In the current trade standoff between the US and China, Europe has a golden opportunity to gain a competitive advantage.
At every healthcare conference I’ve been to recently in the US or Europe, the same question is being debated on panels: Should you or should you not have a China strategy as a biotech CEO?
Does it make sense to spend time there while China currently represents very little of the pharmaceutical business? What about the radically changing regulatory landscape that makes it difficult to pin down a strategy? Will you be spreading yourself thin and defocusing efforts on the prime directive, that is, getting your products through clinical trials and approved in the US and Europe? Are you not taking a risk to go with the wrong local partner and possibly have your intellectual property challenged — ultimately losing all the value of your investment in time and money?
These are all valid questions. From my perspective, however, while you should not underestimate these challenges, there are also good reasons to invest the time in understanding this new market opportunity and finding the right approach. It is not about the why, it is about the how.
Of course, one needs to place this discussion squarely in the context of a current trade war between the US and China. We should not be blind to the impact that this may have, both positive and negative. But we should still take the long view. And I would argue that European biopharma companies have an additional incentive to do so.
We are asking CEOs of our biopharma portfolio to project themselves 10 years in the future and manage the probabilities of successful drug development, so navigating through complexity and planning with incomplete information is second nature for them. And you do not need me to debate the fact that China is a huge potential market by the sheer size of its population, disease prevalence, and the fact that healthcare is a major focus area for the government.
I first ventured to China three decades ago, with several trips per year becoming the norm in the last five years. I have seen with my own eyes the birth of their biopharma ecosystem, with companies that were once small startup operations blossoming into multi-billion-dollar companies, like Jiangsu Hengrui or Wuxi, that have both the capital and executive talent to compete on the world scene. This is happening. And these companies want to access the best products in the world.
When you visit Chinese pharma companies, in particular those that are entrepreneurial, you notice there has been a huge recent upgrade in the quality of the management teams. One reason for this is that there is a large number of returnees from the US, many of whom spent decades in the pharma and biotech industries or academia, who are now populating the C-suite of this new generation of companies.
This new generation of leaders understand drug development from a Western perspective. And they have ambitions that are not limited to China. They want to develop quickly and cannot solely rely on the innovation growing locally, certainly not at this stage. In a nutshell, at least in the short term, they need what the Western companies can provide.
If you are European, it used to be that apart from a few obvious European pharma giants, the only choice to find a partner was to cross the Atlantic. While it is still the case today, China could offer another valid option. You can still go west… but you can now also go east. Many of our portfolio companies are exploring this angle.
While there are of course challenges, such as identifying the right partner and striking the right deal, these companies are taking the necessary first steps. Not doing this now could relegate you to the back of the queue when it will matter most.
The short-term impact of the trade war between the US and China is boosting the interest and appetite from both Chinese investors and corporations to look at European companies. This may not last, so it is our chance to show them what we have to offer.
Images via E.Resko