Amid a Global Pandemic, Global Ventures Investors See Opportunities in China

Updated: Mar 31

China’s innovation economy has been a success story so far. While the global COVID-19 pandemic continues to dominate headlines in the US and China - the world’s two largest healthcare markets are working to solve enormous healthcare challenges.


On the global healthcare stage, biopharma is consistently the leading subsector in terms of invested capital. China remains a strong contributor and value driver due to its skilled workforce and growing consumer demand to address the healthcare priorities of its growing middle class and aging population. While we’re faced with many uncertainties in 2020, the fundamentals for healthcare and the life sciences remain strong, and the tight knit community that composes our industry is positioned to navigate the path forward together.


Due to COVID-19, we saw 2020 having a strong growth in venture capital investment leading to Innovation drives. The Global healthcare innovation ecosystem has raised $35B in 2020 alone, of which China has managed to raise $6.7B (19%) of the total investments.

The aging population of China is driving it to make huge investments in the healthcare market. Over the last three years, Biopharma has led China’s venture-backed healthcare financings, reaching $9.7B. China is also second - largest source of Biopharma funding in the world (behind the US), surpassing the UK by more than fourfold. China’s Big Biopharma company performance as of 2020 H2 indicated that only 48 of 353 biotech/pharmaceuticals had growth. In 2018, healthcare funding saw a significant surge stemming from Ping An medical and healthcare management’s (alternative care) $1.2B deal and WeDoctor’s (alternative care) $500M financing. Ping An’s $1.2B deal is the largest alternative care deal the global healthcare sector has ever seen.

China’s investment in Medical equipment is said to be the top in the world with ($1.8B) compared to the US and European countries. China also ranks second in device funding, behind US($10.6B) and ahead of France ($512M) and UK ($456M) which ranks third and fourth in global device financing respectively.


Medical Device Investment is focused on different life sciences as mentioned below:

Cardiovascular – China has a huge demand for cardiovascular devices and equipment with 330M patients with cardiovascular disease. With this, there was an increase in revenue of the top 10 cardiovascular companies [~38.1%]. The centralized procurement policy has encouraged domestic products, but most of the cardiovascular devices are still not covered under this policy. With the drop in price to make it accessible to more patients, there is growth in the sales. MicroPort designs and produces products for a range of medical fields including cardiology, interventional radiology, orthopaedics, electrophysiology, and surgical management. The stock price of Micro Port raised more than 400% between Jan 2020 and Dec 2020.


Ophthalmology – China has the largest Myopia patient group - more than 700M, cataract patients ~160M. It also has the leading Ophthalmology Medical University and hospital in the world. The China government has several national policies to reduce myopia prevalence. Among all the 19 companies whose value is over 100M RMB and listing in Stock A market in China, Aier Eye hospital is one of the only two companies which has positive growth rate during 2020.


IVD - The breakthrough in sequencing and computation lead to the fast development in IVD. The IVD area especially the early diagnostics for cancer has great potential. Singlera Genomics is a gene sequencing company which was founded in 2014, It just finished a 1B USD size B round financing. Companies related to AI and computational biology have great advantages in China: researchers can get patients much easier than in the US; this can greatly shorten the development time.


In coming years, Government-led reforms such as the 4+7 drug procurement program, will continue to accelerate innovation and cement China as a key contributor to the global healthcare innovation ecosystem. China will continue to see mega/giga rounds ($100M/$1B+ financings), as its total treatable population is projected to become four times the size of the US in 2030. Shanghai and Beijing will establish their positions within the top five global cities for healthcare innovation, further becoming attractive hubs for foreign-trained talent.


The COVID-19 pandemic will cause valuations of US-based healthcare companies to decline in 2H 2020 and 1H 2021, which may result in an increase in cross-border activity within the US venture-backed healthcare ecosystem. The recently reformed ChiNext Market, STAR Market and HKEX will result in local companies favouring these exchanges over the Nasdaq. With these developments it will be a good time to invest in the healthcare companies interested in cross-border activity and trying to achieve their goal. We at Bridge Point Capital are already transacting in this area of business trying to grow more in the coming quarters.


Source:

"China in the Global Healthcare Ecosystem - Strong Venture Growth Drives Innovation", Sillion Valley Bank, 2020