 billion. It is already well-placed in the Chinese diabetes market, and plans to expand its Beijing manufacturing site.

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