Q&A: China’s Role in the Global Biotech Industry

Q&A: China’s Role in the Global Biotech Industry

This post was originally published in the September 2014 issue of our healthcare newsletter China Healthcare Deals+Strategies.
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China’s Role in the Global Biotech Industry

SSCO’s Carl-Johan Skoeld spoke with a leading and expert on the development and commercialization of biotech drugs in China.

How do you view China’s role in the global pharmaceutical and biotech sector?

JT: China’s current role in the global biotech industry is in many ways similar to that in manufacturing 10-20 years ago. China’s main competitive advantage was low manufacturing costs; in biotech China’s competitive advantage is its large pool of relatively low cost bench researchers. But China still lack many of the other success factors needed to foster a globally competitive biotech industry.

What key success factors are China missing, and how can these be addressed?

JT: First, there is still a low supply of creativity – the ideas needed to develop novel technologies. Secondly, the market for new technologies is still relatively
small; innovative products still make the vast majority of profits in mature markets. This situation is likely to remain for the next 10 years.
International partnerships that utilize China’s competitive advantage and closing these ‘gaps’ are essential to the long term development of the industry.

What are some of the steps China can take to develop its biotech sector?

JT: Making it easier to raise money and stimulate the development of new products would be important steps.

What are the key issues inhibiting fund raising?

JT: Currently, intangible assets cannot exceed 70% of the registered capital of a company in China. This creates a fund raising problem for many R&D intensive companies, as their intangible assets can make up well above 90% [of their registered capital]. Another problem is that there is no “China NASDAQ” board for growth companies such as biotechs. Listing requirements at China’s GEM-board, ChiNext, is three years of profits, a requirement that very few drug discovery and development companies meet.

What is the main obstacle to developing new technologies?

JT: The CFDA does not approve any completely new products. Often it is necessary to obtain an IND approval (approval to conduct clinical trials for a new drug) from the US FDA before it is possible to get approval by the CFDA.

How would you summarize the current Chinese biotech landscape?

JT: China is a very attractive place to develop technology. But it is still not a good market for selling technology – both in terms of inventors selling their creative ideas and as an end market for novel products.