High Healthcare Valuations Force Investors To Seek Early Stage InnovationCHINA MONEY NETWORK
A: I think what is happening in China’s healthcare market is really exciting. The China Food and Drug Administration (CFDA) initiated a major reform program around 18 months ago. There are sweeping changes in the way traditional generic drugs file for approval, what’s required for approval, and how new branded products can start clinical trials and “green channels” for certain breakthrough therapies.
For example, the time that companies have to wait for CFDA approval of HIV products they developed or discovered could be shortened to less than six months from the current two to three years. The new policy currently only applies to the HIV area, but CFDA is going to expand it to all the therapeutic areas for drug innovation.
As a result, CFDA can greatly reduce its workload, and focus on the truly innovative drugs. That’s really exciting, because patients in China can now enjoy true generic drugs with lower prices.
A: Well, it not only influenced the valuations, but also could increase the success rate of those companies. In this industry, time is money. To develop a new product is expensive. If you’re successful, the payoff is very high, but if you don’t have a good product, you want to kill it as soon as possible, so that they can start to focus on other new products.
A: In some medical technology areas, China is actually taking a leadership position, such as gene sequencing. China has the world’s largest gene sequencing service company, BGI Genomics Co., Ltd. With more multinational companies coming to China and utilizing service providers like BGI, there exists more collaborations between young Chinese tech companies and foreign institutions. Also, for the very first time, CFDA reforms are allowing multinational clinical trials to be conducted, so we’ll see more cooperation between Chinese and foreign hospitals and medical schools.
For the past few years, China has allowed companies to conduct central laboratory services for clinical trials. One company, a pioneer in the area is called Kindstar Global, offers central laboratory services for both hospitals and pharmaceutical companies conducting multinational clinical trials. If the standards in China and western countries can be standardized, it will allow more companies to conduct clinical trials in global settings. That will support innovation in healthcare in China.
A: One of our portfolio company, called GenScript, serves as an agency to pharmaceutical companies globally. The company started its own CAR-T lab four years ago, and recently received some outstanding data, including a 100% objective response rate in a clinical trial.
We will continue to explore CAR-T, especially applications in areas beyond its initial focus of Leukemia, including applications in solid tumors such as lung cancer and liver cancer. The technology could be applied to substitute genes in materials and plants, which could create cotton that makes cloth that’s extremely strong and stretchable, or perfume that could adjust smells based on your preference each day.
A: Areas like artificial intelligence (AI) are really exciting. For example, I started to see AI applied in joint discovery in China. I mean, if you go to a clinic, you will be amazed at how many robots they have in their laboratories. But I think the question for investors come down to: how do you make money?