China’s Medical Industry Outlook 2019

“Shares in the UK-based biotech ReNeuron rose more than 30 percent, after it announced a licensing deal for its products to be developed and commercialised in China. Fosun Pharma, a Chinese life sciences company, will licence the rights to two cell therapy programmes in a deal that will potentially net ReNeuron £80m (approx. RMB 700m)”.——Ftchinese.com

Fosum Group, the parent company of Fosum Pharma, put up three LED screens in between the glistening buildings of the Bund Financial Center (BFC) in Shanghai. Several urban male and female figures, portrayed with the simplest lines, hustles among the screens. Their non-stop movements can be quite an interesting analogy of China’s booming medical industry, as reported above by FTCHINESE.com.

After the dot.com bubble, everyone’s looking for the next market boomer. With Wilddesign’s expertise in medical design, I think it’s safe to say that the medical industry might just be the focus of attention for domestic investments in the next few years. This conclusion is backed by not only data and predictions from various media and consulting firms, but also the social background that China’s facing a rapidly-aging population, who are becoming more health-conscious.

Moreover, softened domestic laws and regulations and development of science and technology bode well for the future of China’s medical industry. In this article I’ll briefly analyze China’s medical industry outlook in the second half of 2019 from four perspectives: capital injection, influence of science and technology, tech innovation and domestic regulations.

Capital injection：medical industry, the one after dot.com

According to the article “Medical and Healthcare Industry’s Investment and Financing Report 2018” 36Kr reposted, the total financing volume of China’s medical industry in 2018 amounted to around 82.5 billion RMB. Among the 16 segments, medical equipment saw the most financing cases. China National Pharmaceutical Industry Information Center (CPHIIC) predicted as well that by 2019, the market size of medical equipment in China will surpass 600 billion RMB. Experts say that the country’s medical equipment innovation is embracing 10 years of its golden age.

As mentioned in the beginning, China is actively seeking overseas opportunities. In an article published last year titled “8 Reasons Why China is Becoming the Most Exciting Medical Market”, Mckinsey & Company pointed out that Chinese funds are becoming a more and more vital support to American biotech companies such as Grail, VielaBio and IDEAYA. In addition, these funds are turning their attention to biotech companies in Europe.

Meanwhile at home, three tech giants: Pingan, Alibaba and Tencent (PAT), have put in a lot of stake in the medical industry and are building up an unprecedented medical ecosystem. Innovated technologies of the companies, such as the advanced logistics capacity of Jingdong, will also greatly influence the healthcare value chain for domestic patients.

Influence of science and technology: China’s ambition for 5G and AI

“China is on the right track to become the winner of 5G”, said the British accounting firm Ernst & Young (EY) in the latter half of last year, in a report on China’s 5G (5th generation wireless systems) development titled “China is poised to win the 5G race”. EY pointed out that China is in the leading position of the world’s 5G race, with its top-down national development agenda and a series of key decisions all in full support of building a comprehensive eco-system. This will undoubtedly bring fundamental changes to a lot of industries, medical undoubtedly being one of them.

China has strong determination to become a global innovation leader

“5G represents a whole new way of digital medical networking, and is very likely to upgrade patients’ healthcare experiences. It helps users maintain their wellness through three major capacities: Internet of Medical Things (IoMT), enhanced Mobile Broadband (eMBB) and mission critical services. All three come together, delivering holistic, personalized services to users anytime anywhere”.

Furthermore, in an article “What Changes will 5G bring to the Medical Industry? How Can IoMT Companies Ally with Operators?”, 36Kr concluded that the technological leap in big data and telemedicine will shorten the time and distance for patients to obtain medical treatment.

As for China that is starting the era of 5G this year, its medical industry will inevitably see quite a number of changes. For overseas pharmaceutical companies that are planning to enter the Chinese market, this is also an important factor to take into serious consideration.

