Nation set to move up global biopharm value chain

Chinese companies are now vying aggressively with multinational corporations for domestic market share in the country's innovative drugs sector, thanks to strong industry support, said global consultancy Boston Consulting Group.

These incentives, including funding, policy, infrastructure and talent recruitment, are propelling homegrown companies to continue improving their innovation capabilities to allow them to eventually compete with MNCs outside of China.

The report found that more than 140 new biotech firms emerged in China from 2010 to 2020, a figure which compares favorably with other major markets.

"The sheer number of patients in China makes the market very attractive for companies that win bids and are listed on the government's National Reimbursement Drug List," said John Wong, a core member of Boston Consulting Group's healthcare practice and chairman of the company's China system.

"These demographic and demand trends have created an opportunity for domestic biopharma to pursue innovation in China for China, which dovetails nicely with the Chinese government's focus on the industry over the past decade."

Four structural changes underpin that development. More and more private capital is available to the industry through venture and private equity funds, which underwrite most R&D in China. Government and institutional funding through the China National Science Foundation and government grants are also channeled through private equity firms and are an important source of funding.

Government support is also critical. Over the past five years, China has enacted several policies to explicitly improve market access and support innovation. The government has worked to significantly ease the registration process for innovative drugs and harmonize the approval process with global norms.

In addition, the Chinese government has also supported the development of science parks and city hubs for innovation and R&D by offering land to developers at very attractive prices.

From 2016 to 2020, the number of biotech science parks grew 50 percent－from about 400 to some 600－and the total value of their output has grown by more than 80 percent over that period.

Returnees have been without question the key driver behind the formation of innovation companies in China over the past 10 years. More than 75 percent of the top talent in China have at least five years of overseas research experience.

All these have been driving the country to move toward an early stage of innovation and engage more actively in original indication expansion, combo therapies and novel antibody work.

"These areas also demand more innovation expertise, from hypothesis to clinical translation," Wong said. "As China deepens its understanding in areas such as oncology pathogenesis, biological mechanisms and antibody engineering, we expect this progress to continue."

A third wave, namely innovations involving completely new mechanisms of action, is also picking up momentum. These involve completely novel technologies, such as focusing on cell therapies and gene editing.

"There's little doubt that MNCs with long-term global ambitions need to be in China," Wong said. "An MNC might choose to collaborate in local R&D through a different structure, or it might contribute to the innovation ecosystem in other ways."