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China: life sciences industry overview and opportunities, Gao Ronghui

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Biocat held a workshop entitled Fostering internationalization (II): China on 25 January 2013 in Barcelona, featuring Gao Ronghui, a life sciences consultant with extensive experience in technology …

Biocat held a workshop entitled Fostering internationalization (II): China on 25 January 2013 in Barcelona, featuring Gao Ronghui, a life sciences consultant with extensive experience in technology transfer, fund raising and access to the Chinese market.
More information at: http://www.biocat.cat/en/news/biotechnology-internationalization-china

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  • 1. Sino–Euro Bio-Bridge Dr. Rong Hui Gao M.D. MBA G-Med ConsultingJan. 2013 Workshop organised by 1
  • 2. Sino–Euro Bio-Bridge (I) Industry Overview (II) Cultural Difference (III) OpportunitiesJan. 2013 Workshop organised by 2
  • 3. Sino–Euro Bio-Bridge Industry Overview - Pharmaceutical - Medical Device - Diagnostic - Medical ReformJan. 2013 Workshop organised by 3
  • 4. Industry Overview Pharmaceutical (1) Bio-Medical industry – 7,782 companies in total • Pharmaceutical: 5,646 • Medical device: 1,168 • Pharmaceutical machinery: 163 • Healthcare materials: 677 Source: CPA 4Jan. 2013 Workshop organised by
  • 5. Sino–Euro Bio-Bridge Pharmaceutical (2) Pharmaceutical 5,646 Chemical TCM Biologics 2,508 2,271 867 Source: CPAJan. 2013 Workshop organised by 5
  • 6. Industry Overview Pharmaceutical (3) • 817,000 tons chemical API; • 533.18 billion tablets; • 129.43 billion capsules; • 28.34 billion injections; • 11.7 billion infusion solution; • 16.24 billion powder injections; • 3rd drug consumption market globally Fast market growth (24% annual growth for past 10 years) Source: CPA 6Jan. 2013 Workshop organised by
  • 7. Industry Overview Pharmaceutical (4) Healthcare Industry Output 2000 to 2011 18000 RMB 100M 35% (€190B) 16000 29% 15255 29% 30% 26% 14000 25% 25% 12073 25% 12000 22% 20% 19% 10000 9626 20% 17% 16% 7914 8000 15% 12% 6157 6000 10% 4000 2917 2122 2452 1761 4211 4928 05% 2000 3254 0 00% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 General Output Year-on-year Growth Rate 7Jan. 2013 Workshop organised by source: ims
  • 8. Industry Overview Pharmaceutical (5) Output Breakdown (%) ) 权重(% 化学药品原料制造 Chemical API manufacturing API 19.9% 化学药品制剂制造 Chemical manufacturing Biologics10.5% 中药饮片加工 TCM decoction pieces processing 中成药制造 TCM manufacturing 生物生化药品制造 Biologics manufacturing 卫生材料及医药用品制造 Healthcare material TCM 21.7% Chemicals 26.8% 医疗仪器设备及器械制造 Medical device &machineryJan. 2013 Workshop organised by 8 source: ims
  • 9. Industry Overview Pharmaceutical (6)  5,646 manufacturers, 13,000 distributors and 390,000 pharmacies in China  Accounts for ¼ of international chemical API trading volume  Fast market growth, but a long way to go to catch up with leading countries. A big man, not a strong manJan. 2013 Workshop organised by 9
  • 10. Industry Overview Medical Device (1) West:8-15% 1:1 72% 70% High China:5% 1:3 7% 30% Low Of GDP Device:Pharma Global Market Share Mid/High-End Market Market ConcentrationJan. 2013 Workshop organised by 10
  • 11. Industry Overview Medical Device (2) China medical device market (2007-2014E) RMB Billion Comments +13% • China medical device market grew to RMB 120 bn (EUR 15bn) in 2009, taking over Japan as the 2nd largest market in the world +20% • High-end market will grow at 10% per year • Mid to low end market will grow at ~30% per year • Every 8-12 years, large equipment need to be replaced, a significant driver for the market Source: National Statistics Bureau; China Mechanic and electrical data onlineJan. 2013 Workshop organised by 11
  • 12. Industry Overview Medical Device (3) Pharma Distributors Hospitals Device Class III:1,399 Distributors 13,000 Class II: 6,468 150,000 D:H <2:1 Total:7,867 D: H >20:1 Total purchase value: RMB 500bn (EUR 62bn) in 2011 Average sales: less than RMB 4M (EUR 50K ) / distributorJan. 2013 Workshop organised by 12
  • 13. Industry Overview Medical Device (4) Imports vs. Domestically med devices Domestic production Domestic (more MNCs) (including MNCs) • All large MNCs have at least one JV with a local Chinese firm ~45% Imports • Need for a strong distribution/sales (slowing trend) ~55% network compels MNC companies to produce • Many MNCs are shifting domestically manufacturing to China Imports • Hospital purchase • Local Chinese companies contracts favor locally are investing more in produced products R&D to compete with MNCs; RMB 62 bn (EUR 800M) stimulus package from Chinese government Source: China Market Research Group, Espicom China Medical Device Market Q42010Jan. 2013 Workshop organised by 13
