China has witnessed a biotech boom over the past decade. By 2016, China has the world's second-largest pharmaceutical sector after the U.S. Sales reached $137 billion in 2018. The growth has been phenomenal and it is going to accelerate in the next few years.
Biotech is one of the eight key strategic industries set by the Chinese government in its last two five-year plans. The domestic biopharma sector has enjoyed dynamic growth in a short period of time due to a combination of government policies, industry deregulation and a large pool of private and public funds available.
The rule changes in both Hong Kong and the Chinese mainland stock markets in 2018 made it possible for young pre-revenue biotech firms to raise money on public trading platforms.
In 2020, new biotech listings in Hong Kong raised more than $6.4bn, almost double the previous year’s total. Biotech companies listed in Hong Kong have attracted funds at a record pace in 2021 as buoyant markets and rising interest from global investors poured funds into the Hong Kong Stock Exchange. Venture capital investment into most sectors in China/Hong Kong has generally plunged throughout the COVID-19 pandemic but biotechnology has been a noticeable exception.
Domestic firms are now playing a key role in this rapid growth, showing an evolutionary shift in Chinese biopharma sector. Moreover, these firms are going to have their own innovative treatments rather than copies, increasingly having their share in the global pharmaceuticals market.
Talent. China’s talent pool is still smaller than in the US, but it’s rapidly expanding as local talent continues to develop and Western-trained scientists steadily return to China. Returnees (Haigui or so-called “Sea Turtle”) have undoubtedly been the key driver behind the formation of many innovative companies in mainland China over the past decade. Since 2013, some 250,000 Chinese have returned from abroad to work in China’s life sciences sector.
More than 75% of the top talent in China have at least five years of overseas research experience. While the government has actively encouraged their return with generous government grants, the attractive market dynamics have already superceded government incentives.
These so-called “sea turtles,” armed with top-notch training from foreign institutions and experience at large multinational biopharma companies, set up their own shops. Many firms initially licensed foreign drugs for the domestic market, but in recent years the focus has turned to drug discovery.
Starting in 2015, Chinese regulators ushered in a slate of reforms, creating a more amicable environment for the biopharma industry to thrive. To help innovative drugs get to market faster, China’s FDA started to allow foreign clinical data to support applications and streamlined its review processes. As a result new drug approvals surged. In 2017, 42 new molecules won approval in the Chinese market, up from seven in 2016, according to data. In 2018 and 2019, those numbers were 60 and 57, respectively.
Some industry forecasts show China’s biotech market is to grow at a five-year growth rate of 16.4% by 2021, making it the world’s fastest. China’s emergent pharmaceuticals industry could disrupt Western markets by making advanced yet reasonably priced drugs available in the West – in some cases for 70% less than their Western equivalents. Industry experts also point out that this is happening “without compromising quality.”
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