麦肯锡中国医药创新某省市场机遇战略研究

BroadeningtheBridgetoInnovationNovember

18th,2020AND

PROPRIETARYAnyuseofthismaterialwithoutspecificpermission

of

McKinsey

&panyisstrictlyprohibitedNote

VG:

US

Chinadecoupling2020in

the

mirror:Nine

key

trends8

Tsunamiofvaluecreationfor

China

biotechSource:

McKinseyanalysis

McKinsey&pany24

Costcontainmentgatheringpace3

Deepening

healthsystemreform5

CHI:silverlining

orsilver

bullet?7

China

innovationingofage6

Digital

health

charging

ahead9

Neweraforbiopharma

deals2

Splinteredglobaleconomy1

PostCOVID-19

next

normalSustainedeconomicandgeopoliticaltensionsDeglobalizationandchallengingdynamicslikelyto

persistpostCOVIDLocalizedsupplychainLarge-scalenearshoringspurredbysupplychainplexitiesHealthcareexpenditure

underpressureBudgetnegativelyimpacted,withallocationshiftingtowardspublic

healthDualcirculationExpandandupgradeconsumptionandencourageinvestmentdomestically,whiledeepening“openingup”policyRiseofvirtualdemandRapiddevelopmentin

home-basedservices,remotework,andgigeconomyDecentralizedhealthcareservicesmunityandremotecareenabledbydataanddigitalofferings1:Next-normalemergesasChina’seconomyrecoverspostCOVID-196.4%

6.2%

6.0%

6.0%3.2%-6.8%ChinaGDPshowingsignsofrapid

recoveryYearonyearGDPgrowthofmajoreconomies1

China

Euroarea

US2019

20201.Percentagechange,paredtosame

period

previous

yearSource:OECD;

National

BureauofStatisticsofChina;

McKinseyanalyses

McKinsey

&pany

310%5%0-5%-10%-15%Next

normalemerges

post-COVID4.9%-2.9%-4.3%Q1

Q2

Q3

Q4

Q1

Q2

Q3StartedrelocatingConsidering

relocatingNotconsidering

relocating811802018

2019PlanningNotplanning201920202:DespitesplinteringUS-Chinarelations,MNCs’confidencein

ChinaremainshighNON-EXHAUSTIVESplintering

US-China

relationswithfocuson

technologyandtrades%of

AmChampanies

relocatingmanufacturingorsourcingoutside

ofChina%ofEUCCpanies

relocatingmanufacturingorsourcingoutsideof

ChinaSection301

investigationAug2017ZTE

penaltyAug-Jun2017TariffraiseApr-Aug2018APECsummitNov

2018Tariff

raiseMay

2019US-China

Phase

1Trade

DealJan2020Source:

McKinseyGlobal

Institute;

European

UnionChamberofmerce;AmericanChamberofmerce

McKinsey

&pany

4Multinationalpanies

(MNCs)

remainmittedtoChinan=314

n=327

n=585

n=629Export-control

escalationAug2020Hong

Kong

sanctionsMay

2020US-China

tradetalksFeb2019Consulate

closuresJul2020HuaweiJan2019

ongoing988983851511Strengtheningdisease-

controlcapabilityStrongemphasisfromthe

centralgovernment“Bydevelopingastrongpublic

healthsystem,improvingtheearlywarningandresponsemechanisms,prehensivelyenhancingthecapacityforprevention,controlandtreatment,weingatightpreventionandcontrolnetwork,andconsolidatingthewallofquarantine,wecanprovideastrongguaranteeforsafeguardingpublic’shealth.”–

PresidentXi,June2,2020City-level

implementationShanghaiaspiresto“beoneofworld'ssafestcitiesin

public

health

by

2025”

Decentralizingfunctionsand

resourcesBasic

Healthcareand

Health

Promotion

takeseffectfrom

June

1,2020,withemphasisonempoweringgrassroots3:ChinapublichealthsystemisevolvingalongthreekeythemesImprovingefficiencyandreducingcostDiagnosis

relatedgroups(DRG)China

publicSource:

