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Author: Jean-Claude Muller, 穆卓Executive Editor at BtoBioInnovation  jcm9144@gmail.com

SPECIAL REPORT #10

Investments in China Healthcare

There is not a single report on global Healthcare which does not mention the impressive outcomes obtained by China over the last decade. Thanks to a a recent State of China Life Science issued by the ChinaBio® Group we got access to accurate and updated figures supporting factors driving this success.

The three main pillars explaining the results are : political, socio-economical and funding.

Political

China spends more than $1 trillion in global healthcare costs and $137 billion on drugs, both expected to increase at around 5% for the coming years.  Growth which was as high as 19% CAGR in 2008-2013 has slowed down to 8% CAGR in the 2013-2018 period and is expected to further decline to 3-6% through 2023. As reported previously much of the growth, in the past, came from government reforms initiated by former Health Minister Chen Zhu, between 2007 and 2013, to expand insurance access to a large untreated rural population and to modernize the hospital system. The Chinese programs to favor affordability of the more than a billion poorest population are focused on the use of Essential Drug List (EDL) and National Reimbursement Drug List (NRDL). In June 2018, China has joined the International Conference for Harmonisation (ICH) as its eighth regulatory member, pledging to gradually transform its pharmaceutical regulatory authorities, industry and research institutions to implement the international coalition’s technical standards and guidelines.

The China’s State Council has recently outlined plans to reduce the value-added tax (VAT) on domestic and imported rare disease drugs, improve cancer treatment and accelerate approval of cancer therapies. Beginning March 1, the government will reduce the VAT on a "first batch" of 21 rare disease drugs and four Active Pharmaceutical Ingredients (APIs) from 16% down to 3%. The affected drugs were not identified, but most orphan drugs commercialised in China are of foreign origin. China made a similar move for VAT taxes reduction on cancer drugs last year.

Socio-economical

With a population of more than 1.4 billion people China has the largest world population. China’s overall economy and gross domestic product (GDP) is still growing at 6.5% although substantially down from highs around 15% ten years ago. In 2017 Per Capita GDP was reported to be $8,826 and is expected to reach the $10,000 mark in 2020. Since 2010 China has become the second largest biopharmaceutical market with annual spending of $137 billion in 2018 and expected spending of $175 billion in 2023.

These projections are based on the following premises:

• A 300 million middle class population who can afford paying for healthcare.
• A fast-growing aging population already representing 17% of the global population and expected to be as high as 30% in 2049.
• An explosion of 20-30% increase in chronic diseases and various cancers.

Since a long time Chinese authorities have also favoured the homecoming of “sea turtles returnees”. Over the last six years more than 2 million individuals have returned to China, whereby roughly 250,000 are now active in the life science sector. Most of these returnees have received high level education (engineers, master degrees, Ph.D., M.D., MBA, etc..) from western universities (360,000 Chinese students currently in the US) and, in addition, many have gained valuable professional experience outside of China. These returnees are major contributors to innovation “made in China” and often founders of new companies dedicated to healthcare.

Public and Private Funding

Government support in improving overall healthcare policies exceeds $100 billion every year.

Venture Capital and Private Equity funds were at $42.8 billion in 2018, up from $1.2 billion in 2008. In 2018, the report has identified 67 dedicated healthcare funds down from 74 and 86 in previous years, but with an average fund size of $764 million. According to these numbers China investements in life science are almost on par with the US.

Investments flowing into China life science reached a record high of 696 representing $17.3 billion, up from $327 million in 2008, with an average investment of $44 million. Pharmaceutical companies received largest investment (44%) followed by e-health (29%). The highest investment was received by Ping An Healthcare with an overall cross-border deal of $1.2 billion.

218 M&A deals were coined in 2018, up from 184 in 2017 and 57 in 2012, with a total value of $34.2 billion, up from $22.3 billion in 2017 and $1.8 billion in 2008. The Biopharmaceutical sector represented 63% of total deal value. Four M&A deals were valued at more than one billion dollars. The largest one was the acquisition by Grifols Diagnostic Solutions (US) of Shanghai RASS Blood Products for $5 billion.

ChinaBio® has identified more than 1,000 partnering, licensing and acquisition candidates for western life science companies over the past 10 years, with as many as 218 in 2018, representing a total value of $13.8 billion, up from $8.3 billion in 2017 and $726 million in 2008.  Deals in the oncology field dominated the partnering activity with 31% followed by the neurology field at 9%. The largest deal worth up to $1.3 billion was BeiGene’s acquisition of Asian rights of Zymeworks’ (Canada) portfolio of cancer drugs and a research and licence agreement of Zymeworks platforms globally.

27 IPOs were completed in 2018, down from 53 in 2017, but the total funds raised reached $6.9 billion up from $4.9 billion in 2017 and $726 million in 2008. The Hong Kong Stock Exchange (HKEX) has been driving the majority of them in 2018. The average money raised was at an incredible record high of $256 million up from $90 million in 2018, partially due to the reintroduction of WuXI AppTech in August at the Shanghai Stock exchange, followed in December at the Hong Kong Stock Exchange with total raised money of more than $1.35 billion

The ChinaBio Partnering forum to be held on May 8-9, 2019 in Shanghai, at the Zhangjiang Hi-Tech Park, will be a unique opportunity to gather more information at the forecasts for the 2019 China Healthcare sector.

This document has been prepared by btobioinnovation and is provided to you for information purposes only.  The information contained in this document has been obtained from sources that btobioinnovation believes are reliable but btobioinnovation does not warrant that it is accurate or complete. The views presented in this document are those of btobioinnovation’s editor at the time of writing and are subject to change.  btobioinnovation has no obligation to update its opinions or the information in this document.