Innovation can end China's healthcare downcycle - AVCJ Forum

James Huang, a founding managing partner at Panacea Healthcare Venture, noted that this is the industry’s first downcycle since 2011. “For every 10-year cycle, you would likely see a downcycle that’s typically one-third as long,” he said, adding that “after two years (of downcycle) we are getting much closer to the end.”

Panellists identified two “elephants in the room” – a recent crackdown on corruption in healthcare procurement that has targeted hospitals and pharmaceutical companies and sluggish IPO markets – but neither was described as a threat to the industry.

Huang contended that the anti-corruption campaign should help create greater transparency and encourage companies to improve in areas such as sales and marketing. Meng Jiang, a senior managing director and head of venture at CBC Group, noted these external pressures could push industry practitioners to adjust their strategies and develop new competencies.

“When money is available for all it’s hard to see who is swimming naked,” said Jiang, adding that the good days for healthcare companies are gone.

While NASDAQ is an option for some players, given the suspension in A-share IPOs and the lack of liquidity in Hong Kong, and others are increasingly open to trade sales, she expects to see more failures when private market capital dries up. Companies are already prioritising cash flow management, resource reallocation, and R&D as they look for ways to survive.

Jiang also argued that the “in China for China” strategy no longer works in healthcare. This view was endorsed by Sean He, a partner at Novo Holdings, which manages the assets and the wealth of the Novo Nordisk Foundation. Novo Holdings started actively pursuing biotech investments in China last year and He observed the landscape is completely different to a decade ago.

“Now we see true innovations, underpinned by those mega-collaborations between China biotech companies and global giants,” he said. “We are super optimistic of future development of healthcare and life science in China.”

Fewer than 10 biotech companies created in the last 10 years have achieved market capitalisations in excess of USD 15bn. Two of them are Chinese: BeiGene and Legend Biotech. The best-performing biotech IPO of 2023 – Structure Therapeutics, which raised USD 161m in February – also comes from China, Huang said.

“You can see what’s thriving underneath the negative environment are companies that are innovating their business models to be more capital efficient, getting scale and deploying resources to places where they need to be,” Huang said. He believes that “in China for global” is now the most compelling model for Chinese healthcare companies.

As for the most attractive sub-sectors, the panellists highlight the transformation potential of gene editing and artificial intelligence (AI). Gene editing applications include changing the way cells express proteins to help fight cancer, while AI is already improving the speed and accuracy of drug design.

He observed that “we are witnessing a new era for the healthcare sector in China.” Huang added that these technological developments are changing the way “we understand why diseases happen, why we age and how can we live healthier going forward.”

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• Topics
• Greater China
• Healthcare
• IPO
• Expansion
• China
• Pharmaceuticals
• AVCJ Events
• CBC Group
• Panacea
• Novo Holdings