Recap: China’s Biotech Frenzy: Opportunities and Challenges, 6.2.21
On the heels of bullish growth in China’s biotech sector, China Institute hosted a business dialogue on June 2 with U.S. and Chinese experts on the factors spurring this massive industry expansion in China. How can companies map a strategy for tapping into the country’s growth and innovation in biotech? How will China’s biotech reshape the global biopharma landscape? What are the opportunities and continuing challenges? And how does US-China tension influence affect the outlook for collaboration?
Nisa Leung (NL) is a Managing Partner of Qiming Venture Partners and leading its health care investments. Qiming Venture Partners is a leading investment firm in China which currently manages over USD 5.9 billion in assets and investment in over 380 companies. Prior to joining Qiming, she was co-founder of Biomedic Holdings with operations and investments in medical devices, pharmaceuticals and health care services in China including Novamed and U-Systems. Leung earned her MBA from Stanford Graduate School of Business and a BS from Cornell University. She is currently visiting lecturer at Harvard Law School, member of Stanford Graduate School of Business Advisory Council, Hong Kong Exchanges and Clearing Limited Board of Directors and Hong Kong Palace Museum.
Scott Moore (SM) is a researcher and policymaker focused on emerging environmental and technological challenges. Dr. Moore is currently director of the Penn Global China Program in the Office of the Provost at the University of Pennsylvania, where he works with faculty across the university to design and conduct research on emerging challenges facing China and the world, including climate change, artificial intelligence, and gene editing. His first book, Subnational Hydropolitics: Conflict, Cooperation, and Institution-Building in Shared River Basins (Oxford University Press, 2018), examines how climate change and other pressures affect the likelihood of conflict over water within countries. His next book, also from Oxford, will examine China’s role in providing public goods and regulating emerging technologies. Dr. Moore holds master’s and doctoral degrees from Oxford University and an undergraduate degree from Princeton.
Greg Scott (GS) founded ChinaBio® Group in 2007 to help life science companies and investors achieve success in China. ChinaBio® works with US, European and APAC companies seeking partnerships, acquisitions, novel technologies and funding in China. ChinaBio® has also organized over 30 conferences in China focused on cross-border investment and partnering. Scott is also co-founder of two investment groups that have funded over 50 biotechnology and medical device companies in the US and China, and Executive Editor of ChinaBio® Today, a widely read newsletter covering the China life science industry. He also is the current chair for the American Chamber of Commerce Healthcare Committee, and a former board member of BayHelix Group.
Xiaoqing Boynton (XB) is a Senior Director for International Affairs at the Biotechnology Innovation Organization (BIO), the world’s largest biotech association headquartered in Washington, DC. Drawing on over 15 years of experience in US-China relations and global government affairs, she is responsible for developing and executing BIO’s advocacy strategy with respect to key Asian markets, with a focus on China and Japan. Boynton holds an M.A. in International Development from Brandeis University and a B.A. in International Economics and Trade from Beijing International Studies University.
Full Video of China’s Biotech Frenzy:
Selected Program Quotes:
XB: Looking at the new 14th Five Year Plan, there is a very strong focus on biotech from basic biotech research, to cutting edge innovation and R&D, and developing innovative gene therapies. This sector is receiving heightened focus on both sides of the pacific.
What are keys issues in terms of U.S.-China cola, why does it matter china is aiming to develop sector so rapidly?
SM: [Biotechnology and biomedical research] are rapidly becoming one of the most important issues in the US-China relationship overall, and China’s relationship with the world at large. Biotech has become a new arena for competition and rivalry in the US-China relationship.
XB: Without a doubt, there is a lot of excitement about China’s biotech industry. Can you share some thoughts on the opportunities on the investment side you are seeing?
NL: I think there is somewhat of a bubble going on. […] We are forecasting that valuations will come down, the interest in the sector will come down, and so quite a few companies will have a hard time fundraising in China in the next year or two.
GS: There is too much money and not enough good deals, so we are seeing a bit of a frenzy. So far, this seems to be continuing this year. But we are still seeing a lot of investments and new funds being raised. These are billion dollar funds, which you would not have heard of a few years ago. So, it is a phenomenal time to be an entrepreneur and an investor in China.
XB: China has a massive drive to promote innovation. This also appears to be closely associated with government push for self reliance. How will this impact prospect of global collaboration?
