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China welcomes global innovation opportunities: 90% of international pharmaceutical companies intend to enter the Chinese market
Dec 05, 2018

With 60% of the world's population, Asia has the largest medical market opportunity in the world today. In the past few decades, Japan has been a leader in the field of biomedicine in Asia, and has received extensive attention from the global medical industry.


In recent years, the Chinese government has issued a number of policies to support and encourage the development of innovative biotechnology, especially in drug regulatory reform and intellectual property protection. China's domestic investment in the pharmaceutical sector has continued to grow, and the size of the Chinese pharmaceutical market continues to expand, ranking second in the world.


Under this trend, China is gradually developing into a market that cannot be ignored when the global biomedical industry seeks development opportunities. According to LEK's research results, 90% of international biopharmaceutical companies intend to enter the Chinese market or further expand their business in the Chinese market. At the same time, the number of products exclusively granted to Chinese pharmaceutical companies by international biopharmaceutical companies has tripled in the past five years. Times.


At the same time, however, the survey also shows that for most international biopharmaceutical companies, the Chinese market is still very complicated and unfamiliar. Three-quarters of the international biopharmaceutical companies that participate in the research tend to choose partners to jointly develop the Chinese market, especially Those products are still in the early stages of research and development. This has brought unprecedented opportunities to many biopharmaceutical companies in China. Whether it is a mature pharmaceutical company that needs to consider transformation and upgrading, or an innovative R&D enterprise that needs to expand its product pipeline, or even a financial investor, it is actively exploring opportunities for cooperation. And many have been put into practice.

1. Asian opportunities


Currently, Asia accounts for 30% of total global drug expenditures. This number is expected to increase as the medical burden in the region increases, especially in the treatment of chronic diseases. According to the World Health Organization (WHO), by 2020, the Asian cancer treatment market is expected to reach $150 billion, an increase of 40% from $107 billion in 2015. This increase is mainly due to the substantial increase in cancer patients in India and China, where cancer patients in India have increased by a factor of five, and the number of confirmed cancer cases in China has reached nearly 4 million. In other chronic diseases (such as old-age dementia), 60% of the world's cases are concentrated in low- and middle-income countries, and Asia accounts for a large proportion.

2, will not ignore China


For international biomedical companies, the domestic market is of course in the first place. L.E.K.'s survey of international biomedical companies shows that China is one of the top four markets for biopharmaceutical companies' investment choices, of which 22% said that China is a high priority. Despite this, in fact most biopharmaceutical companies still focus on the US, EU, Japan and local markets. After US companies set up their own institutions in their home countries, they usually give priority to the Western European market, and vice versa. Given the relative size of the market and the familiarity with the local market, such a choice is certainly reasonable.


However, due to the rapid growth of the Chinese market and the continuous increase in medical and health expenditures, the development potential of China's biomedical industry cannot be underestimated. As one investor in the United States focused on developing early stage assets, “In the companies we invest in, although we can't ask for assurances that they must choose China, I can at least make sure that they don't ignore China when they think about it.”


The survey also showed that 94% of respondents expressed interest in participating in international expansion, 90% said they are interested in the Asian market, and 86% are particularly interested in entering the Chinese market. Respondents' strong interest in the Chinese market is mainly due to the huge and rapidly growing market volume. However, there are also cases where the initiative comes from the board of directors or from Chinese companies.


Nearly half of biopharmaceutical companies tend to trade in China or the interests of Greater China, including Hong Kong, Macao and Taiwan, and about 20% are more willing to reach regional deals including China. Biopharmaceutical companies, regardless of the stage of development, will consider entering the Chinese market, and the biomedical companies surveyed in Phase II clinically have the strongest interest.


3. Opportunities in the Chinese market


Under the combined effect of various factors, China has become the main source of growth for the global biomedical industry.


China has the largest population in the world, and older people aged 65 and older account for 22% of the total population (about 1.3 billion people), creating a huge pharmaceutical market. In 2017 alone, China consumed $122.6 billion in prescription drugs, and it is expected to continue to grow at a nearly double-digit ratio in the future. China's demographic information shows that China has already faced a huge disease burden and will continue to increase in the future.


Boards or executives with international market experience expressed in the survey: Given the size of the entire Chinese market, biopharmaceutical companies are sometimes asked by the board of directors to develop a Chinese strategy. If the management team has international market experience, they are more likely to be proactive in considering the Chinese market.


Chinese companies have taken the initiative to attack. Small or in-development biopharmaceutical companies typically focus on current clinical development projects and have no energy or awareness to think about the next important milestone, let alone consider entering the Chinese or Asian markets.


