The Chinese healthcare industry is in a period of enormous growth and change as China's economy develops.
But how is it changing and developing? What are the challenges and opportunities in the years ahead? And what are the opportunities for international talent and companies in the healthcare space in China?
Here we meet Gary Rieschel, the member of the Second International Advisory Board of the School of Management of Fudan University, and the Founding Managing Partner of Qiming Venture Partners. This time he gave a talk on the China's booming healthcare market at Fudan University School of Management.
Gary Rieschel came to China in 2005 at a time when venture capital was still being institutionalized. He had a successful investment career with Softbank and was ready to retire, but he chose to build one of the most successful venture capital firms in China, Qiming Venture Partners.
Today, Gary is dubbed the “Godfather of investors and entrepreneurs”, and is the managing director of Qiming. The Shanghai-based firm currently has $2.8 billion under management. Gary explains how the healthcare sector has evolved in the past 15 years, and how it has made enormous contributions to China's GDP.
Tigermed Spurs Change in China’s Pharmaceutical Landscape
One of Qiming Venture's most successful investments besides smartphone giant Xiaomi is Tigermed, a drug trial company in China.
When Gary moved to China, only one novel compound was approved in the Chinese drug market. It was a foreign licensed product that was brought in and went through the Chinese drug approval process.
Gary adds that in 2006, China lacked real research capability and had a poor system in place for doing clinical trials.
Back then, most Chinese companies would do internal development but would naturally gravitate toward finding innovative solutions overseas. For a drug to be released in China, the registration and approval process required a company to finish phases two and three in the United States before it can undergo clinical trials in China. As a result, releasing drugs in the country was delayed by 3 to 4 years.
Qiming Ventures invested in Tigermed, and the company became one of the first world-class institutions that conducted clinical trials in China. Tigermed allowed the creation of a domestic innovation engine in the pharmaceutical industry, which China needed the most during those times. Today, the company is worth $6 billion dollars. In 2019, there were approximately 300 pharmaceutical products approved in China.
As of March 2020, Tigermed has climbed 8% as the pharma research group was approved by Chinese authorities for a clinical trial of Remdesivir, a novel anti-viral drug.
Venus Medtech Leads Global Innovation in Transcatheter Heart Valve Medical Device
Venus Medtech is a young multinational Chinese medical device manufacturer and leading transcatheter heart valve medical device player in China in terms of implantation volume in 2018.
Venus developed the world-renowned VenusA-Valve, the first transcatheter aortic heart valve replacement (“TAVR”) product approved by the National Medical Products Administration (“NMPA”) and commercialized in China.
Founded in 2019, Venus Medtech began as a startup, but today, the company operates in a largely untapped and fast-growing transcatheter heart valve market in China and globally.
According to Gary, “Medtronic, one of the world’s largest medical device companies would tell you that the product developed by Venus Medtech was two and a half to three years more ahead than what Medtronic could ever develop.”
China's medical device industry, gene sequencing, and diagnostics are cutting edge and are some of the largest in the world.
China’s Booming Healthcare Industry
China's healthcare industry is attractive to foreign investors because of its size and growth potential. Healthcare is one of the fastest-growing emerging economies in China. In fact, in 2013, China took Japan’s place as the world’s second-largest healthcare market.
According to Gary, in 2005, China spent 2.5% less on healthcare from its GDP. In 2018, China spent about 6.8 to 7.2% and it probably will spend 12% in the coming years.
In 2016 alone, the Chinese healthcare industry accounted for RMB 5,670.3 billion (US$853.7 billion), a 12% increase from 2015. The medical device market increased by 20.1% and the pharmaceutical and health products sales rose by up 10.4%.
Opportunities and Challenges in the Chinese Healthcare Market
Gary highlighted the importance of the creation of trust in the Chinese healthcare market.
Most people in China did not trust the healthcare systems in place in 2005. Gary likened this to Alibaba creating trust within their customer base.
When Alibaba was launched, it overtook Ebay’s place. But two years later, Jack Ma and his team were dissatisfied and they overhauled the process of delivery via couriers, improved logistics and customer service.
This goes the same for healthcare companies in China. When looking for business opportunities, he suggests asking the question, “Where can you create trust where it does not exist?”
Urbanization and artificial intelligence are also key opportunities that healthcare companies in China can explore.
On challenges, Gary says the main focus will be on jobs. Where will future job opportunities come from?
Gary believes that manufacturing jobs have been the engine of middle-class creation for the past 100 years, but this trend has changed and is very fast, “We have to think about it or try to build a business model that serves middle-income people. ”
He also pointed out that in the past 15-20 years, because of innovation, our world has undergone tremendous improvements, “the future belongs to optimistic people.”
Gary doesn't see himself retiring any time soon. He is currently in Seattle successfully building a new Qiming in the United States bringing his portfolio of companies in China that are looking to invest in new products overseas.
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