India is already renowned for being a pharmaceutical giant. But China could steal that crown within a decade. This could provide investors a ground-floor opportunity to make huge profits from IPOs, says Irwin Greenstein.

Today, India is the seventh largest pharmaceutical market with revenues of about $12.2 billion. Despite projected growth of $17.8 billion by 2012, it could get eclipsed by its arch rival, China.

A recent report by PricewaterhouseCoopers suggests that China’s faster overall economic growth will propel its pharmaceutical segment ahead of India. It could China another 12 years to reach that goal, but investors should keep a sharp eye on Chinese pharma companies that could go public with a big bang as did Chinese Internet and solar IPOs.

China has several obstacles to overcome. With tainted food scandals, Beijing has suffered a black eye in terms trust and quality. In addition, intellectual property violations have also contributed to a culture of piracy that could put off major Western pharma companies from setting up shop in China.

Still, over the coming years China could easily crack down on violators with their eye on the pharma prize.

According to a PricewaterhouseCoopers report, “China would be the second or third biggest market in the world by 2020 and India might well be in the top 10.”

This growth will come with an increase in Western pharma companies establishing so-called contract manufacturing organizations (CMOs) in both countries.

In effect, CMOs serve as R&D and manufacturing facilities that provide cheaper scientists and operating expenses than in industrialized nations.

PricewaterhouseCoopers says that Asian companies provide a huge cost advantage that can range from 50 to 80% compared the manufacturing performed in the developed countries.

While cost is certainly a factor, manpower may be the true underlying impetus.

The PWC report notes: “The number of doctorates awarded in the natural sciences and engineering has leveled off or declined in the United States, United Kingdom and Germany since the late 1990s. Conversely, it has been rising steadily in Asia, such as Singapore, China and India.”

The legal systems of the West also favor Asian investments - despite current fears of patent infringement.

Impending patent expiration dates in the U.S. and Europe are about to given generic drug makers a big boost - in a way forcing the Big Pharma offshore into rapidly growing markets.

At this point, China may be too early for any investments. But it’s certainly not too early to start researching the sector now.