Microscope
Insights into China’s biopharmaceutical market
The Broad Scope and Scale of the Biopharmaceutical Industry around the world
  • Biopharmaceuticals are the best-selling pharmaceutical products with large market scale and high growth rate

Biopharmaceuticals are drugs that are partially or fully manufactured, or extracted from biological sources. Biopharmaceuticals are the world's best-selling pharmaceutical products. Among the top 10 best-selling drugs in 2018, eight are bio drugs, including 7 antibody drugs and one vaccine. The sales revenue of the eight bio drugs accounts for 82.5% of the total sales revenue of the top 10 best-selling drugs.

Top 10 best-selling drugs in 2018

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The global biopharmaceuticals market accounted for $186.5 billion in 2017, and is projected to reach $597 billion by 2025, registering a CAGR of 13.8% from 2018 to 2025.[1]

Global biopharmaceutical market size 2017-2025 (in billion US dollars)

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  • COVID-19 exerts positive impact on pharmaceutical industry

On the one hand, the pandemic has attracted more attention to the pharmaceutical industry, and the market is demonstrating greater enthusiasm than ever. On the other hand, economic downturn caused by COVID-19 led governments around the world adopt counter cyclical policies and means, which are advantageous for industries with high-risk assets such as biotechnology.

  • Capital market pays close attention to biopharmaceutical enterprises

The size of IPO of pharmaceutical and biotechnological enterprises continues to grow. In 2018, there were 74 enterprises went public, and the total amount of funds raised reached 11.5 billion US dollars. Both data reached the highest level in ten years. Also, the total market value of pharmaceutical and biotechnological sector keeps rising. According to Deloitte, the market value of biomedical companies in the US stock market, A-share market and Hong Kong stock market has shown a rapid growth trend in the past decade, with compound annual growth rates of 12%, 17% and 15% respectively.

Number of IPOs in US, A and HK stock markets

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Total scale of IPOs in US, A and HK stock markets (in million US dollars)

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Insights into China’s biopharmaceutical market
  • China's biopharmaceutical industry accounts for 20% of the world with growth rate higher than the world average

Data show that in 2019, China's biopharmaceutical market reached 317.2 billion yuan, with an annual growth rate of 22%. With the improvement of affordability, the growth of patients and the expansion of medical insurance coverage, it is estimated that the scale of China's biopharmaceutical market will further expand to 464.4 billion yuan by 2021.[1]

Chinese biopharmaceutical market size 2015-2021 (in billion RMB)

The number of bio innovative drugs approved in China was more than the United States in 2019. This is mainly due to the reform of innovative drug listing policies and regulatory system in China in recent years.

Number of Innovative Biological Drug Approved in US and China

Such accelerated innovation grew partly from pent-up domestic demand in what’s become the world’s second-largest biopharma market—one whose demographic is aging dramatically, with increasing prevalance of many diseases including cancers, cardivascular diseases, and diabetes. In additon, some c ancers such as gastric, HCC, and esophageal, and diseases such as HBV, are more prevalent in China than in the West. The sheer numbers of patients in China makes the market very attractive for companies around the world.

  • COVID-19 vaccine R&D and production capacity demonstrate the potential of China's biopharmaceutical industry

At present, there are 12 COVID-19 vaccines in use, and China owns 5 of them, being the country with the largest number of COVID-19 vaccines in the world.

  • Competitive landscape of biopharmaceutical industry in China

The number of new Chinese biopharma companies has risen steadily over the past three decades, accelerating dramatically in the last ten years. While company formation declined in other major markets such as the US, Europe, and Japan, more than 140 new biotech companies emerged in China from 2010 to 2020.

Number of New Chinese Biopharma Companies

While the number of emerging companies in China is rising, the situation that several enterprises monopolize the market has not yet formed in China's biopharmaceutical industry. Compared with international giants, the scale of Chinese biopharmaceutical enterprises is generally small.

The three major enterprises in China's pharmaceutical industry are China Resources Pharmaceutical Group, Sinopharm Group and China General Technology. The three companies are all central government owned and comprehensive pharmaceutical enterprises, but the proportion of biopharmaceutical sector is relatively small, less than 10% of the total revenue (1.3 billion RMB, 4.3 billion RMB and 3.2 billion RMB respectively).