  • 14. Industry Overview Diagnostic (1) IVD Market Trends in China ($mm) 2500 2073 2000 Million USD 1511 1500 1200 1000 800 600 400 450 500 300 0 1995 1997 2000 2002 2004 2006 2009 2011 Source: McEvoy & Farmer 14Jan. 2013 Workshop organised by
  • 15. Industry Overview Diagnostic (2) Total IVD Sales ($mm) 2500 Segment not covered: 2,073 microbiology, 2000 200,0 clinical pathology, 111,74 cytology 1,511 1500 100 Million USD 81,78 678,29 Molecular Testing: Infection Disease 520,58 119,8 Florescent in situ 1000 67,9 317,75 hybridization, 244,25 88,7 microarrays, 500 67,94 81,08 oncology, etc. 69,05 CAGR 13% 475,63 359,64 0 2008 2010 Routine Chemistry Critical Chemistry Clinical Chemistry Urine Chemistry Hemo,Flow Coagulation IM Molecular Testing Segment not coveredJan. 2013 Workshop organised by Source: McEvoy & Farmer 15
  • 16. Industry Overview Diagnostic (3) Contribution of Each Market SegmentJan. 2013 Workshop organised by Source: McEvoy & Farmer 16
  • 17. Industry Overview Medical Reform (1) • Government spending over RMB 1240 bn (EUR 155bn), • Four of the five tasks have developed rapidly • Healthcare insurance • Grass-roots medical service system • Public health • Essential drug • Hospital reform has not been implementedJan. 2013 Workshop organised by 17
  • 18. Industry Overview Medical Reform (2) Universal reimbursement coverage system • New Rural Cooperative Medical System • Medical Insurance System of Unemployed Urban Residents •.Medical Insurance System of Employed Urban Residents • Complementary Medical Insurance System • Commercial Medical Insurance for Public ServantsJan. 2013 Workshop organised by 18
  • 19. Industry Overview Medical Reform (3) Government continues to increase investment • By 2015, Government’s subsidies to rural residents’ medical insurance will be further increased by 50% from the level in 2012 • Reimbursement rate will increase to 75% • Reimbursement cap will increase up to RMB 80,000 (EUR 10,000) per person p.a.Jan. 2013 Workshop organised by 19
  • 20. Fact Sheets (1) • Population 1.35bn by 2010 • Chinese people aged 60 or above stood at 118.85 million in 2010, accounting for 13.26 percent of the total population • Life expectancy: 74.84 years, male: 72.82 years female: 77.11 years,2012E (source NBS) • 300M emerging middle class • Urbanization 45% vs. 55% 2010 • New cancer patients 3.12M p.a.; 2.7M patients died of cancer p.a. • 90m diabetics; 160m hypertensive population • Obesity rate less than 5% country wide, but more than 20% in some cities • 80% adults do not exercise regularly • Lifestyle: – Changing eating habits of Chinese population, more fast food and sweet drinks – 60% male adults smokeJan. 2013 Workshop organised by 20
  • 21. Fact Sheets (2) Six people are diagnosed with cancer every single minute in China High Low MortalityJan. 2013 Workshop organised by 21
  • 22. Cultural Difference Break the Cultural WallJan. 2013 Workshop organised by 22
  • 23. Cultural Difference Culture Matters 谦恭 个性 Modesty PersonalityJan. 2013 Workshop organised by 23
  • 24. Cultural Difference Face - Truth Introvert - Extrovert Follower - Creativity Practical - Interest Relationship - Credibility Work - LifeJan. 2013 Workshop organised by 24
  • 25. OpportunitiesJan. 2013 Workshop organised by 25
  • 26. Opportunities Government continues to increase investment • China’s pharmaceutical market is expected to experience 24% of CAGR during 2011-2015. • Fast growth disease area: anti-oncology and anti-diabetes and immunopotentiator • Fast growth pharma sectors: bio-similar, modernized TCM • Large scale primary care medicine • Strong demand for high-end devices in large cities and hospitals; basic needs increase for low end productsJan. 2013 Workshop organised by 26
  • 27. High income market for best-in-class products Low income market for basic needs 2008 GDP per capita by province 2008 exp. per capita on healthcare (urban) by province Heilongjiang Heilongjiang Jilin Jilin Liaonin Beijin Liaonin Inner Xinjiang Inner Beijing Xinjiang g g Mongolia g Mongolia Tianji Gansu Tianji Gansu n Hebei n Hebei Shanx Ningxia Shanx Shandong Ningxi i Shandong i a Qinghai Qinghai Hena Jiangsu Hena Jiangsu Shaanxi Shaanxi n n Shangha Shangha Tibet Anhui i Tibet Anhui i Hubei Hubei Chongqing SichuanChongqing Sichuan Zhejiang Zhejiang Jiangxi Jiangxi Huna Huna n Fujian Guizho n Fujian Guizho > RMB 50K / y u > RMB 1k / y u Yunna Yunna Guangxi Guangdong Guangxi Guangdong n n RMB 30K – 50K / y RMB 800 – 1k/ y RMB 15K – 30K / y RMB 600 – 800 / y Hainan Hainan <RMB 15K / y <RMB 600 / yJan. 2013 Workshop organised by Source: National Statistics Bureau 27
