This year marks the 40th anniversary of China's Reform and Opening Up policy, which was established in 1978. China’s embrace of economic reform and free-market principles has propelled unprecedented business and industry growth since that time, firmly securing its position as the world's second largest economy.
In light of the rise of China's economy, a number of global biotech companies—such as Denmark's Novo Nordisk—began to build an early presence there. Building on this foundation, within the past few years biotech has started to grow at an explosive rate in China. In fact, China's biotech industry is anticipated to exceed four percent of GDP by 2020.
Why is biotech betting big on China? Here, we explore three factors driving the country's recent biotech boom and what it means for those looking to capitalize on this growth.
National innovation strategy attracting top talent
Ten years ago, a biotech specialist from China may have needed to look for international career opportunities. But today, thriving government programs and a surge of entrepreneurial investments have created more incentive than ever for top talent to establish careers in China.
The Chinese government has made it a priority to transform the country from a manufacturing to an innovation-driven economy by developing five-year national strategic plans that set economic and growth goals. The most recent plan, which put special focus on the biotech industry, outlines the development of 10 to 20 biomedicine life-science parks with an output surpassing $1.5 billion by 2020. This is in addition to the 100 life-science parks already established throughout the country, as well as $100 billion of government investments dedicated to innovation.
The government's Thousand Talents Plan—which encourages Chinese scientists, academics and entrepreneurs living abroad to return to China—has recruited 7,000 experts since 2008, with 1,400 of them recruited specifically by the life sciences committee for biotech.
The government has also heavily invested to enhance the intellectual property environment in China. The State Intellectual Property Office (SIPO), China's patent office, has received additional resources to address the growing volume of patent applications and has implemented an expedited examination process. In 2007, SIPO had 2,672 examiners dedicated to examining patents; by 2017, that number had grown to more than 11,500 (SIPO Annual Reports, 2007 and 2017). SIPO also offers attractive benefits to high-demand patent applications, such as covering filing fees and providing tax incentives and monetary rewards.
Beyond the government, Chinese venture capital and private equity funds raised $45 billion for life sciences in two and a half years, which contributed to the development of China's flourishing biotech start-up culture.
As a result of all of these factors driving innovation, patent applications have soared—more than 50,000 biotech patents were submitted in 2017, up from less than 20,000 in 2010. Some fields leading this growth are natural products, biologics and bioinformatics.
Demand for new treatments creating an attractive market
According to the United Nations, China's population is ageing more rapidly than that of any other country. This fact, along with changing lifestyles and environmental concerns, is driving increasing rates of critical and chronic illness. For example, 36 percent of the world's lung cancer diagnoses come from China, yet the five-year lung cancer survival rate is currently 17 percent lower than the global average.
This market landscape creates surging demand for pioneering medical treatments, and investors are turning to Chinese scientists to develop solutions that could not only be sold in China, but enhance treatment worldwide.
Major pharmaceutical companies in the west are taking note as well and considering ways to bolster their presence in China as domestic investors gain market share, with many global leaders opening research centers in China and others coordinating research cooperation pacts with Chinese institutions.
Globalized approach to regulations easing market entry
In March 2018, the China Food and Drug Administration (CFDA) announced it will merge with other administrative bodies to form a national market supervision administration. As part of the restructuring, a new entity is being created that will focus primarily on medical technologies. This is expected to bring increased efficiency and consistency to regulation of pharmaceuticals and medical devices in China.
Further, in April 2018, the government launched initiatives to support generic drug research and development as a means to foster innovation and provide more accessible treatment options to Chinese patients. They include providing research grants, as well as expediting the review and approval process of generic drugs based on name-brand drugs with compulsory licenses.
These efforts are the latest in a series of reforms aimed at streamlining China's regulatory process to align with international standards. Last August, for example, the CFDA announced it had joined ICH, a global federation of medicines regulators that seeks to harmonize health technology regulations. It also announced it would allow data from clinical trials conducted outside of China to be admitted as part of regulatory filings, a move that fast-tracks new treatments from the lab to the clinic. Overall, these efforts to streamline China's regulatory processes and align them more closely with those outside of China eases entry into the Chinese market for domestic as well as foreign investors and also make it easier for Chinese firms to market their innovations internationally.
These developments, along with the impressive growth rate, clearly demonstrate that China is quickly establishing itself as the eastern hub for biotechnology innovation. Organizations looking for growth opportunities in biotech should certainly have China on their radar. However, a successful strategy for growth within any industry sector in China requires a deep understanding of the market and intellectual property landscape, as well as governmental and cultural factors.
Successful global innovators know that the effectiveness of their strategy is directly tied to the quality and depth of their knowledge and insights. When it comes to insight on the biotech landscape in China, CAS can help. CAS employs a large number of Chinese-speaking scientists to review and curate Chinese patent and journal publications and provides timely access to this information through our solutions such as SciFindern and STNext. By translating titles, abstracts and indexing terms to English, we make this information, and the insights that can be derived from it, more accessible to the global community. If more specific investigation is required to answer critical business questions, the CAS Analytics team is also able to undertake custom projects and can provide service in Chinese or English to meet global customer needs.
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