Opportunities for Entrepreneurs in Chinese Healthcare

UK China Entrepreneurship and Business Forum

London, 19th May 2009

Opportunities for Entrepreneurs in Chinese Healthcare

What is Stravencon?What is Stravencon? Status of Chinese Healthcare Reform & Status of Chinese Healthcare Reform &

IndustriesIndustries– Key Trends affecting the healthcare market and industriesKey Trends affecting the healthcare market and industries– DemandDemand– Supply ChainSupply Chain– Multinationals Multinationals – Domestic IndustryDomestic Industry

• Strengths/WeaknessesStrengths/Weaknesses Opportunities for Entrepreneurs in Chinese Opportunities for Entrepreneurs in Chinese

HealthcareHealthcare– Healthcare Product Trading (Export/Import)Healthcare Product Trading (Export/Import)– Investing in Chinese HealthcareInvesting in Chinese Healthcare– Developing the Healthcare Service SectorDeveloping the Healthcare Service Sector

What Is Stravencon?

Product Trading

Pharmaceuticals Diagnostics

Medical devicesInnovative Technologies

Financialadvisory

Globalizationsupport services

Stravencon Product Trading Platform-China to Europe Stravencon obtains marketing authorizations Products supplied directly to partner companies and purchasing organisations Manufacturers hold strategic inventory Revenues:

– license of marketing authorizations– direct sales to purchasing organizations and partner companies– royalties on sales

ChineseManufacturers

Products

Data

Payments

Products

Payments

PartnerCompanies &Purchasing

Organizations

Marketing Authorization

Stravencon Ltd.

Key Trends Affecting Chinese Health Industries

Entry into WTO (2001) Development of regulatory system like

USFDA/MHRA/EMEA, State Food and Drug Administration (SFDA)– Good Clinical Practice (GCP) in Sept 2003– Good Manufacturing Practice (GMP) in June 2004, but– Corruption scandal in SFDA (2007), resulting in arrest and execution of

director Return of Chinese nationals with expertise and

experience in Western biopharmaceutical companies (“sea turtles”)

Chinese government’s promise to expand Intellectual Property (IP) protection and enforce production quality

Background (1)

DEMAND

Large, rapidly aging population, growing economy, and increasing diagnostic and treatment rates will soon make China the world’s 4th largest market for health care products• Chinese Rx pharma market: expected to grow to US$ 24 billion by 2010• OTC’s expected to reach US$ 5.7 billion by 2010• Biopharmaceutical production reached US$ 4.2 billion in 2005

(with US$ 478 million in exports)-producing 8 of 10 top rDNA drugs/vaccines worldwide)• Value of medical devices market: US$ 10 billion• Value of in-vitro diagnostics market : US$500 million • Value of contract manufacturing services (CMO’s): US$ 7.5 billion• Value of clinical research services (CRO’s): only US$ 63 million

Background (2)

SUPPLYDomestic Chinese pharma supply chain has undergone major changes in consequence of reforms and FDI• Migration of drug distribution from hospitals (still about 80% of dispensing• From 2003 to 2008, number of retail drugstores grew from 180K to 400Kand number of retailers owning pharmacy chains rose from 1,200 to 1,349

• Investments by Alliance Boots & Goldman Sachs in retail chains• Listing of Nepstar on the NASDAQ

• E-pharmacy has been growing by 300% p.a. to reach 15% of total trade volume by 2008

Background (3)

MULTINATIONALS

Only major MNCs have established direct presence in China, and almost exclusively for domestic market penetration• China has > 6,000 pharmaceutical businesses, 700 of which are

foreign-invested (either wholly-owned or JV’s)

• Increase of multinational R&D investments (eg., Novartis, Astra Zeneca)

• Foreign companies make 40 of the 50 most popular brands, but MNCs account for only 20-30% of market

• Entry of foreign OTC healthcare/dermocosmetic companies in partnership with domestic retail chains (e.g., Garnier)

Background (4)

DOMESTIC INDUSTRYChina’s pharma and medical device manufacturers focus on copy, generic and OEM product marketing and, due to political, cultural and language barriers, have generally failed to establish alliances and access outside of China’s traditional export markets• 97% of drugs made by domestic companies are generic or copy products• Strong potential position in biosimilars (biogenerics)• API’s/bulk pharmaceuticals/traditional medicines (TCM’s) also major

part of domestic production• 10 Chinese finished-drug manufacturers have received US FDA certification• Two are certified at present in EU-GMP • Low investment to-date in R&D although government providing incentives • Fledgling export industry of medical devices and diagnostics

based on OEM experience

Strengths/Weaknesses of Chinese Healthcare Companies

in World Markets

Many traditional pharma cos. manufacture APIs a/w/a finished formulations

Biotech producers have capabilities of entering global biosimilar markets with minimal delays

Vaccine producers/diagnostics manufacturers are preparing for possible outbreak of avian influenza

Chinese medical device suppliers are highly experienced (OEM) and cost effective

Strengths Weaknesses

Most lack approved (US/EU) manufacturing facilities and adequate product documentation

These producers lack European/US market knowledge and strategic direction

Lack of EU/US-GMP facilities for manu-facturing vaccines/test kits in China and shortage of qualified personnel

Excessively dependent on manufacture to order and (in general) insufficiently market-oriented

Healthcare Product Trading (Export/Import)

• Major opportunity to work with major/entrepreneurial Chinese pharma & medtech companies to access regulated markets

• Planning very important given lead times, esp. in pharma

• Opportunities to develop original Chinese health technologies

• Development of TCM’s into conventional drugs• Life science start-ups (biotech/genomics)• Value-added medical devices & diagnostics

• Source products from Europe & USA for Chinese pharma companies and distributors

•Investing in healthcare infrastructure (hospitals, Investing in healthcare infrastructure (hospitals, polyclinics, polyclinics, pharmacies)pharmacies)

•Investing in already private healthcare companiesInvesting in already private healthcare companies •Privatizations of state-owned healthcare enterprisesPrivatizations of state-owned healthcare enterprises

•Investing in novel technologiesInvesting in novel technologies

Investing in Chinese Healthcare

•Major opportunity to develop CRO’s and other Major opportunity to develop CRO’s and other pharmaceutical industry servicespharmaceutical industry services•Development of healthcare marketing services, Development of healthcare marketing services,

including including market measurement and research market measurement and research •Recruitment of experienced healthcare institution Recruitment of experienced healthcare institution

managementmanagement•Training of Chinese healthcare institutional and Training of Chinese healthcare institutional and

industry` industry` personnelpersonnel

Developing the Chinese Healthcare Service Sector

Chinese Life Scienes Trade & Investment Platform

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US Office :110 East 42nd StreetSuite 1301, New York, N.Y. 10017 U.S.A.

Tel. +44(0)788 18 20 416 • info@stravencon.com • www.stravencon.com

Chinese Office :Level 29, Kerry CentreNo. 1515 Nan Jing West RoadShanghai 200040 China