SM: In China’s economic policy, you see a bit of a tension and internal struggle between the impulses to liberalize, and structure regulations and policy to structure and leverage the inflow of foreign capital, investment, ideas, and talent, combined with the opposite instinct, which is deeply rooted in Chinese political history since 1949. There is a real desire for self-reliance and indigenous innovation, as well as not needing to rely on sources of investment, talent, or ideas from abroad. This struggle and contradiction is not a bad way to think of China’s economic and biotech policy writ large.
XB: I think in many areas of biopharma, multinational companies are bringing much needed innovative therapy solutions and technologies to Chinese patients. Some of them are through partnerships with China-based companies, and others are through direct investment. These are the bright spots in the cross-border activities and the U.S.-China bilateral relationship.
GS: The government is creating a lot of very good policies that are productive for multinational companies, and even small companies that want to bring their drugs or devices to China. In August 2015, the Chinese government announced a major sea change in their government policies for accepting drugs and devices into China, and that they would start to accept foreign data.
In the five years following, China has completely changed their regulations. China has joined the ICH (International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use), they accept global trials, and you can now conduct a phase 1 trial in China. There have been huge changes, and it has made it much easier for multinationals to bring their products to China.
Now everyone is worried about volume-based pricing. Even if companies can get their drug into China, they do not know what they will be able to charge for it. The dichotomy is although it is much easier to get pharmaceutical products into China, it is much more difficult to make money from them.
How innovative is China’s biopharma sector? What are the opportunities and challenges that exist for China based companies in today’s geopolitical environment?
NL: In reality, China is still 20 years behind the U.S. when it comes to innovation in the healthcare sector. When I came back to China in the early 2000s, India was much more advanced than China. I didn’t think China even had a chance to become the second largest market in the world. One issue made China have a chance, which was the Indian court ruling to nullify Pfizer’s patent, and allowing a generic Indian company to win because they wanted to promote their domestic sector. At that time, a lot of the big Pharma MNC’s were planning to do their R&D centers in India, but they then decided to pull out and set them up in China. This is when China really flipped, and had the opportunity to be one of the major centers in the sector.
GS: We are seeing more multibillion dollar deals where they are out licensing their assets to Western companies. This has been a major shift over the past 3-4 years.
In addition to novel drugs going outside of China, you also have novel drugs coming into China, and being developed for the China market by Chinese companies. For example, Zai Lab is in-licensing drugs from Western companies and developing them for the global market in China because they believe it is more efficient.
There is a lot of innovation coming out of China. There are more CAR-T trials being done in China than anywhere else in the world. They are very focused on things like CRISPR, as well as other novel technologies and moving them forward very quickly. There are areas where China is very far behind: medical devices is one of them. However, China is catching up in the drug area, and might even be ahead in some parts with regards to other countries.
SM: All major powers, including the US and China, have a shared interest in doing something to attempt to regulate the use of [gene therapy] technology, and the availability of really dangerous forms of genetic material. On the other hand, gene editing opens up astonishing ways to improve the human condition. China will be in the center of all of that—the risks and rewards. We certainly, at some level, have to figure out how to develop a constructive relationship and framework in biotechnology with China.
While there are certain ways in which you have geopolitical and commercial competition, a lot of it is coproduction. There are gains to both sides, and drug trials are an interesting example of this. Particularly in early phases of drug trials, it can be advantageous to test drugs in the Chinese market for regulatory and logistical reasons that make it cheaper and provide a stronger evidence base for certification both in China, the U.S., and other markets. The reality is that there are a lot of opportunities and benefits that flow from cooperation and collaboration in different arenas.
NL: More collaboration is good for all parties. The ultimate goal for scientists is to develop drugs that work and can serve the general good. By collaborating, it will not only help people in the US and China, but also individuals globally.
All of the major multi-national Pharma companies have followed [Johnson & Johnson] to create innovation centers in China, and recognize that cross border collaboration is incredibly important. These incubators are not only for Chinese companies, but also for western companies that want to come to China and collaborate with the Chinese. People in the industry truly believe collaboration is the best way to go, and they are trying to foster that the best way they can.
SM: China has some unusually restrictive policies when it comes to data sharing in general, especially when it comes to biomedical data. There are good reasons for this, and China is not alone with this policy. However, due to the size and scale of China’s biotech sector, this is something that has been of increasing concern abroad from both an economic competitiveness and geopolitical point of view. If there was one segment I would say it is important to focus on, it is data.