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Western manufacturers like Thermo Fisher, Merck ( MRK ) are major

reagent suppliers in China

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Import tariffs, access concerns leading to more requests

to

Chinese manufacturers - executives

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Merck ( MRK ) building factory in China closer to customers, Roche

expanding a facility

By Andrew Silver

SHANGHAI, Aug 14 (Reuters) - 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 ( TMO ) and Germany's Merck ( MRK ) 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 ( MRK ) 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 ( MRK ) and Swiss diagnostics group Roche Holding are

moving some of their reagent production closer to their Chinese

customers.

In 2023, Merck ( MRK ) 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 ( MRK ) 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.

($1 = 0.8605 euros)

($1 = 7.1779 Chinese yuan renminbi)