NHSA;Xinhuanet;

McKinseyanalysisMcKinsey

&pany

5payment

piloted

in30cities

in2020and

set

to

start

in2021healthsystem

23127%25%25%41%72%52%32%22%VBPexpectedto

impact

majorityoftoday’s

pharma

market

in3yearsEstimatedVBPimpactonpharmasalesbyproduct

category3%of2019sales34%61%6%Nationalvolume-based

procurement

(VBP)continues

toexpand

inscopewithsharp

price

reductionsNumberofmoleculespassedtenderinganderageprice1

cut#ofmolecules,%

of

price

cut~400-64%-68%-74%-71%1.Simpleerageoftenderwinners,paringVBP

tender

price

to

mediantendering

price

in

the

previous

year2.Basedon

draft

candidate

list

ofVBP

products3.Basedonthe

680

hospitals

(>60%

Class

III)from

PDBdatabase4.SOD:SolidOral

Dosage;

SI:Sterile

Injectables.

SI

includes

biologics

and

insulins5.Otherse.g.

inhalers,

eye

drops,topical

treatmentVBP

could

impact70%of

today’s

pharmamarketin3years4:Costcontainmentgathering

pace553225

25Not

impactedbyVBPVBP:Additional~400molecules

expected

to

be

impactedVBP:

112molecules

impactedtodateSource:

NHSA;PDB;McKinsey

analysis

McKinsey

&pany

6bined

~70%

acrosscategories1st

roundVBPSep.2019“4+7”扩围“4+7”

pilotNov.

2018集中采购试点Potentialcoverage

in

next3

years22nd

roundVBP

Jan.20203rdroundVBP

Aug.2020SI4

Others5}SOD43%CHI

premiumgrowingrapidly,expected

toreach~US

$300

billion

in

2025HealthinsurancegrosswrittenpremiumBillionUSD,

%

oftotal800~90064%4345:mercialhealthinsurance(CHI)playsanimportantandgrowingsupplementalroleinChina’spayorlandscapecitysupplementaryinsurancesince2015,

majorityaddedin

2020>20

MnenrolleesasofOctober2020Citysupplementaryinsurancewith

specialtydrugformularyincludingbothNRDLandnon-NRDLlisteddrugs>20citiesand

8

provinces2

launched239

77%BMI1

86%

36%100%foreignownershipin

life

insurersallowed

startingJanuary

1,2020ShandongEmergenceandgrowthofnewforms

ofCHISince

2020Source:CIRC;China

InsuranceYearbook;

McKinseyanalysisMcKinsey

&pany

7ShenyangNanjingSuzhouNingbo

HangzhouTaizhou

WenzhouGuangzhou●AnhuiFujianHuizhouShenzhen

DongguanYinchuanDeyangGuiyangGuangxiFoshan1.

BasicMedical

Insurance2.AsofOct.

20,

2020ShanxiHubeiChongqingZunyiLianyungang

YanchengExample2025E2015201923%Beijing●14%CHIChengduHainanZhuhai70%Hospital-ledinternethospitalsExamples30%Techplayer-led

internet

hospitals6:Internethospitalsquadrupledintwoyears,withonline

consultationsexperiencingexplosivegrowthRegistered

internet

hospitalsandonlineconsultations

byyear5772016

1718192020H110

4090

270Online

Basic

Medical

insurance

(BMI)settlement

currently

implemented

in

71internethospitals,majoritybeing

hospital-ledSource:

Industry

report;McKinsey

analysis

McKinsey

&pany

8Totalof~600internethospitalsacross

26

provincesTwomaintypes

ofinternet

hospitals#ofonlineconsultations

(million)11351362139Establisheddigitalinnovationhubin

Shanghaitobuildadigital

innovativeecosystemwithlocalstartups500million

RMBinvestment

in

Chengduglobalresearch&operationcenter,focusing

ondigitalinnovationandbig-data

analyticsInitiatediHospitalstrategicprojectShanghai

AIinnovationcenter“Bybiningbig-datainsights,new

platformconstruction,andexploringmorepartnership,MerckwillfurtherfacilitatetheimplementationofHealthyChina2030.”–GM&

