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China Takes First Place as Asia’s Leading Biopharma Cluster

publication date: Apr 3, 2014
 | 
author/source: Richard Daverman, PhD

China is Asia’s number one biopharma cluster, according to a ranking system devised by Genetic Engineering & Biotechnology News (see article). The country won the top spot because it led all other countries in biomedical R&D spending ($160 billion out of $243 billion in all of Asia), the number of life science companies (7,500 last year), the total number of industry jobs (over 250,000), and venture capital ($74 million to five companies). China was second to Japan in IPOs ($2.1 billion raised by 14 companies since 2010) while its 9,302 biotech/pharma patents (apparently counted from 1970 to the present) were in third place overall.

China won the number two ranking in biopharma IPOs (2010-2013) the hard way: there were no IPOs in China of any kind during 2013. The government shut down initial offerings from all industries while it developed new investor-protection procedures. However, six life science companies completed IPOs on the Hong Kong market during 2013, raising $820 million.

Using a different methodology from GEN, ChinaBio® produces an annual White Paper that analyzes China-specific life science trends. With history dating from 2007, the White Papers detail the explosive growth of the past seven years. The 2014 White Paper (available free as a download) summed up 2013 as a positive year, though with some problems. Specifically:

  • Partnering was the standout investment sector, rising 112% from the year earlier to $1.1 billion with average deal size doubling to $54 million;
  • M&A rose 22% to $5.2 billion, with an increasing emphasis on cross-border transactions;
  • VC/PE investment fell slightly to $901 million, a 9% drop from the year earlier (ChinaBio®’s total differs greatly from GEN’s); and
  • IPOs, affected by China’s year-long suspension, were very weak. On the plus side, the suspension created a huge backlog, and the market for life science IPOs is the strongest in years.

China has come a long way in a short time. GEN points out that the country didn’t recognize patents until 1984, and provisions for biopharma patents did not became effective until 1992. This forced China to work hard to make up for lost time, compared to countries like Japan. Nevertheless, it has responded to the challenge: in the last 20 years, China has strengthened its generic drug and traditional herbal businesses while adding a formidable innovative sector. 

Japan was ranked #2 on GEN’s list of Asia biopharma clusters. In 1990, Japan seemed to represent the future, but 20 years of economic stagnation have taken their toll on biopharma in Japan, along with the rest of its economy. In the next year or two, China’s pharmaceutical market will be larger than Japan’s “developed” market for drugs.

Prime Minister Shinzo Abe has taken steps to revitalize biotech among Japan’s large pharmas. But Japan’s spending on R&D remains below China’s (exact numbers for Japan’s biopharma R&D spending are not available, according to GEN). Because of its long history of R&D work, Japan still leads in patents, and it also was number one in biomed IPOs. However, the 2010 IPO of Otsuka Holdings was responsible for most of the latter. That single transaction raised $2.4 billion of Japan’s total $2.6 billion.

India was given the #3 slot in the list of Asia’s biopharma clusters. India has long had a powerful generic drug industry, and it has started developing innovative drugs. That activity remains despite the problems with quality that have created a cloud over India’s products in the last year. Investment remains strong: the country was second in VC investments ($66 million to four companies) and it was fourth in IPOs (largely due to Claris Lifesciences, which raised $80 million in 2010).

Dragging India lower, it is fifth in three metrics: the number of companies (around 500), R&D spending ($24.3 billion in 2007 to an estimated $40 billion in 2012) and patents (4,793).

For all of Asia, GEN ranks the top eight as follows:

  1. China
  2. Japan
  3. India
  4. South Korea
  5. Taiwan
  6. Australia
  7. Singapore
  8. Malaysia.

Biopharma has prospered in Asia, GEN argues, because western life science companies were initially drawn to the lower manufacturing cost there. This move helped Asia gain technological expertise. Governments cleverly leveraged this advance by funding further R&D.

In China, this scenario was especially true. China excelled in providing low-cost manufacturing and CRO services, and the government followed that up by funding biopharma innovation generously. In fact, China is responsible for two-thirds of Asia’s spending on biomedical R&D, an investment that has moved China to the top biomedical cluster in the region.

Disclosure: none.



 

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