The revenue of multinational pharmaceutical companies in China and its proportion in global revenue have increased over the year. Assume that 40% of total revenue is in biopharmaceutical sector, the market revenues for the top 8 companies are: 13.6 billion RMB, 12.96 billion RMB, 11.64 billion RMB, 8.8 billion RMB, 8.76 billion RMB, 8.44 billion RMB, 6.12billion RMB, 5.36 billion RMB. 

China’s share of major MNCs’ global revenue

The revenue of major MNCs in China in 2019 (in billion RMB)

The competitive landscape of biopharmaceutical industry in China

Chinese government attaches great importance to biopharmaceutical industry

Chinese government named biopharma as one of eight key strategic industries to develop. Four structural changes underpin that development.

  • Funding

More and more private capital is available to the industry through venture and private equity (PE) funds, which underwrite most R&D in China. (Note that such funding helped the US leapfrog the EU 30 years ago.) Government and institutional funding through the China National Science Foundation and government grants are also channeled through PE firms and are an important source of funding. Today, China has the second-highest funding globally, although the US still leads by a siginficant margin: $212 billion vs. China’s $60 billion—adjusted for purchasing power parity—in 2018-2019.

  • Policy

Over the past five years, China has enacted several policies explicitly to improve market access and support innovation. The government has worked to significantly ease the registration process for innovative drugs and harmonize the approval process with global norms. For example, in 2011 it took 31 months to get a clinical trial application approved in China; by 2018 it took just two months. And since 2017, the government has held national contract negotiations for high-priced innovative drugs, which previously had limited to no access to public insurance reimbursement.

  • Infrastructure

The Chinese government has also supported the development of science parks and city hubs for innovation and R&D by offering land to developers on very attractive terms. From 2016 to 2020, the number of biotech science parks grew 50%—from about 400 to about 600—and the total value of their output has grown by more than 80% in that time.

From the perspective of industrial layout, three key regions of biopharmaceutical industry formed around the Bohai Sea, Yangtze River Delta and Zhuhai Delta.

  • Talent

China’s talent pool is still smaller than in the US, but it’s rapidly expanding as local talent continues to develop and Western-trained scientists steadily return. Returnees have been without question the key driver behind the formation of innovation companies in China over the past ten years. More than 75% of the top talent in China have at least five years of overseas research experience. While the government has actively encouraged their return, the attractive market dynamics have already superseded government incentives.

Sources

1. 中国医药产业互联网白皮书,艾瑞咨询; http://www.199it.com/archives/1170610.html

2. 中国互联网+医疗行业研究报,艾瑞集团; http://www.199it.com/archives/1143713.html

3. 中国AI+医疗行业研究报告,艾瑞咨询; http://www.199it.com/archives/1190050.html

4. 生物医药行业:2020生物医药产业园区百强榜,赛迪;

https://www.fxbaogao.com/pdf?id=2079542&query=%7B%22keywords%22%3A%22%E3%80%90%E8%B5%9B%E8%BF%AA%E3%80%91%E7%94%9F%E7%89%A9%E5%8C%BB%E8%8D%AF%E8%A1%8C%E4%B8%9A%22%7D&index=0&pid=

5. 报告从资本视角看创新药驱动下的生物医药行业,德勤;

https://robo.datayes.com/v2/details/news/56317271

6. 2018年中国生物医药行业发展现状及未来发展趋势分析, 智研咨询;

https://www.chyxx.com/industry/201808/667957.html

7. 2020年中国生物医药产业园市场前景及投资研究报告,中商产业研究院;

https://robo.datayes.com/v2/details/report/4138872?tab=original

8.Market Analysis on Biomaterials and Biomedical Engineering, 2019, Nanotechnology & Regenerative Medicine;

https://biomedicine.imedpub.com/market-analysis-on-biomaterials-and-biomedical-engineering.pdf

9. Competing in China’s Booming Biopharma Market, BCG;

https://www.bcg.com/publications/2020/competing-in-chinas-biopharma-market

10. Trends To Watch In China's Biopharma Industry, BioPlan Associates Inc.; https://www.pharmaceuticalonline.com/doc/trends-to-watch-in-china-s-biopharma-industry-0001

11. Biopharma in China: Insights into a market at a crossroads, McKinsey;

https://www.mckinsey.com/industries/pharmaceuticals-and-medical-products/our-insights/biopharma-in-china-insights-into-a-market-at-a-crossroads