China Investors Club 3rd August round table discussion was sponsored by China Medical City (CMC) the leading medical zone in China. Attending were investors, innovators and financiers received an update on:
- accelerated Chinese FDA licence approval
- access to Chinese capital
- China's pilot "2-invoice" policy that is changing the shape of how pharmaceutical products and medical devices are procured in China
- September business development tour to meet investors and new clients
1. CFDA licence
It is known that obtaining a licence for even the simplest of non-invasive medical devices let alone pharmaceutical products can take months or even years. With only 200 staff in the whole of China's CFDA assessment team trying to handle thousands of applications each year, it is not surprising that delays occur. However, CMC is able to demonstrate that it is the leading medical development zone in China as it has over 15 staff just in its own assessment team in Taizhou (close to Shanghai). These staff mean that licence approval times are reduced by between 1/3 and 1/2 simply by having additional resources to process applications. In addition, by having such strong government support, CMC is also able to help with the whole spectrum of licensing applications in arranging field trials, IP law and even financing. The UK medtech firms joining our International Medical Expo will gain first hand support from CMC when they visit on 15-17th September (see later).
During discussions there were two pieces of advice. Firstly was to get your Chinese IP arranged before starting the CFDA process. The nature of the CFDA process means that you will be disclosing IP to the China authorities so by having the newly strengthened IP laws in your side will definitely help you. The second piece of advice was to find a Chinese partner to support the development, marketing and protection of your product. Easier said than done but by spending time on the ground in China with local support will make this process very much easier.
2. Accessing Chinese capital
Since 1st July 2017 there has been ever more stringent controls over individuals, companies and state owned enterprises (SOE) acquiring assets outside of China. While this is true for trophy real estate assets and football teams, there are selective approved investment channels that Chinese investors can use. This is especially the case if they relate to investment in Life Science and Healthcare, advanced engineering and other value-add sectors. China Investors Club does not feel that there will be any relaxation of capital controls until after the National Congress in early Q4 but we will see this reappraised as the new leadership team are identified.
As mentioned earlier, CMC have a financing arm which is very active in seeking investments into UK medtech and biotech. This investment pool will be accessible to those companies joining our September Taizhou trip.
3. 2-invoice policy
This topic deserves a whole discussion paper in its own right. The essence is that China is changing how hospitals pay for drugs and medical devices. At the moment an international supplier invoices a single distributor who then uses a network of other distributors to get the product to the end hospital. The mark-up at each stage of this chain means products prices are vastly inflated at point of use. The new system will still see an international supplier invoice their distributor in China. However after that point, the Chinese distributor creates just one further invoice to the hospital. Trials so far have proven this effective in reducing drug costs by 25-50% and so now the central government is reviewing whether it is rolled out nationwide. It is uncertain whether such an approach will see price inflation for the supplier or whether the policy will apply to domestically produced products. If the latter is true then UK suppliers will want to quickly established Chinese partnerships to allow quicker access to the new supply chains
4. Chinese investor meetings and International Medical Expo 14-17th September
A small number of UK medtech and biotech firms are going to get the opportunity to meet 30+ potential investors in Shanghai on 14th September. The investor pool will comprise wealthy individuals, privately owned healthcare related companies and major pharmaceutical groups. Following this the UK firms will spend 3 days at the International Medical Expo in Taizhou, the largest medical zone in China. Once there they will meet investors, hospitals, clinics and distributors but most importantly of all, they will have 1-2-1 meetings with the CFDA licencing teams to talk them through the best options for obtaining regulatory approval for their products. With only two places left, this tour has proven popular.
Chinese demand continues to grow for UK firms involved in the medical sector. Similarly, there is a growing awareness in the UK medtech and biotech sector that the Chinese market can offer new growth opportunities. Now that they have access to a supportive CFDA licencing partner (CMC), this crucial barrier can be overcome which can transform the strategic focus for UK firms. We will be keeping a close eye on developments and will share findings as they become available.