Financial Services Association, November 15 (Reporter He Fan) After ten years of critical innovation, how should China's pharmaceutical industry meet new challenges at a time when capital is cold in the winter and the innovation ecosystem is shaking?

On November 14, 2024, the 16th China Pharmaceutical Entrepreneurs, Scientists, and Investors Conference (“Inspiration Conference”) opened in Chengdu. Chairman of leading listed companies, pharmaceutical experts, and investors such as Bailey Tianheng-U (688506.SH) discussed in depth the challenges and opportunities currently faced by the Chinese pharmaceutical industry. The two major keywords of “going overseas” and “innovation” continued throughout the conference. “Focus on the field of expertise”, “follow the path of brand and innovation as a two-wheel drive”, “digital innovation”... Faced with the question of where China's innovative drugs are going, the participating corporate guests also gave different answers.

“Going to sea” is frequently mentioned

The conference was co-hosted by the China Pharmaceutical Enterprise Management Association, the China Pharmaceutical Biotechnology Association, and the Sichuan Pharmaceutical Industry Association, and hosted by E-Pharmaceutical Managers and the China Healthcare Industry Investment 50-Person Forum (H50). The theme of the conference was “Ten Years of Innovation · Next Ten Years”. At the conference, Zhu Yi, Chairman of Baili Tianheng, and Sun Piaoyang, Chairman of Hengrui Pharmaceutical (600276.SH), shared their experiences in ten years of pharmaceutical innovation in China.

Currently, China's pharmaceutical industry is facing a new social environment and development trend. Wang Hongguang, director of the Chinese People's Life Safety Research Institute at West China Hospital, said in his keynote speech that the domestic pharmaceutical industry has characteristics such as a complete industrial system, large scale, rapid innovation and growth, and new medical models. In the future, he hopes to achieve the goals of a strong scientific and industrial country, and strive for 1-3 companies to enter the top 10 in the world, account for 50% of the self-owned drugs, and occupy 15% (excluding domestic) of the international market.

Zhu Jun, CEO of Fu Hong Han Lin (02696.HK), also mentioned internationalization in his speech. He said that after ten years of development, domestic innovative drug research and development capabilities are becoming more mature, and the share of innovative therapies has gradually increased. In recent years, the results of domestic innovative drugs going overseas have been concentrated and implemented, proving that domestic R&D strength has been recognized internationally. Zhu Jun believes that in addition to the vast market space in Europe and the US, overseas markets also have great potential for growth. Take the Southeast Asian market as an example. The Southeast Asian market has opportunities such as low clinical costs, increased medical demand, reliance on imported drugs, and premium space for innovative drugs. The regional pharmaceutical market space is about 23.1 billion US dollars.

So, how to build a multinational pharmaceutical and device enterprise based in China from a global perspective? Fu Wei, CEO of Kangqiao Capital, believes that M&A investment can help enterprises to internationalize more quickly. M&A investment can accelerate enterprise endogenesis. While localizing tactics, enterprises can internationalize talents and technology, and use the resources of top international universities and research institutions to connect with global technology platforms.

At the international strategy roundtable forum, Xiao Weihong, chairman of Haizheng Pharmaceutical (600267.SH), mentioned that finding the right leaders and local business partners is very important for companies to go overseas. At the same time, they must set up their own teams and stick to the long-term path of going overseas. Ding Zhao, chairman of Huiyu Pharmaceutical-W (688553.SH), shared the same view. “To achieve the overall internationalization of the enterprise, the entire company is first required to position the internationalization strategy from top to bottom, from product selection, R&D system, production quality system to sales channel layout. The overall organizational structure revolves around going overseas in all aspects to achieve strategic and tactical collaboration.”

Yang Rui, co-CEO of Gloria Ying (002821.SZ) Pharmaceutical Group, also believes that choosing a cooperation platform is very important for companies to go overseas. She believes that from a platform perspective, choosing experienced service companies in the process of going overseas can help Chinese innovative drug companies and provide platform-based capability support for various aspects, including the drug itself. Second, it is influenced by geopolitics, etc., and exploring cooperation models such as Local for Local can also support innovative pharmaceutical companies to go overseas.

Where is the future path for innovative drugs?

Currently, innovation is increasingly becoming mainstream in the industry, competition in the domestic innovative drug market is becoming more and more intense, and companies are also facing geopolitical risks when going overseas. How should Chinese pharmaceutical companies deal with these industrial problems?

Sun Piaoyang, chairman of Hengrui Pharmaceutical, believes that China's innovative pharmaceutical industry is currently facing a series of problems, including insufficient protection of intellectual property rights and mistakes in predicting the returns that enterprises can bring about the project. In the process of continuing to increase investment in innovative drugs, Hengrui Pharmaceutical will fully consider investment and output in order to balance the relationship between quantity and quality and reduce R&D risks. While maintaining quantity, it will also eliminate some R&D pipelines that are not very reliable or have little future market space.

Zhu Yi, chairman of Baili Tianheng, said in his speech that scientific logic should be used to penetrate the frontiers of cognition. Product innovation is an “invention”, not a “discovery”. True innovation is scarce, and the only test criterion is market value. Currently, Bailey Tianheng does not have global commercialization, manufacturing, and supply capabilities. In the future, it will focus on the field of cancer treatment through potentially major drugs and pipelines, compounding factors such as global cooperation and capital support, and strive to make the company's innovative drugs enter the domestic, European and American markets one after another over the next 3 to 5 years, and become the world's leading MNC in the field of cancer treatment over the next 10 years.

In the “Path to Transformation to Innovation” forum, Ye Yuxiang, chairman of Xinlitai (002294.SZ), also mentioned “focus”. He said that the company will continue to focus on chronic diseases, especially the cardiovascular sector. There are many unmet domestic needs. After becoming very familiar with this field, there will be fewer opportunities to make mistakes. The company chose to focus heavily on one area of expertise and constantly control risk.

Shan Guohong, president of Takeda Pharmaceuticals China, said that digital innovation is very important, not only in the drug development and production stage, but also in clinical scenarios and operation stages, and can truly solve problems that cannot be solved. In the next decade of innovation, we hope to join hands with China's innovative forces to bring China's innovative achievements to the world.

Qiu Huawei, chairman of China Resources 39 (000999.SZ), revealed that the company will choose to follow the path of brand and innovative two-wheel drive to become a service enterprise for China's health industry and medical industry. On the one hand, it uses the company's own commercial capabilities, and on the other hand, it links more overseas companies to help more biopharmaceutical companies achieve their business goals.