①At the 2024 New Investment Conference hosted by Frost & Sullivan, the topic of going global was well received by participants. ②There is a new trend in China's innovative drug going global, for example, the number of outbound BD exceeded License-in for the first time in 2023. ③Some participating experts put forward rational views, calling for solid internal strength rather than just enthusiasm.
On August 31, according to Caixin (reporter: Wang Junxian, He Fan), the "going global" trend of domestic innovative drug and medical device companies continues. At the 2024 New Investment Conference hosted by Frost & Sullivan, the topic of going global was well received by participants, with multiple roundtable forums focusing on going global.
There is a new trend in China's innovative drug going global, for example, the number of outbound BD (License-out) exceeded License-in for the first time in 2023. In the first half of this year, about 80% of cross-border BD were outbound BD, and the total transaction amount of the TOP 10 outbound BD transactions has nearly reached the level of the previous two years. Regarding the hot trend of outbound BD, some participating experts also put forward rational views, calling for solid internal strength rather than just enthusiasm.
A new trend in cross-border BD.
"Starting this year, especially life science companies have significantly accelerated their pace of going global. Personally, I have received a lot of inquiries in the first half of this year, surpassing the total inquiries I received last year." Xiao Jia, Director of the Life Sciences Industry at the Irish Investment Development Agency, has directly felt the trend of going global.
Recently, the 18th Sullivan China Growth, Innovation and Leadership Summit and the 3rd New Investment Conference, hosted by Frost & Sullivan and co-organized by Tigermed, opened in Shanghai. At the life sciences new investment summit themed 'Adapting and Creating New Situations,' discussions on the topic of going global were held in both the pharmaceutical and medical device sessions.
It is reported that due to the late start of China's innovative drug industry development, in the early growth stage, the development model mainly focused on fast following overseas high-quality innovative drugs or introducing foreign innovative drugs into China through the License-in model for commercial survival and development considerations. However, as domestic innovative drug research and development show a trend towards homogenization, coupled with policy guidance and domestic innovative drug companies placing more emphasis on independent innovation research and development, a new change has occurred in the trend of China's innovative drug cross-border transactions.
In the recently released "2024 China Biomedical Going Global Current Situation and Trend Blue Book" by Sullivan, it is analyzed that the License-out model has become one of the main ways for Chinese medicine companies to go global since 2023. In 2023, the number of License-out transactions by Chinese domestic pharmaceutical companies continued to grow, and the transaction size kept breaking records. A total of 58 License-out transactions occurred throughout the year, exceeding the number of License-in projects for the first time, marking a shift in China's innovative drug industry from "introducing" to "exporting".
Lu Qiwen, director of BFC Group, an investment bank specializing in the medical and health field, said that the number of cross-border license-out transactions by Chinese companies has been increasing year by year. In the first half of this year, the number of Chinese innovative drug products going abroad accounted for 80% of the total cross-border BD transactions. Moreover, MNCs strongly support the overseas expansion of Chinese innovative drugs. Based on the number and amount of past License-in transactions from China, the top ten MNCs have already paid a down payment of 7.2 billion US dollars for Chinese innovative drugs, with a total transaction amount of 45 billion US dollars.
According to Sullivan's incomplete statistics in the aforementioned blue book, there were a total of 34 License-out events in the Chinese innovative drug field in H1 2024, with a total down payment amount of 0.72 billion US dollars and a total transaction amount of 20.21 billion US dollars for the top ten events. In 2022 and 2023, the total transaction amounts for the top ten License-out events were 21.06 billion US dollars and 23.29 billion US dollars, respectively. From this perspective, the total transaction amount of the top ten events in the first half of 2024 is already close to the annual level of the previous two years.
Lu Qiwen predicts that in the next one or two years, there will continue to be a constant emergence of Chinese innovative drug companies engaging in overseas transactions. On the one hand, this is due to the urgent need for funds by Chinese pharmaceutical companies, and on the other hand, as the number of overseas transactions for innovative drugs increases, the innovative research and development capabilities of Chinese pharmaceutical companies are gradually gaining international recognition.
Out to sea or out of the game?
Going overseas seems to have become a way for domestic pharmaceutical companies to alleviate the anxiety of internal competition, but it is also an important way to relieve the pressure on cash flow for pharmaceutical companies.
Chen Youchen, Vice President of Eli Lilly and Co. (02142.HK) and Head of Investor Relations and Corporate Development, said that to be honest, the Hong Kong market may be starting to experience fatigue when it comes to BD transactions. At the beginning, when some transactions were announced, there would be a significant increase in stock prices. However, gradually, the market may no longer consider millions of US dollars of down payments as significant, and the impact of BD on stock prices or the entire capital market begins to fade. Nevertheless, BD is important for companies. It provides substantial short-term cash flow.
Qin Gang, founder and CEO of Keer Medical, also believes that BD is an important way for pharmaceutical companies to diversify their development channels. Under the current capital market conditions and payment system, pharmaceutical companies need more resources to support domestic research and development, especially when clinical development enters the later stages and requires a significant amount of funding.
However, the current pursuit of BD has also raised concerns among industry insiders.
"Some companies are forced to do License-out, especially sci-tech enterprises facing the challenge of survival." Cai Huiming, Chairman and CEO of Nuoyuan Medical, expressed concerns about the current wave of going global. He believes that companies should genuinely produce medical devices with internationally advanced levels, leverage their advantages to find differentiated competitive methods, build internal strength, and prepare for the future new economic growth cycle.
Xiao Jia agrees with this view, believing that going global requires products or services to be competitive on their own. Because if they can't win in the domestic market, they won't win in the international market either. In the domestic market, they face domestic competitors, but in the international market, they may face competition from MNCs like Merck and Eli Lilly, making the competition even fiercer.
He further stated that the current high enthusiasm for going global is justified, but enthusiasm alone is not enough. Going global is actually a long-term event, and in the process of landing, many problems may be encountered. These problems may arise from information asymmetry, cultural differences, and will certainly be much more difficult than imagined, with a longer period than expected. Therefore, patience is more important than enthusiasm.
