We see a rising interest in the fast growing rural areas and expect China’s
healthcare industry to grow at an average rate of 23% in 2010E, with 35%-40%
growth in rural areas. We envision two major themes in tapping China’s rural
healthcare markets. Theme 1: Change in product packaging (minimum
dosage) and shift to low-cost formulation (i.e., from capsules to tablets) to fend
off pricing pressure. Theme 2: Focus on preventive care and diagnostic-
related products, as we see the Chinese government trying to shift its focus on
disease prevention (i.e., vaccines). Moreover, we envision an accelerated growth
in diagnostic-related products fueled by hospital’s incentive to lift prescriptions
for medical testing to offset the losses from zero drug price mark-ups.