  • 28. Opportunities Concentration of cities based on current city potential Comments • Tier 1 and 2 cities are already being penetrated by large MNCs for high-end to low-end Tier 1 & 2 Cities Current City Potential Index products (Shanghai, Beijing, Nanjing, Xi’an, and • New government reform will others) have the greatest influence in smaller cities not heavily penetrated by MNC players • Current city potential index reflects the current opportunity NEXT STEP: Tier 3, 4 ad 5 that combines primary research cities with available data to project (Chaoyang, Yulin, Guilin, Zhuhai, the potential for a specific etc) category China Cities (from the highest potential to the lowest potential) Source: IMS health analysisJan. 2013 Workshop organised by 28
  • 29. Opportunities Growth and current sales potential in Chinese cities Smaller but high growth cities: Longnan, Yulin, Chaoyang, Ankang, Ji’an, Shuozhou Medium Size Cities: Changchun, Dalian, Xi’an, Urumqi etc. Large Cities: Shanghai, Beijing, Guangzhou, Tianjin etc. Potential Growth Index Current City Potential IndexJan. 2013 Workshop organised by Source: IMS health analysis 29
  • 30. Opportunities Evolution of the healthcare provision system Current situation Future situation Tertiary care providers • Treat all types of patients with all levels of severity, large number of operations and outpatients Tertiary Disproportionate number of Care patients Providers Secondary care providers • Specialized hospital • Include out and inpatients • Focus on sophisticated and emergency treatment treatment & research Secondary care providers Not fully utilized • Large regional hospital Primary care providers • Provide emergency and general • Tier 1/Community hospital services hospitals Primary Care providers • Outpatients Low utilization • Through CHCs in urban areas and a 3 tier system in rural areas with village clinics, township centers and county hospitals • Treat mostly outpatients with small/common ailments • Prevention Source: IMSJan. 2013 Workshop organised by 30
  • 31. Opportunities Sector 1. BioPharmaceuticals BioPharmaceutical sector is a strategic focus in 12th Five Year Plan for the Chinese central government, 15/25 funded projects are biopharm projects (including vaccines). • Key players: • Bio-similar: CP Guojian, Biomab, Simcere, and Sansheng etc. • CMO: BI, CP Guojian, Genor AutekBio • Development: T-Mab, CP Guojian, BioMab etc. • Potential collaboration areas: • Product development (clinical stage) • Process development (productivity and cost) • Quality and engineering process • TA: onco, autoimmune, diabetes, liver diseaseJan. 2013 Workshop organised by 31
  • 32. Opportunities Sector 2. Vaccine The current Chinese vaccine market is about 1.2bn US dollar, with 25% growth rate. More than 40 manufacturers produce over 30 products. • Class I: HBV, BCG, polio, DPT, MMR,DPT, HAV, meningitis, Japanese encephalitis, areas of focus groups hemorrhagic fever vaccine, anthrax vaccine and leptospirosis vaccine.(covered by national immunization program) • Class II: Influenza, chickenpox, influenza B, haemophilus, oral rotavirus, pneumonia, rabies (self paid) • Key local players: China National Biotech Group, Sinovac, Bio Tech Pharma, Walvax, Innovax and Cansino • Potential collaboration areas: • R&D capability improvement (tech platform) • Product development on new products • Manufacturing process upgrade • CapacityJan. 2013 Workshop organised by 32
  • 33. Opportunities Sector 2. Vaccine Vaccine engineer center in CMC, 46,000M2,including R&D labs: Pre-clinical, clinical trial, Lab BL2+ for bac. and virus, Information system in large, sera and strains pool for trialsJan. 2013 Workshop organised by 33
  • 34. Industry Overview Sector 3. Diagnostic • National 12th Five-Year Plan • Improve R&D capability and encourage development of innovative instruments and reagents • Enhance international footprint • Support transformation of leading local companies • Market continues to grow at 15-20% annually. • Cost $1.5/person VS $25 to $30/person in developed countries • Independent Clinical Labs becomes part of IVD market. Key players: KingMed, Da An, Adicon, D. A. Diagnostics and Lawke (Local IVD manufacturing is booming, 87 in 2004, 137 in 2010). Potential Collaboration area: POCT Source: McEvoy & FarmerJan. 2013 Workshop organised by 34
