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Yanxiu Gu, Product specialist, Chinese equities, ODDO BHF AM.

“No longer satisfied with providing “me-too” therapies to patients, Chinese biomedical companies are now competing in the field of “first-in-class” products”

Just 30 minutes away from Shanghai by highspeed train, Suzhou is a city with more than 2000 years of history. It is my hometown, famous for its centuries-old sumptuous private gardens. Suzhou Industrial Park is located here. The heart of Suzhou Industrial Park is BioBay, the Biomedical Industrial Park, home to China’s most advanced biomedical companies. Over 2000 biomedical companies are located on both sides of its main street. More than 20 are listed on the capital markets.

Suzhou is just one example of China’s biomedical clusters. Guangzhou, Jiangsu (where Suzhou is located), Zhejiang, Shanghai and Beijing are five major cities / provinces where biomedical companies form into clusters to leverage a concentrated supply of talents, capital, logistics, etc.

No longer satisfied with providing “me-too” therapies to patients, Chinese biomedical companies are now competing in the field of “firstin-class” products. Over the past decade, Innovent Biologics (a biopharmaceutical company), Wuxi Biologics (a contract research development and manufacturing organization), Beigene (a biotechnology company), and many others have become the research & development partners or competitors of leading international pharmaceutical companies, such as Johnson & Johnson, Mercer, GlaxoSmithKline, Roche, Pfizer, etc.

COMPANY EXAMPLE: BEIGENE, LISTED IN THE US, HONG KONG, AND ON THE ASHARES MARKET

Specialized in cancer treatments. One of its key products, Baiyueze (zanubrutinib), is the first Chinese-origin oncology drug to receive US FDA approval and the first Chinese-origin drug to receive the FDA’s “breakthrough therapy” recognition and “priority review” qualification.

SUPERSIZED DOMESTIC DEMAND UNDERPINS GROWTH OF THE MEDICAL SECTOR

China is the biggest contributor to global economic growth and also the biggest contributor to annual new cases of cancer and deaths from cancer. Furthermore, its aging population is placing a heavy financial burden on the Chinese healthcare sector. To deal with these challenges, innovation of medical treatments and services for chronic diseases, cancers, and other high prevalence diseases have been accelerating.

HIGH PREVALENCE OF CANCER

China has the highest number of deaths from cardiovascular and cerebrovascular diseases in the world. China also has the highest number of new cases of and deaths from malignant tumors. China accounts for 24% of global annual new cases of cancer and 30% of global deaths from cancer. (WHO)

THE HUGE BURDEN OF AN AGING POPULATION

The number of people over 60 years old is expected to exceed 400million by 2035, whereas medical expenses for people over 65 are approximately 3-5 times that for people under 65, and medical expenses for people over 80 are approximately 13-15 times that of people aged 65-80 (National Health Commission, China)

TALENT SUPPLY IS THE KEY TO SUCCESS FOR CHINA

In 2009, biomedicine was recognized by Chinese government as an important component in scientific, technological, and industrial development. Since then, many Chinese lifescientists, local and abroad, have begun to realize that the development of innovative drugs in China was about to start, and many of those who lived abroad have gradually returned to China. For example, Dr. Michael Yu, with 13 years of experience in innovative drug research in the US, established Innovent Biologics in Suzhou, which once created the strongest financing record in the Chinese bio-pharmaceutical sector.

The sector’s success relies heavily on talents. Local governments have been trying to attract both Chinese and global life-scientists and researchers, while transforming the educational philosophy to cultivate young talents. In Suzhou BioBay, there are already more than 35 thousand “high-quality” researchers, dedicating themselves to innovative therapies, high-end medical equipment, and biotechnology. Local governments provide generous incentives to these talents. Subsidies are given to companies, talents, and even headhunters to attract global talents. Some local private schools waive part of the tuition fees for the children of these talents. And for qualified foreign scientists, local governments also work on easing work

permits and providing rental subsidies to remove the hurdles. I also noticed that some local middle and high schools have established partnerships with life science laboratories in Suzhou BioBay.

This is a pioneering reform to China’s decades of “practice makes perfect” education philosophy.

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KFI

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