In this case, Chinese biopharmaceutical companies, investors or business consultants often look for partners or projects. Two-thirds of the world's biopharmaceutical companies have received contacts from Chinese companies.


China treats 3 million to 4 million cancer patients each year, accounting for 37% of global lung cancer, 44% of gastric cancer and 52% of liver cancer. There are 110 million people with diabetes, of which 1/2 have not been formally diagnosed, and 500 million are pre-diabetes. There are 140 million hepatitis B patients, of which 30 million are chronic hepatitis B patients, 270 million hypertensive patients in China, and about 100 million chronic obstructive pulmonary disease patients.


Li Tongming, CEO of Genisphere, said: "The number of Chinese pharmaceutical companies participating in the San Francisco JPMorgan Medical Health Conference has increased significantly this year. I am very surprised by the size and maturity of the Chinese business team. Many sales exceed $1 billion. Chinese pharmaceutical companies will send teams of 4 to 6 people to attend all the surrounding conferences and arrange more than a dozen meetings every day."


4. Representative events


In January 2017, the cooperation between Fosun Pharma and Kite Pharma was regarded as a groundbreaking transaction by many biopharmaceutical companies: Fosun Pharma paid a down payment of up to US$40 million and an additional investment of US$20 million to support clinical development. At the same time, Fosun will also pay $35 million in commercial milestones and product sales commissions. The deal and some other well-known trades in the industry once again prove that China is a high-growth and high-value market.


Joseph Weilun, senior vice president of business development and collaborative management at Horizon Pharma, said: "We have recently seen some US companies and Chinese partners have reached deals to promote product commercialization, which has led us to consider entering China. market."

The needs of patients and doctors in China seem to be very different from those of other countries, but this is also keeping pace with the times. Patients have limited ability to pay and limited medical resources, which has also caused uneven acceptance of expensive and innovative treatment options in the Chinese market. These differences make it possible for medical innovations that have value in developed markets such as the United States and the European Union to die or fail in China. In addition, for more than a decade, although many multinational companies in the pharmaceutical field have performed strongly in China, some Chinese local companies can still occupy half of the country, for example, the strong development of orthopedics, such as Weigao, Kanghui, Chuangsheng, and generics. The first sound, Qi Lu and Heng Rui. China's health care innovations tend to focus on developing cost-effective products that provide one of the most economical products when quality meets basic requirements.


Since the medical reform in 2009, Chinese government policy makers have provided strong direction guidance and policy support for the development of China's medical and health undertakings. These support were further strengthened in the 12th Five-Year Plan and the 13th Five-Year Plan.


However, it also includes some ambitious long-term goals. For example, the market share of some key products reaches 30% to 40%, and the overall competitiveness of the medical device technology industry is enhanced. In order to achieve these goals, a number of factors, such as funding, local policies, and regulatory enforcement, are continuing.


The Chinese government has been committed to creating a good environment for the development of innovative biomedical fields. In the past decade, China has launched a series of programs aimed at building an ecosystem that effectively supports the development of innovative healthcare products. These programs include: more effective intellectual property protection mechanisms; mechanisms to attract overseas outstanding Chinese to return to the country; funding for the world's leading research and development projects (such as committing more than the federal government's level of funding for precision medical programs); reforming the regulatory system, Accelerate market access for medical innovations that are urgently needed or developed locally (such as “Opinions on Deepening the Reform of Examination and Approval System to Encourage Drug Medical Device Innovation”); increase investment in approval to shorten and standardize Chinese medical products that have been criticized The time for listing approval (for example, the number of experts in the drug evaluation center has reached 3-4 times that of 2013).


In June 2017, China began a series of major reforms to its clinical trials and drug registration technology to meet the requirements of the International Technical Registration of Human Drugs (ICH). These reforms will reduce the cost and time required for products to enter China and are widely recognized as a sign of the Chinese government's encouragement of international cooperation. These reforms will also better help Chinese companies prepare for their future participation in international competition.


Most importantly, the State Council of China launched the “Made in China 2025” program in 2015 to increase the speed of innovation in China and the level of manufacturing. The “Made in China 2025” program identified ten strategic development areas as the focus of ongoing government support, including biomedical and high-performance medical device industries. China hopes to encourage domestic innovation in key areas through this policy, and relevant local policies and initiatives are also expected to be supported by high-level central government.


The Chinese government has set ambitious goals, but China's competitiveness in innovation in digital medicine and cancer immunity has not yet reached an ideal state. As China's affluent level rises, eager patients are increasingly looking for high-end medical products. From 2016 to 2017, China’s overseas investment spending almost doubled from five years ago. This provides a huge opportunity for international biomedical companies to shape themselves into reliable and trustworthy partners for Chinese patients and fill the gaps in the Chinese market.

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