HONG KONG – China is on track to achieve some major milestones in biotechnology by 2020, further accelerating the growth of its drug development sector. Despite numerous challenges, the outlook for China's pharmaceutical industry remains very positive as the country aggressively implements reforms, according to industry analysts.

China's Ministry of Science and Technology (MOST) recently announced a new plan for biotech innovation, which aims to boost the country's biotech sector to more than 4 percent of GDP by 2020. According to the plan, which adds to the national 13th Five-Year Plan (2016-2020), China will further invest in its pharmaceutical industry, among other biotech-related sectors.

Zhang Zhaofeng, director of science and technology for social development at the MOST, said that by 2020 China would have built 10 to 20 new science parks for biomedicine with a total output value exceeding ¥10 billion (US$1.45 billion).

"A large number of new technologies have emerged with China's rapid development in biotechnology in recent years," he said. "And for the past five years, China has ranked second in the world in terms of published papers and patent applications."

Earlier this month, the CFDA issued a draft policy, titled "On the encouragement of pharmaceutical and medical equipment innovation to speed up new drug and medical device reviews and approval of relevant policies." It intends "to further deepen the reform of the review and approval system, to promote technological innovation in the pharmaceutical and medical equipment industry, to improve industrial competitiveness and to meet public clinical needs," according to the agency.

The draft policy is now open to the public for comments until June 10.

According to the draft policy, review and approval priority should be given to innovative drugs and medical devices that are included in major national science and technology projects and key national R&D programs. A conditional approval is proposed for new drugs and medical devices that treat life-threatening conditions and conditions for which there are no effective treatments, if the product's early and midterm clinical trials indicate efficacy and clinical value.

The establishment of a rare disease patient registration system is also proposed, based on the list of rare diseases published by the National Health and Family Planning Commission. New drugs and medical devices for treating rare diseases can apply for reduced clinical trial applications to speed up the review and approval process.

The draft policy also proposes a better balance between the benefits of traditional Chinese medicine (TCM) and the requirements of modern drug development.

It proposes the establishment of an evaluation and registration system that is in line with the characteristics of TCM, "to encourage the use of modern science and technology in the R&D of TCM and to promote the healthy development of the TCM industry."

FAST-GROWING SECTOR

Anchoring opportunities in China is a sizeable chronic disease burden combined with improving rates of disease diagnosis in the country, according to BMI Research.

"The confluence of a growing chronic disease burden together with improvements in disease diagnosis rates will be positive for biologic products in China. While the former follows a global trend among emerging markets, better and prompt diagnosis has largely been driven by the government's commitment to health care," Ang Wei Zheng, analyst at BMI Research, told BioWorld Asia.

An example is the three-year cancer prevention and treatment plan launched last year by the National Health and Family Planning Commission (NHFPC). The plan aims to standardize a tumor registration system to cover 30 percent of the population, track cancer occurrences and deaths from cancer, increase knowledge of cancer prevention and treatment in 60 percent of the population, and ensure that 50 percent of major cancers are diagnosed and treated at an early stage.

"Regulatory advances in China are helping the industry to grow rapidly, as well as improving health insurance coverage," John Chen, analyst at Beijing-based consultancy SGS-CSTC Standards Technical Services Co. Ltd., told BioWorld Asia.

Biologic and biosimilar products also will be a top priority in the pharmaceutical industry.

"Industry sentiment towards the subsector is positive, as the expansion of private health insurance eases affordability constraints while reforms to the country's universal health care system see a greater scope of medicines reimbursed," said BMI in a report. "This will incentivize continued investment by multinational drug makers into the subsector, and will accentuate the competitive dynamics in the country. Notably, multinational pharmaceutical firms will face significant competition from domestic firms that have invested in developing biosimilars."

According to a 2016 survey by pharmaceutical conference organizer CPhI China, more than 80 percent of foreign companies expect the country to have the fastest growing biologics sector over the next 10 years, with rapidly increasing sales. Over 50 percent of Chinese pharmaceutical firms also said that growth will be the fastest in the biologics and biosimilar segments, as well as other subsectors such as active pharmaceutical ingredients.

"In terms of competitive dynamics, we expect a 'hybrid' market with original biologics competing against biosimilars," said Ang.

PRACTICAL CONSTRAINTS

But China's biotech development still faces some challenges. The country lacks original scientific discoveries and disruptive technologies, and ideas often fail to translate into results.

In a report on the 13th Five-Year Plan, KPMG mentions that a shortage of core technology, a subpar industrial structure, weak R&D capacity, low resource efficiency and disorderly markets are some practical constraints in the industry. High barriers to entry, high risk of investment, long investment cycles and a deteriorating macroeconomic environment, as well as policies that favor industry growth over R&D and geographic concentration over advances in quality are some other major issues.

However, "there is huge potential for development as the industry is still at an early growth stage with a high demand for technology. The market remains very fragmented with many small players," said Chen.

"China has already emerged as a leading consumer market in biopharmaceuticals, which is set to be a major segment of China's advanced consumer market over the coming years. By 2020, the size of China's biopharmaceutical market will be second only to the U.S.," said KPMG.

According to China's Bio-industry Development Plan, the biopharmaceutical market will grow to ¥7 trillion by 2020, at an annual growth rate of 20 percent.

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