Biotech in China: Oasis in the Desert?
The world's second-largest market for the pharmaceutical industry and biotech is currently reaping the fruits of the result-driven regulation reforms and cutting edge technologies to provide healthcare for its 1.4 billion citizens.
Besides the macro drivers, such as changing demographics and enriching the middle-class, the Chinese biotech industry was further fostered by the regulatory overhaul and outstanding developments in particular areas such as immuno-oncology and deep learning-driven techniques.
Regulatory rejuvenation from top to toe
The China Food and Drug Administration (CFDA), now under the National Medical Products Administration (NMPA), had intended to transform the Chinese pharmaceutical industry by introducing a series of regulations, and it partially succeeded. Since early 2016, Chinese regulators have been updating the overall drug registration and related policies to create a well-working domestic pharmaceutical industry, as well as to provide cheaper drugs and medicine for the public.
First, the regulators freed the drug developers from the lengthy procedures in the approval course, accelerating the entire process of approval. 774 applicants benefited from the regulatory update in 2018, McKinsey found. Secondly, a set of regulatory updates facilitated multinational novel drug developers' drug distribution procedures in China, making operational deployment in the mainland even easier for pharmaceutical multinationals. Thirdly, drug developing licensing procedures have been eased for third party drug developers and Contract Research Organizations (CROs), creating a brand-new development channel for CROs in China. Last but not least, the regulators announced that they'd include high-priced, novel and innovative drugs into the reimbursement lists, creating a massive wave of R&D investment into these therapies: namely, genomics, immunotherapy, and other cutting-edge therapeutics.
Private Equity investors' foray into Chinese biotech startups
In fact, the optimistic atmosphere had started long before the specific regulatory updates, with a couple of visionary plans introduced by the central government, namely, 'Made in China 2025' and 'Healthy China 2030'. The regulatory overhaul was the final move that put the pieces together in China's biotech and pharmaceutical industry.
China's once generic-dominated drug development scene is transforming; it is becoming feasible for novel drug developers to shape the industry. On both the supply and demand sides, the Chinese pharmaceutical industry will stay as one of the critical pillars of the primary market investment drivers in China, and ultimately its contribution to public markets is expected to be consolidated.
The growth-stage vanguards of China's biotech field
There has been an outstanding increase in immunotherapy, antibodies, and genomics focused companies in China. The country has a high incidence of malignant tumors, with nearly 4 million new cancer cases diagnosed each year. Thereby, immunotherapy and oncology companies that are developing innovative solutions for cancer have mushroomed in the mainland.
The trend is fostered by the regulators. The approval of Nivolumab in China in June 2018 for treating non‐small cell lung cancer (NSCLC) in adult patients made available the first immune checkpoint inhibitor in China. One month later, the NMPA granted Merck's Keytruda (pembrolizumab) approval in combination with pemetrexed and platinum chemotherapy to treat patients with metastatic NSCLC.
Numerous start-ups scaled their businesses, meanwhile. I-Mab Biopharma, a Shanghai-based clinical-stage Immuno oncology provider, filed for a much-anticipated IPO with the US Securities and Exchange Commission at the end of October 2019, aiming to raise up to USD 100 million. The firm is focused on developing new therapeutics for cancer by immunotherapy. Shanghai Cell Therapy Group, another prospective startup, is a developer of precision medicine through cell therapy. Established in 2000, the company is offering cancer diagnosis and treatment, and services that include cell production, cell cryopreservation, genetic testing, and cell-related products. The company has raised more than CNY 2 billion in total, led by Legend Capital, Haier Capital and China Industrial Asset Management.
Human resources in life sciences and R&D accumulation are the essential assets of biotech companies. There was a massive divergence before the year 2000 in the annual number of biotechnology patents granted between the US and China. From 2007-2012, the number of biotechnology research publications from Chinese institutions increased year-to-year by an average of 20 percent and realized a catching-up trend. Finally, in 2012, Chinese publications outnumbered those of in the US.
Meanwhile, the Chinese central government had initiated a talent cultivation plan called 'Thousand Talents Programme' to bring about the necessary talent pool in life sciences and other strategic areas in 2008, by utilizing foreign talents in the mainland. On the other hand, 352,000 Chinese students have studied life sciences in the US as of 2017. Most of them are studied chemistry and engineering, UBS found.
There is no silver bullet for Chinese in their arduous journey to create a competitive biotech and pharmaceutical industry. Still, the industry will be gradually leveraging its standards up to higher than those of contenders as its research environment is saturated. And this is a long-term-only transformation.