MDofMerck

KGaA

Biopharma

China“Digitalizationisaninevitable

industrytrend.Wenotonlyneedto

developgood

products,butalsotobuilda

patient-centricecosystem.”–

PfizerChinaInpartnershipwithTencent,launched“AI

Nurse”intelligentplatformin

April2020supportingpatients,physicians,andnursestobettermanageheartdiseaseSetupall-roundonlinediabetescare,includingonlineconsultation,Rxrefilling,drugproductracking,anddiseasemanagementviamultiplepartnerships6:Digital

and

analytics(D&A)

a

top

agenda

itemforMNCpharmacosinChinaIncreasingemphasisonDigital

&Analytics

byMNCs

inChinaSource:pany

announcements;

McKinsey

analysis

McKinsey

&pany

9AmeileBiLiTingBrukinsaCoblopasvirCipterbinYiKa

(EC)Third-generation

EGFR-TKINasalsprayforallergic

rhinitisBTKinhibitorfor

adult

MCLand

CLL/SLLSecond

local

innovative

HCV

drugAnti

HER2withstrongerADCC3Fusion

proteinforTBdiagnosisSelectexamplesoflocal

developed

innovations

in20207:Chinainnovationingof

age3011192020YTD237%54945201817%Source:GBI;panyannouncements

McKinsey&pany105311421920%4114020172%NDAapprovalsforinnovative

drugs11.Including

both

innovative

chemicaldrugsand

biologics2.AsofOct

20,

20203.Antibody-dependent

cellularcytotoxicity734201643%%from

localpaniesLocalpharmaco/biotech

MNC图-1

zai

ab.

15STAR

Board2016

2017201820192020YTD1#ofnewlylisted

biotechs

and

ecosystem

playersTotal

marketvalue1

oflisted

innovative

China

biotechsandecosystem

players2,3

on

majorstockexchangesBillion

USD8:Tsunamiof

valuecreationbyChinabiotechandecosystemplayers2020YTD1

marketvalue

Billion

USD4214530453693124

1

5

7

18

1.Year-endorYTDvalueas

of

Nov

10,

20202.Biotechsand

CRO/CDMOsfocusingon

innovativedrugdevelopment3.Forpanieslistedin

multiplestock

markets,

marketcap

value

fromthe

primary

listing/largest

market

cap

is

usedSource:Capital

IQ;McKinsey

analysis

McKinsey

&pany

11

CRO/CDMO217

2

6

8103

BiotechNASDAQQH

ent

ius⃞cansinoBioHKEX2081381211MNCandChinafundspartnertofosterinnovationMNCopeningtechnologyplatformto

ChinainnovatorsUniversalCAR-Tcelltechnology2:1T-cellbispecificantibodyplatform60+localfrom

MNC

in-licensing

deals1Newtypes

ofcollaborations

oninnovation

alsoemerging

…1.As

ofOct

20,

2020MNC-Chinabiotechstrategicpartnershipwithequityinvestment$200Mnequity

investmentChinarightsofsugemalimabMNCshapinginnovativeportfolioforChinatode-riskVBPimpactDorzagliatinClenil,

Foster20+localto

MNCout-licensing

deals19:NeweraforbiopharmadealsSource:GBI;panyannouncement;

