The Chinese pharmaceuticals industry is growing rapidly as firms trade imitation for innovation, attracting talent and investors, notably in biotechnology.
China became the world’s second-largest pharmaceuticals market after the U.S. in 2016. By 2018, sales reached $137 billion, doubling in just six years. As sales continue to climb, they are projected to equal half of America’s by 2030 – most from domestic firms, representing an evolutionary shift in Chinese pharmaceuticals. Moreover, these firms will produce innovative treatments rather than copies, increasingly for sale on the global pharmaceuticals market.
What has set the industry on the fast track is an increasing alignment of the China’s drug regulations with international standards, as well as faster approval processes. Regulatory oversight of clinical trials is weeding out thousands of would-be copycats.
In terms of talent, China is benefitting from countless science graduates, many leaving top foreign universities and big pharma companies to avoid immigration complications and broaden their opportunities for advancement. This is giving China an edge in medical innovation. Since 2013, some 250,000 Chinese have returned from abroad to work in China’s life sciences sector.
China’s booming drugs market has become a major attraction for venture capital and private equity investors as well. Investments in the biotech sector, most from domestic sources, reached $17 billion in 2018, according to consultancy ChinaBio. In the first half of 2019, five of the world’s 10 biggest biotechnology IPOs were of Chinese companies. Together they raised $1.6 billion.
Many firms in China’s biotech sector initially licensed foreign drugs for the domestic market, but in recent years the focus has turned to drug discovery. The Economist reports that Chinese companies started 26 multiregional clinical trials in 2018, up from four in 2013. Some are running clinical trials in the U.S. and Europe. Among them is Chi-Med, which discovered China’s first new cancer drug. China overtook America in clinical trials of novel immunologic treatments for cancer in 2017.
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. Marc Funk, Chief Executive of Lonza, a Swiss contract manufacturer which is opening a facility in Guangzhou, is quick to point out that this is happening “without compromising quality.”
Of course, such a complex industry faces obstacles. One is a crowd of Chinese biotech firms focusing on cancer treatments. This creates a hyper-competitive market, in which some are doomed to fail. Big losses have been known to spook investors out of the sector altogether. Further, the infrastructure is mixed. In clinical trial sites that are not up to global standards, there is a risk of faulty batches. This risk is compounded by political pressure to accelerate development, coming loud and clear from President Xi Jinping as part of his “Made in China 2025” leadership strategy.