After four years away, Brendan Shaw recently returned to China to attend the ChinaBio Innovation and Investment Conference in Suzhou. Although geopolitical tensions, the fallout from COVID-19, and local market challenges have dampened stakeholder optimism around China somewhat in the last few years, Shaw feels that the country still has a lot to offer canny life science investors and opines that through greater international understanding and collaboration, can participate in solving some of humanity’s greatest challenges.
When the winds of change blow, some people build walls and others build windmills
Traditional Chinese proverb
In the centre of the ancient Chinese city of Suzhou in Jiangsu province, there is the 16th century ‘Humble Administrator’s Garden’, rebuilt by a Ming Dynasty official as a place for reflection and contemplation of life’s ups and downs.
This year marked my return to China to attend the ChinaBio Innovation and Investment Conference in Suzhou after a four-year absence due to pandemic-inspired lockdowns and travel bans. It provided me with my own opportunity to reflect on the state of the industry today, observes some of the most important emerging trends, and discuss where the industry is going.
China has changed a lot in the last ten years or so, and its life sciences sector is no different. While some may not realise it, China’s life science research and development capabilities have grown significantly in the last decade. The vibe at this year’s conference reflected an industry that is growing and developing significantly, but – like its counterparts across the globe – must navigate the various economic, social, environmental, and geopolitical forces confronting the world today.
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Given that understandings of what is going on in the life science industries of countries like India and China are sometimes complicated by the use out-dated stereotypes, here are five trends I noticed in my first trip to China in four years.
1. The Chinese life sciences industry can ride out the capital market ‘cold winter’
One of the important discussions at the CBIIC conference was how the Chinese life sciences industry can weather the current capital market ‘winter’. Five years ago, the industry was highly popular in both local and international capital markets, but in recent times it has not had as many friends – venture capitalists, international investors and the like.
Factors such as rising global interest rates, Silicon Bank collapses, declining investor appetite for risk, capital crunches at home and abroad, domestic economic issues in China, and changing geopolitical relationships between countries are all likely making capital raisings for Chinese life science companies more difficult.
That said, the mood at the conference seemed to be that the Chinese life science industry was well-placed to ride out the storm and, perhaps, even take advantage of opportunities in such an environment. Discussions at the conference noted the significant number of both Chinese and international companies that are making significant investments. An evolution in Chinese government funding policies for medicines and healthcare is another encouraging trend. Domestic health markets are growing and there is hope that the Chinese government will recognise the importance of a robust local life science sector in its own drug pricing policies.
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There was also some discussion that perhaps the industry had been too overpriced in the past, attracting market valuations it did not deserve and that were often multiple times higher than those in the US. What we may be seeing now is a recalibration towards more realistic valuations for the Chinese life sciences sector, rather than a downturn as such. This is probably a good thing.
Another issue discussed was whether the Chinese industry was being innovative enough. Some speakers noted that government policy in China is trying to push the industry to be more innovative in its approach to drug development. This may require Chinese life science companies to focus less on ‘me-too’ drugs that compete with existing medical technologies, and instead focus more on developing ‘me-better’ and ‘me-first’ (first-in-class) innovative medicines.
2. A growing internationalisation of Chinese market and companies
Another strong theme running through the conference was the growing internationalisation of the Chinese life science sector. It feels like the number and scale of Chinese companies looking to expand internationally has grown, and much of the discussion in the industry is how such companies can continue moving up the knowledge curve, become more innovative, and expand internationally.
A topic of discussion was how to integrate both Chinese and international skills and experience into Chinese companies’ global expansion plans, be it Chinese companies employing local staff in foreign markets, undertaking multi-centre clinical trials in different countries, or integrating Chinese and Western strengths into science and innovation strategies, Chinese companies need to increase their engagement in and collaboration with global markets. Early adopters like Betta Pharmaceuticals and BeiGene have been pioneers in the Chinese sector ‘going global’, and now other firms like Fosun Pharma, Innovent, Simcere, and Ascentage Pharma are examples of companies looking to expand globally through innovation and collaboration.
At the same time, Western multinationals like AstraZeneca, Roche and Eli Lilly have made major pushes into the Chinese market and are looking to integrate the country into their global business strategies. For example, AZ Chief Executive Pascal Soriot, has recently said “It’s hard to not be impressed by the progress that has been made in China over the last few years.”
