As the Pharma Letter reports, at the recent China Biomed innovation and investment conference, several VCs and biotech experts have claimed that although there is a clear Chinese biotech bubble, the investor’s interest in Chinese biotechs will continue to increase. With the Covid-19 pandemic and the Chinese biotechnology sector working on finding an effective vaccine, alongside the MedTech sector growing vigorously and becoming more and more crowded, should investors worry?
Record-High Growth For Chinese Biotech
“Estimated value for Chinese biotechs in 2020 hit record high, and an influx of investments caused a big bubble. We know that only real innovative biotechs can survive the bubble, but what I see is there are very few of them,” a managing director at Warburg Pincus, Fang Min, said during the conference
Is Covid-19 The Reason For MedTech Development?
The Chinese Medtech startups have raised a record high-amount of more than $29 billion, more than double what they saw in 2019. Clearly, the Covid-19 pandemics is one of the biggest reasons for the high interest of investors. While there are already effective vaccines in the market and more are expected to be approved in the upcoming weeks and months, companies are still raising millions in funding to develop a vaccine against the virus.
Fang’s warned against it. “The pandemic will likely be controlled by the rollout of vaccines in the next one or two years. Will these companies have a way to support their growth after that?” he said.
China Biotech Bubble Prior To The Covid-19 Pandemic
The speculations about China biotech bubble began long before Covid-19 pandemic. Some experts argued that the Chinese biotechnology industry needs the bubble in order to become a leader and an innovator unsteady of the follower. Others warn the investors to look beyond the rosy picture and analyze whether investing in a company that is operating in a hyper-competitive market and may not have sustainable growth is a good idea.
Kevin Li, the partner at the healthcare dedicated VC, LYZZ Capital, stated,
“Science, talent, and fund are essential for China to grow its own Takeda, the hot money in the biotech sector could help start-ups build a proper supply chain, buying good assets and forging a partnership with big pharmas”
Projected Value Of $209 Billion
Already in 2018, a large development in the biotech industry was recorded, with both the quantity and quality of the Chinese biotech companies increasing. In 2018, the pharmaceutical market alone was valued at $132 billion, with a projection of reaching $209 billion by 2022. Considering the latest development and the impact of Covid-19, it is safe to say that this number will be exceeded by far.
Cancer Treatment Development
Apart from Covid-19, China has become known for developing cancer treatments, getting attention from some of the largest biotech giants like Novartis, Pfizer, AstraZeneca, or Amgen.
Second Largest Pharmaceuticals Market
In 2016, China became the world’s second-largest pharmaceuticals market, being surpassed only by the U.S. Already before Covid-19, the value of sales have doubled in under six years and continued to climb vigorously. Thus, while the Covid-19 pandemics may play a big role in Chinese biotech’s growth, there are more factors to consider. While in the past, Chinese biotech companies have mostly licensed foreign drugs, they have switched their focus to R&D.
While Chinese biotechs show promising potential, they are definitely not for the faint-hearted investors. While 2021 will likely continue to see the interest in biotechs, MedTech, and healthcare startups soar up, what investors must keep in mind is what will come after that and whether the growth of the company they’ve invested in will be sustainable.
Once the Covid-19 pandemic is under control, Chinese biotech companies will go back to focusing on breakthrough treatment for fatal diseases. That research is characterized by one thing: volatility. In the cancer drug discovery, and covid-19 vaccine development, the Chinese market is crowded as the Chinese biotech companies focus mostly on these two spheres, creating a hyper-competitive market. Is a good market to invest in? Debatable.