China pharma firms turn to local reagent suppliers to cut costs and delivery times

Pharmaceutical research and development firms in China are increasingly interested in procuring critical supplies known as reagents from local manufacturers, industry executives and managers said, as they seek to cut costs and delivery times. Western reagent suppliers including U.S.-based Thermo Fisher Scientific and Germany's Merck have profited in the world's second-largest pharmaceutical market from the compounds used in lab tests for analysis and quality control. But rising Chinese import tariffs due to the trade war with the U.S. and longer-term concerns about costs or access are spurring Chinese companies to request products from local rivals like Shanghai Titan Scientific and Nanjing Vazyme Biotech instead, the executives and managers said.

The five who spoke to Reuters work at Chinese firms involved in the purchase or supply of reagents and their comments are an early sign of an expected industry shift toward more Chinese purchases. China's reagent market for lab and diagnostic use has been to some extent supplied by imports, which were valued at $5.76 billion in 2024, down slightly from $5.83 billion in 2023, according to U.N. Comtrade data. "It is actually more advantageous (for reagents to be local) because the timeliness requirement is high," said Ma Xingquan, co-president of pharmaceutical research firm ChemPartner PharmaTech. Most reagents it uses in its pre-clinical work are products that are made in China by firms including Titan and Shanghai Aladdin Biochemical Technology, he said. ChemPartner's usage of locally made reagents would probably increase further as new products become available, Ma added.

TARIFF BUMP The rush to use domestically made reagents has accelerated since April, the month China raised duties on U.S. goods to 125%, a manager at Titan and an executive at Vazyme said, though the levies have since been lowered as Beijing and Washington continue trade talks.

Some Chinese drugmakers were worried about tariff policy uncertainty, Titan product manager Yang Dong said.

Since April, more than 90% of Vazyme's customers have discussed replacing imported reagents with its products, Vazyme Senior Vice President Xu Xiaoyu said. "Before April, customers were only saying long term, they hope to be able to replace (reagents) with those locally made, it would be better," Xu said. "But to customers these tariffs are like a shock in a short period of time. They clearly felt this type of direct impact... their impetus (for replacement) will be stronger."

Titan and Vazyme are both forecast to report strong sales growth this year, according to brokers.

China International Capital Corp expects Titan's annual revenue to grow 22% to 3.52 billion yuan ($490.39 million) this year, while Vazyme's revenue is set to rise 15% to 1.59 billion yuan over the same period, according to Soochow Securities.

"There is still a lot of room for substitution of imported biological reagent enzymes, clients are strongly interested in locally-made replacements," Soochow said in a recent note.

Shares in Titan and Vazyme have risen about 54% and 18% respectively since the start of the year. Merck and Thermo Fisher shares have fallen about 21% and 8% respectively over the same period.

CHINA CHALLENGES
Morningstar analyst Max Jousma expects China's reagents market to grow more than 10% annually over the next five years, driven by government support for the biotech and pharmaceutical sectors and growth in research and development activity and in-vitro diagnostic testing.

Merck and Swiss diagnostics group Roche Holding are moving some of their reagent production closer to their Chinese customers.

In 2023, Merck announced plans to invest 70 million euros ($81.35 million) in a reagents facility in Nantong that is on track to begin operations next year.

Merck declined to comment on any short-term shifts in ordering patterns from Chinese customers. "The decision to invest in reagent manufacturing in Nantong reflects our commitment to supporting the growing needs of life science and biopharma customers in China and the broader Asia-Pacific region," it said in a statement.

Roche is expanding production, laboratory and logistics facilities from 2028 in Suzhou, where it produces reagents for diagnostic systems, the company said in a statement. The expansion will help it meet increasing demand for diagnostic solutions in China and parts of Asia-Pacific, it said.

Thermo Fisher declined to comment on its reagent sales and strategy to compete against local manufacturers in China, citing a policy of not providing details of its business by product line or country.

Chinese drugmakers that use reagents from Western companies and are looking to purchase substitutes from local firms will face some challenges given the products are difficult to switch during or after the regulatory approval process because of a need for material consistency, industry experts said.

"Switching reagents will cause significant disruption and delay for drug development," said Huang Linfeng, a scientist specialising in RNA biology at Duke Kunshan University. Another hurdle is manufacturer access to technology or processes, some of which could still be protected under patent or not disclosed, said Cheng Shaojun, a vice-general manager at supplier Fu Chen (Tianjin) Chemical Reagents Co.

"(Reagent) production equipment is also not necessarily able to be bought," he added.