  • 35. Opportunities Sector 4. Stem Cell Unit: 100M RMB (12.5M EUR) Stem cell technology development in China • Large population, can provide abundant resources for stem cells. For example, more than 17 newborns are born in China each year • The process of approval for clinical use of stem cells is much shorter. For example, the period from animal experiments to clinical China Growth Rate phase I is less than 18months, whereas USA needs about 6-8 years. Data Source: The world stem cell market data issued by SelectBiosciencesJan. 2013 Workshop organised by 35
  • 36. Opportunities Sector 4. Stem Cell Strategic Government Initiative to develop Stem Cell technology China’s 7 Emerging National New&Hi-Tech Plan: Industries of Strategic Torch Project Importance: 1.Energy Saving and Stem Cell Environmental Protection 2.New Energy •Stem Cell Clinical •Stem Cell R&D National High Technology Research 3.New Energy Vehicles •Stem Cell Bank and Development Program 863 Project •Stem Cell Cosm. 4.Biology •CRO 5.High-end Equipment Manufacturing 6.Information Technology National Basic Research Program of China 973 Project 7.New MaterialJan. 2013 Workshop organised by 36 Source: Angecon
  • 37. Opportunities Sector 4. Stem Cell Current Status of Stem Cell in China • The industry develop into: stem cell repository, therapy, cell production, cell bank and related services, etc. • The clinical market for stem cells is still in the early stage, but lacks of industry standard and quality control system. Some unqualified companies exploit opportunity to make profit and have negative effect to the industry. • China has huge medical needs, - 240m CV patients, 92m diabetic, 40m Alzheimers disease,14.6m hematological cancer patientsJan. 2013 Workshop organised by 37
  • 38. Opportunities Europe China  Lack of new tech &  Innovative tech & products products “Bridging” Need Gaps  Lack of leading talents  Leading talents  Low R&D cost  High R&D cost • Technology Transfer  Increase VC funds  Funding shortage • R&D collaboration  Fast market growth  Market growth • Outsource  Strong gov’t support  Strong competition • Commercialization • Cross-border M&AJan. 2013 Workshop organised by 38
  • 39. Opportunities Align the portfolio with high growth opportunities 1 Excel on building the right size, structure and capabilities Picking the right portfolio Build right sales & Match local demand distribution model, with value Getting the the right balance of proposition and right people, depth and breadth 2 leadership 3 relationship and executing well Setting the Building the right pricing right commercial 4 & market access model strategies Source: IMSJan. 2013 Workshop organised by 39
  • 40. Opportunities Government Incentives State Level Provincial Level Municipal Level • S&T Dev Program (€24B) • Talent scheme • Talent scheme on new drug) 12th Five year • Match fund • Start up fund plan • Innovative tech • Subsidy for leasing or • Mega New Drug industrialization grant purchasing premises/land Development Program (€10B) • Tax incentive on hi-tech • Tax incentives • Thousand talent program companies…. (€120) • Financing (seed/VC funds) • Strategic project, P863, P973 • Grant for platform development • Grant for central labsJan. 2013 Workshop organised by 40
  • 41. Opportunities Investment Approach (1) • Wholly owned enterprises • Site selection (location, infrastructure, labour cost, tax, incentives etc.) • Recruiting and retaining talent • Local partners • Government relationship • Joint Venture • Control majority of equity • D.D. on potential partner’s credibility, avoid state partner • Manage IP • Backup planJan. 2013 Workshop organised by 41
  • 42. Opportunities Investment Approach (2) • Distribution • Select right distributors with good experience on regulatory, hospital relationship • Manage Key hospitals or KOL if possible • Be aware of market dynamics and informal practice • Licensing • Select a capable and reliable licensee • Protect your IP (consult attorney with local expertise) • Be aware of the market trendJan. 2013 Workshop organised by 42
  • 43. Opportunities Investment Approach (3) • Co-Development • Select a partner with good track record with MNCs or western clients • Local partner in healthy financial condition and strong team • IP protection • Acquisition • Select a range of target candidates • Thorough D.D… • Valuation is high • Retain staffJan. 2013 Workshop organised by 43
  • 44. Thank you ! Contact: Dr. Rong Hui GaoJan. 2013 Workshop organised by gaorh@g-med.com.cn 44