A new wind is blowing strong and bringing quenching waters for the fertile Chinese land
More than 60 Chinese health-care companies have raised a total $16.3 billion from IPOs and secondary listings this year – and this year’s not over yet. While the far East has traditionally been looked at with a sceptical eye by Western MNs as the land of generic manufacturers (with sub-par quality standards), a recent shift in governmental priorities has finally allowed the nurturing of what is an inherently fruitful market for healthcare in general, and for the pharmaceutical sector in particular.
Nearing 1.5 billion inhabitants, China boasts a unique set of diseases and healthcare needs translating to uncountable new business opportunities which are – incredibly so – still up for grab. It offers massive patient pools with the large majority coming through public hospitals providing an invaluable resource for data collection. After having fuelled the top universities worldwide with a talent for more than 30 years, it is finally experiencing an “inverse diaspora” by which returnees have taken it upon themselves to increase both university and industry standards and incubate home-grown, world-leading know-how.
A rising average quality of life, hence a rapidly ageing population that will likely be filling hospitals and medical practices in the very near future, made the Chinese government realise they will find themselves with millions and millions of customers ready to buy products they – an economy traditionally considered self-sufficient and strong enough to be alone, today, in competition with the great financial blocks of the globe – are unable to provide. Too great of an opportunity to let go of.
China (and the world) prepare for the storm
Having made healthcare a national priority through the Healthy China 2030 plan, the government embarked on a series of reforms to support the growth of the sector. These include a thorough overhaul of the regulatory infrastructure (which is now modelled on top of the American FDA and the EMA) in order to debottleneck processes and accelerate development pipelines and approvals, as well as the institution of numerous incentives for small, medium and big enterprises looking for laboratory and office space, administrative support and financial backing. “It’s a virtuous cycle. To be a success, the whole ecosystem needs to work together” said Sam Thong, a senior healthcare banker at Goldman Sachs.
As demonstrated by a rapidly rising number of start-ups and record IPOs, China is clearly succeeding in transitioning from its role of Western copycat to full-fledged innovator with an ever-expanding spotlight on the stage of bioscience and pharma – within and beyond the geographical borders of China itself. J&J’s collaboration with Legend Biotech for their CAR-T Cilta-cel (Dec 2017), currently making waves in the multiple myeloma space, and Roche’s deal with Innovent Biologics to jointly develop bispecific and cell therapies (June 2020), are among the milestone-setting agreements and only a few of the numerous eloquent examples. For both traditional pharma leaders and Chinese rising stars, partnering seems to be the key to unlock the full potential of all stakeholders’ strengths.
The West is bustling to enjoy the rainy season harvest too
Western MNs have gauged the size of the opportunity – and they are hungry to get their slice of the cake. While many started intertwining commercial relationships (mostly manufacturing based) with the red giant more than 50 years ago now, it is becoming clearer and clearer that China is more than that today and will be tomorrow; so, that it is compelling to make the country a major strategic priority rather than a mere tool to inflate the top line. In August 2019, AstraZeneca – famously among the top bidders on the country’s explosive growth – made the headlines by scoring a second nod from Chinese authorities for the oral anaemia drug Roxadustat, which at the time had not even been filed in the US. Similarly, other pharma champions such as J&J, Sanofi, Pfizer, Eli Lilly (and the list goes on) have, in the past couple of years, began to build up their commitment to Chinese innovation by instituting stronger ties with universities and research centres, engaging in joint ventures with local players and establishing their own local accelerators/incubators.
Pharma has rarely before found itself so much at the epicentre of politics, media coverage and simply every layman’s conversation. While the last year has represented an unprecedented and unexpected turn of events, change was already on the horizon, in the form of digitalisation of operating models, reinvention of payment strategies and diffusion of innovation hotspots (again, the list goes on). Pharma leaders should make the most of the favourable weather conditions and look into what China could mean for their organisation now and in the future: the winds are blowing strong.