McKinseyanalysisMcKinsey

&pany

12China’sinnovation

globalSelectedexamplesInn

ovEn

tInn

ovEn

tSintilimabgoingTJC4Mckinsey&pany

13innovationChinainnovation

momentum01RefreshedperspectiveonChinainnovation

ecosystem02MomentumofChinainnovators

IncollaborationwithHighlightsof2020survey

participants129industry

experts,

of

which

…66%are

CEOs/senior

executives67%he

15+years

of

industryexperiencesCalibratedagainstcurrent

US

levelsAssume

US=8

out

of

10

pointsReflecting

longitudinaltrendsofindustryviews2015

一

2016

2018

2020Regularlyupdatedsince2015,ourChinaDrugInnovationIndex(CDII)helpstogaugeprogress

of

the

China

innovation

ecosystemAssessing

Chinainnovationecosystemalong5

dimensions:Source:Source:2016

(n=65),2018

(n=109),2020

(n=129)CDII

Survey;

McKinsey

analysis

McKinsey

&pany

14LocalinnovationoutputPolicyenvironmentFundingfor

biotechR&DcapabilitiesIntegration

with

globalFive

dimensions

CDII

score

Key

takeaways

0//2

4

6

8

10A:

PolicyenvironmentA1:

RegulatoryA2:

Marketaccess3.5

4.04.24.0

5.54.34.85.55.1o

o

5.5

6.26.0B:

Fundingfor

biotechsC:R&D

capabilitiesD:

Local

innovation

outputE:Integrationwith

globalA1:

Regulatoryreformcontinuestoforgeaheadinfosteringinnovation(e.g.,priority

review,conditionalapproval,breakthroughtherapies)A2:

Progresson

reimbursementforinnovativedrugs

haslagged

behindotherdimensions,despitesomeimprovements(e.g.,dynamicupdate)B:

ReboundofhealthcareVC/PEinvestment

in2020afterdeclinein2019;newweofbiotech

IPOs,withSTARgainingmomentumas

newfinancingchannelandHKEXcontinuingtogrowC:Clearstep-upofR&Dcapabilitiesparedto2018,especiallyinclin.developmentandCMCD:

Pipeline

noveltyandqualityof

R&D

improving

themostacrossall5

dimensions,as

ChinainnovativeassetspivottowardmoredifferentiationE:Cross-borderdealsremainactivewithgrowing“Fastandslow”evolutionof

Chinabiopharmainnovationecosystem

persists

–2016to2020evolutionSource:2016

(n=65),2018

(n=109),2020

(n=129)CDIISurvey;

McKinsey

analysis

McKinsey

&pany

15numberofnoticeableout-licensingdeals

byChineseinnovatorsin2020erageacrossall

CDII

dimensions

AssumedUS

=

8

inall

metrics

4.5

5.05.55.34.6●5.2●5.6 China2016 China2018 China20204.45.0Priorityreview1Regularreview2016

17

18

192020YTD2A1:Regulatoryreformcontinuestoforgeaheadinfostering

innovationinChina14%63%74%77%73%86%37%27%26%23%Priorityreviews1

amongNDAapprovalsof

innovativedrugs(2016–2020YTD2)#ofdrugs,%

ofdrugs100%=

741545330JWCAR029CAR-TtherapyYY-20394Pi3kδ

inhibitorPlinabulinGEF-

H1LCAR-B38MCAR-Ttherapy4

innovativeoncolyassetsgranteddesignationsinceintroduced

by

NMPAinJuly2020og…At

least

13

innovative

newlauncheswithconditionalapproval3

since20181.Including“Drugsofcriticalclinical

needs,”

some

not

directly

granted

priority

review

status

but

expect

accelerated

review

process2.Asof

Oct

20,

20203.ConditionalapprovalfromCDE-published

technical

review

documents

and

NMPA

new

release,

non-exhaustiveSource:

Press

release;

McKinsey

analysis

McKinsey

&pany

16Priority

reviewasthe

newnorm

…DesignationofbreakthroughtherapyConditionalapprovalramping

up

…n朋-

GreenValley

HansohZai

Lab

BeiGene

Hengrui

JunshiemergingInnoventPolicyenvironmentAmgenBioMarinAlexionMerckGSKJ&JChinabiotechs2Chinapharmacos2MNCpharmacos

in

China21752%26%23%2020YTD3A1:Steadygrowthof

innovativepipeline,withlocalbiotechscontributing

more

than

half

of

all

CTAs

in2020#ofinnovative

moleculeswith

CTA

inChina

by

modality,2020YTD3Smallmolecule

Others41.

