A Shifting Future For Big Pharma Involvement In China

7 Dec

By Jessica Yang, Investor Research Analyst, LSN

The Chinese government’s comprehensive overhaul of drug approval is fostering a novel and unique life science ecosystem. China is booming with new opportunities for large pharma companies, within many of these companies are moving in and out. Under China’s new policy, faster approvals could be an incentive for big pharma to step in, as they have the expertise to work and thrive in an improved system.

In the meantime, the funding supported by the Chinese government and local investors such as family offices and venture capital firms is making big pharma companies more interested in working with drug developers in China. Pharma can supply their drug expertise and brand name to China’s startup biotechs and in many cases do not need to provide funds or cover development expenses because many of these companies are well funded by local investors.

Due to the new regulation changes and a growing shift towards developing novel therapeutics, China has become a significant technology market for the big pharma groups. For example, AstraZeneca is establishing a new drug joint venture with a local private equity firm within a capital of $132.5 million. However, other large pharma groups are pulling out. GSK closed its neuroscience R&D center in China; while Eli Lilly also shuttered its Research and Development hub in Shanghai, China.

This is perhaps because, due to all the funding that is available in China, many big pharma companies are finding that valuations are sky-rocketing and have a hard time justifying the valuations of these assets, especially immune-oncology therapeutics.

With the shift in Chinese policies, many big pharmaceutical companies are shifting their strategies as well. It will be interesting to see how each big pharma company chooses to tackle the intricacies of this new system. Will they take a more hands-on approach to increased involvement in JVs or will they take a step back and focus on other areas where they have solid foundations?

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