Artificial Intelligence (AI) will be yet another major influence. Currently robots are used in clinical applications. For example, the da Vinci Robotic Assisted Surgical Systems, developed by American medical equipment company Intuitive Surgical, specializes in complex minimally invasive surgeries. Back in 2012, da Vinci had completed more than 200 thousand operations worldwide. It helps patients and doctors greatly with its astoundingly high precision and accuracy.

Rise of technology: transformation of Chinese enterprises and their focus on design and tech innovation

Siasun, the listed robot company affiliated to the Chinese Academy of Sciences, released a poetic commercial two years ago, in which a robot was playing Taichi with its robotic arm mimicking flexible joint movements that were almost lifelike. Targeting factories with high accuracy requirements, this product masters in precision assembly, product packaging, polishing, loading and unloading. Taichi, a martial art that embodies ancient Chinese philosophy, also seems to imply that China is gradually taking over technology innovation and leaving the age of OEMs behind.

Recent years have also witnessed more and more companies seeking innovation in product design. A good example is a company from Hangzhou, Rejoin, which has been collaborating with Wilddesign for the past three years. Being a newly established Chinese sports medical company that specializes in arthroscopic surgical tools and implants, Rejoin has nonetheless aimed at the global market from the very beginning. That’s how they found us and together we have developed a series of sports medical tools for surgery that are both visually innovative and highly functional.

The final product has a polygonal structure in half-translucent purple, which stands out aesthetically among those traditional opaque surgical tools. It was a long development process, requiring industrial design expertise, clear brand positioning strategy in the early stage, and strong design language. The case also shows that Chinese companies are more willing to spend on honing soft skills such as “innovation”.

Domestic laws and regulations: medical reforms lower barriers to entry for foreign investments

“The Medical Device Registrant Pilot System was initiated in Shanghai Pilot Free Trade Zone in December 2017. This means that eligible medical device registration applicants are entitled to apply for a registration certification independently, and then outsource the production to enterprises with qualification and production capacity, thus the “unbundling” of product registration and production licensing, making it easier for innovations to be marketed.”

Xinhua News Agency published the short editorial earlier last year, describing the very first product getting approved after the Medical Device Registrant System piloted in Shanghai Pilot Free Trade Zone. It only took 26 working days from the product’s initial review to its market launch, 82% shorter than the officially required time.

This also shows that the “innovation barriers” caused by restrictions that registration and production must be done by the same entity have been gradually lifted. Not only is it helpful for foreign investments to enter the Chinese market, but can lead to cost reduction and industrial innovation as well. Market entry has been made easier, nevertheless, China’s lack of protection for patented technology can still be a concern for foreign capital. This will affect the willingness of those small and mid-sized medical companies in Europe, United States, Japan, Taiwan etc. with advanced technology to enter the market.

Taking the above four perspectives into consideration, the outlook for China’s medical industry is positive, especially when the state maintains an open attitude towards foreign companies. It will lead to an overall development both home and abroad. However, there’s still a long way to go with regard to the technology patent system. What’s more, the few medical companies that have achieved remarkable performances in technological innovation only make up a small percentage in the entire industry nationwide.

When it comes to usability, application or cost control, etc., there’s yet much room for technological advancement. But one thing is for certain: in the few years to come, the whole medical industry will continue to move forward unremittingly, just as those figures depicted by Julian Opie on the three LED screens.

References (Source articles in Chinese)：

36kr

What Changes will 5G bring to the Medical Industry? How Can IoMT Companies Ally with Operators?

38.8 billion dollars of financing: Medical and Healthcare Industry’s Investment and Financing Report 2018.

Financial Time/ FTChinese

UK stem-cell specialist ReNeuron agrees to China deal.

How AI is changing the medical industry.

JQR.com

This sevenaxis robot developed by Siasun plays Taichi.

Xinhuanet.com

26 days to certification: Medical Device Registrant System sees first product in Shanghai.

EY

5G China is poised to win the 5G race.

McKinsey | Greater China

8 Reasons Why China is Becoming the Most Exciting Medical Market.

Originally written by Quan Shan, 17. May 2019. Last updated 14. April 2021