HARBIN PHARM. GROUP SANJING PHARMACEUTICAL SHAREHO

HARBIN PHARM. GROUP SANJING PHARMACEUTICAL SHAREHO 1 1 The purpose and significance of the industrial visit and research

to Sanchine 1.1 Purpose To learn and understand the business culture and development of Harbin Pharm. Group Sanjing Pharmaceutical Shareholding Co.,Ltd. 1.2 Significance Having learned about some information of Harbin Pharm. Group Sanjing Pharmaceutical Shareholding Co., Ltd, and about its development and process of workshop.

2 Contents of the industrial visit and research to Sanchine 2.1 The Company profile of Sanchine

Harbin Pharm. Group Sanjing Pharmaceutical Shareholding Co.,Ltd. is principally engaged in the production and distribution of pharmaceuticals. The Company provides western drugs, Chinese medicines and healthcare products, including lacidipine tablets, deer collagen and bone powder, as well as cefotaxime 2

sodium for injection, among others. The Company distributes its products in domestic and overseas markets. The pharmaceutical industry is one of the leading industries in People's Republic of China, covering synthetic chemicals and drugs, prepared Chinese medicines, medical devices, apparatus and instruments, hygiene materials, packing materials, and pharmaceutical machinery. China is expected to become the world's third-largest prescription drug market in 2011, according to a report released by pharmaceutical market research firm IMS Health. The report said that China's pharmaceutical revenue is growing fast and that the market there may double by 2013. Sales of prescription drugs in China will grow by US$40 billion through 2013, the report said. The value-added output of China's pharmaceutical industry increased 14.9% year on year in 2009, according to statistics released by the Ministry of Industry and Information Technology. In the first 11 months of last year, the medicine sector's combined net profit was RMB 89.6 billion, up 25.9% year on year. Growth in the period was only 16.2% in the period from January to August. China has established a pharmaceutical industry structure, and has become one of the largest pharmaceutical producers in the world. The Chinese pharmaceutical industry has been growing at an average annual rate of 16.72% over the last few decades. However, the industry is still small-scale with a scattered geographical layout, duplicated production processes, and outdated manufacturing technology and management structures. The Chinese pharmaceutical industry also has a low market concentration and weak international trading competitiveness, coupled with a lack of patented domestically-developed pharmaceuticals. (Barnet Siu; 2010) As China joins the World Trade Organization (WTO), it will need to integrate more completely into the global economy. The international competition will place an intense pressure on the Chinese pharmaceutical industry. Accession to the WTO will bind China by fundamental WTO principles, such as improved transparency and the strengthening of commercial legal procedures. China's WTO commitments include the tightening of rules on intellectual property, tariff concessions, and market access 3

of non-Chinese service suppliers engaging in the distribution of pharmaceuticals. (Cheri Grace; 2004) Investment conditions in China have improved due to the vast consumer demand for pharmaceuticals, the lower labor costs and the changes resulting from economic reform. Changes to the patenting laws in full compliance with the requirement of the Agreement on Trade-Related Aspects of Intellectual Property Rights (or "TRIPS Agreement") and the lack of Chinese pharmaceutical R&D have also left gaps in the market. The domestic pharmaceutical industry has been a key contributor to the country’s impressive economic growth. As one of the world's major producers of pharmaceuticals, the sector achieved an annual compound growth rate of 16.7% between 1978 and 2003. Both far outpaced other economies in the world, making China the world's fastest growing pharmaceutical market. Although China has enjoyed the benefits of an expansive market for pharmaceutical production and distribution, the industry is suffering from minimal innovation and investment in R&D and new product development. The sector's economies of scale have yet to be achieved. Most domestic manufacturers in the pharmaceutical industry lack the autonomic intellectual property and financial resources to develop their own brand products. Most manufacturers rely on the repetitive production of low value added bulk pharmaceuticals and imitation drugs.