China is also becoming a more important first launch market. For example, Hua Medical launched its first-in-class diabetes drug together with Bayer in China before seeking to launch it worldwide. Certain multinationals seem to be embracing opportunities in China more than others, perhaps in the process recognising the downsides of deglobalisation and ignoring calls for decoupling from China’s economy.
3. Conference attendance and activities reflect global realities
Today, we live in a post-COVID world where borders are still opening and geopolitical realities are ever-changing. One event at the conference which reflected this was the launch of the ‘Suzhou Initiative’ at the Shanghai Cooperation Organisation Pharmaceutical Cooperation and Development Conference. The Suzhou Initiative is a new agreement to enhance dialogue on pharmaceuticals and healthcare issues between the participating countries including Cambodia, China, Kazakhstan, Kyrgyzstan, Pakistan, Russia, and Uzbekistan. The ‘Suzhou Initiative’ reflects Xi Jingping’s call for a ‘multipolar world’ and moves towards more cooperation between non-Western countries.
Western countries were represented at the conference, albeit in limited numbers compared to pre‑pandemic times. For example, the audience contained a smattering of Australian, British and Canadian participants, and the UK Embassy in China put on a well-attended and engaging roadshow of British life science companies looking to engage with Chinese partners. There is no doubt there are more opportunities in the future for more Western companies and countries to engage with China’s life sciences sector.
One hopes that as the world reconnects post-Covid-19 that more international participation will be seen in the future. The opportunities for global cooperation in science, innovation, research, investment and growth between China and other countries to develop new medicines, build better health systems and solve the world’s health problems seem obvious.
4. Increasing importance of environmental standards and ‘green’ life sciences
For the first time since I’ve been coming to CBIIC, I saw evidence that environmental issues are becoming more important in the Chinese life science sector and health policy. Panel sessions included discussions of managing the carbon footprint of the health system, the green economy and the industry’s environmental impact.
This included everything from environmental processes for manufacturing antibiotics, through to emerging Chinese companies highlighting their ESG credentials alongside their clinical trials results. This was pleasing to see and suggests another way the Chinese industry is trying to adapt to international standards, recognise changing market demands, and build growth strategies. China has already made a pitch as a green energy tech leader through its push into things like renewable technologies and electric vehicles. Bolstering the local life science industry’s environmental credentials will help it secure a place in reconfigured global health markets that are increasingly putting a premium on ‘green’ or environmentally sustainable medicines and medical therapies.
5. Changing regulatory standards
Another theme in discussions around the conference was the changing regulatory landscape faced by the Chinese life science industry and health sector. Whether it was discussion about the topic of international regulatory standards needing to evolve for emerging markets, evolving clinical trial regulations, or new opportunities with reforms in Europe, there are opportunities here for companies from China and elsewhere. China, of course, has undergone major regulatory reforms itself over the last decade, including recognition of foreign clinical trial results, upgrading its intellectual property and data protection standards, reforming its clinical trial approval processes to speed up approvals, and recognising that a ‘new drug’ does not have to be a new drug in China to secure special designation.
Of course, a significant current regulatory issue in China is the crackdown on corruption in the hospital sector and hospital pharmaceutical affairs committees. In recent months, authorities in China have swept through the hospital sector to stamp out corruption in medicine procurement. This was discussed in corridors at the conference and the general view seemed to be that this crackdown is a good thing. It presents an opportunity to clean up the hospital sector and introduce further reforms in the future. Several Chinese associations have already done a lot of early work in progressing ethical codes of practice for their members that will be beneficial here.
Build more windmills
At a time when the world seems obsessed with finding new ways to disagree, to divide ourselves and not work together, the global health and life sciences sectors represent opportunities for different cultures, industries and countries to overcome differences and collaborate to solve some of humanity’s big problems.
China has a chance to engage in this collaboration through its own life sciences sector, and there are opportunities here for the international business, research and health policy communities to be a part of that.
Like the traditional Chinese proverb suggests, perhaps now is the time to build more windmills and less walls.
Brendan Shaw is Principal of Shawview Consulting and an Adjunct Professor at the Sydney Pharmacy School, Faculty of Medicine and Health, at the University of Sydney.
