February, 2024
February 2024
Leon ‘Jun’ Tang: Cross-border Business Development and partnerships will be essential for China Biotech to survive and thrive
Dec 3, 2023, 15:29

Leon ‘Jun’ Tang: Cross-border Business Development and partnerships will be essential for China Biotech to survive and thrive

Leon ‘Jun’ Tang, Founding Partner and Entrepreneur of Biotech BD and VC, shared a post by Sujuan Ba, President and CEO at National Foundation for Cancer Research, on LinkedIn:

McKinsey & Company released this insightful report on China Biopharma industry During BioCentury Inc.‘s recent East West Biopharma Summit in Shanghai. I am also honored to be one of the 50+ interviewed for this work. This is a fantastic work by Franck Le Deu, Josie Xi Zhou, and other McKinsey & Company colleagues in China.

A few insights caught my eyes from my lens of Business Development:

  • Similar to the finding from Atlas Venture‘s annual review, this report also points out that global biopharma relies on biotech around the world for innovations.
  • China Biotech now account for 12% of global licensing deals in 2023, a significant increase compared to even 2022’s 7%, due to their unique strength in #FastFollow.
  • China Speed means up to 50% faster preclinical development and 2x ~ 5x faster patient recruitment than the industry average, which make China Biotech’s  Fast Follow strategy very competitive in the global market.
  • Comparing BD transactions of similar assets of Chinese and Western companies, I feel China Biotech(s) are willing to take much lower upfront and very friendly economics vs their Western, especially US, peers. This makes them very attractive among biopharma, whose future Cash Flow is under tremendous pressure due to Loss Of Exclusivity and IRA.

Some unique headwinds in China biopharma space:

  • The innovative drug market in China was only $20bn in 2022, which is VERY small compared to the US’ ~$600bn market of the same year. This produces tremendous headwinds for companies that can ONLY play in the Chinese innovative drug market.
  • China Biotech(s) are being distressed in the public capital market, where IPO is largely frozen and most of the the very few recent IPOs suffered poor stock rout post IPO.
  • The private capital market in China is much tougher than the US one. For example, only 2 late-stage VC/PE funds have raised new funds in 2022 and 2023 vs 15 in 2020 and 2021, a shocking 86% drop.
  • Mergers And Acquisitions would unlikely happen at any level close to the Western markets due to the small innovative drug market to support substantial revenues, the valuation bubble of the existing companies, and the unclear geopolitics that discourages international biopharma with deep pockets to join the market.

Tremendous tailwinds are nudging innovative China Biotech to adopt China For Global strategy while unbearable headwinds are pushing them away from China For China path. The incoming few years will be very dynamic in China Biotech space, where some pain but much more growth will definitely happen.

One thing is crystal clear: cross-border Business Development and partnerships will be essential for China Biotech to survive and thrive.”

Quoting Sujuan Ba’s post:

“Thank you, Franck Le Deu, for sharing the BioCentury China Summit -McKinsey Biopharma Report. It is a very insightful and informative report. It is encouraging to see that innovation in biomedicine and IP protection has improved significantly during the past decade.

The key takeaways from this report are:

1. China’s innovative pharma market is still a growth story with room to grow into 2.5X the size of today.
2) China biopharma went through a Cambrian phase before 2021. With many companies creating and receiving significant investments, the innovative ecosystem is formed, and the value chain is built up with scaled fast-following innovations.
3) A significant correction took place globally in 2022-2023 and is more severe in China, challenging the fundamentals of value creation and revealing a major ecosystem gap.
4) China’s biopharma innovation ecosystem is showing signs of resilience.
5) Local biotechs could accelerate a steep and tough journey toward capturing the potential to survive and thrive.
6) MNCs could consider reconfiguring their business and the risk/opportunity equation to preserve their rights to win in China by more actively leveraging China for global success, especially with ever-expanding patient access.

For 2023 BioCentury China Summit click here.
Source: Leon ‘Jun’ Tang/LinkedIn and Sujuan Ba/LinkedIn