New

molecularentities

(bothchemicaland

biological)

inChina2.China

biotechdefined

aspaniesfocusingon

innovativedrugs;

China

pharmaco

defined

aspanieswith

portfolio

including

both

generics

and

innovative

drugs3.AsofOct

27,

2020.4.Othermodalitiesincludeantisenseoligonucleotides,

peptide,

undisclosed,

etc.Celltherapy2%

Bispecific

and

ADCmAbSource:

GBI;

McKinseyanalysis

McKinsey&pany17#ofinnovative

molecules1

forCTAin

China

bypany

type26546%29%24%201920748%30%21%201818343%38%20%201721756%11439%39%22%20166%24%9%4%Fusionprotein+32%

p.a.VenturecapitalPrivateequityStockmarketfinancingPharmacos’

strategicinvestmentGovernmentfundsDebtfinancing2.9

●

3.5

●5.4

4.94.94.96.5

6.56.4

7.0

4.0erageofall

channels

△.04.85.5

6erageacrossall

CDII

dimensions

◆

◆4.5

5.05.5KeytakeawaysVC&

PEamongthe

mostaccessiblefundingsourcesforChinesebiotechsStockmarket

is

rapidlygainingmomentum(score

rosefrom4.9in2018to

6.4

in2020)as

moreoptions(e.g.,ShanghaiSTAR1)

becameailable China2016China2018China2020

Assumed

US

=

8

in

all

metricsChina

biotechs’accesstofundingB:FundingenvironmentremainspositiveforbiotechsinChinaLevelofeaseforChinabiotechstofinancethroughfollowingBiotech

funding

channels

(1=most

difficult;

10=easiest)channel

0246810Source:2016

(n=65),2018

(n=109),2020

(n=129)CDIISurvey;

McKinsey

analysis

McKinsey

&pany

181.Shanghai

Stock

Exchange

ScienceandTechnology

Innovation

Board5.84.95.05.6oo

o

6.66.36.4VC/PEfundraising

inChinatargeting

healthcare

e-Totalraised

#

of

fundingUS

$Bn8060

464040202002016

17#806040200VC/PE

investment

inChinahealthcare Totalinvestment#of

investmentUS

$Bn#791806040200g.

sizeperdealUS

$Mn69647838126712580060040020002016

17

18

192020H12024

25

18

25g.

size

per

fundingUS

$Mn439

538

639

303

480Notableinvestment

US

~$1Bn

PIPE12US

$310

MnCrossoverfinancing2

US

~$280

Mn

Series

Afunding⃞L

oval

valley

capital

2

US

$186

Mn

Series

C1.Private

investment

in

public

equity2.Onlyshowing

leading

investorB:BothChinahealthcareVC/PEfundraisingandinvestmentare

rebounding

in2020,recovering

from

a

dip

in

2019Source:ChinaBio;

McKinseyanalysis

McKinsey&pany1918

144421funding2020H1432367777418199AmoytopZelgenI-MabBio-InnocareAkesoHitgenKintorLegendSinocell-Immuno-Aidea

SunshineGenorEverestFrontierJWRemeGenThera

bio

tech

techGuojian55294114281332383124240487181141119259371328275298511US

$MnMarketcap1

2.93.82.62.41.92.73.63.91.72.62.43.2US

$BnB:NewweofIPOs,withincreasingnumberatChinabased

markets18

Chinabiotech

IPOs

in2020YTD

,reachinghistorical

newhigh,

ofwhich:16areeitheronHKEXor

STAR14

outof

18heoncologypresencearedual-listedtodate:

BeiGene,

Junshi,andZaiLab2

NASDAQ●HKEX

STARNotableIPOsofChinabiotechs

in2020YTD1JanFebMarApr

May

JunJulSeptOctNovSource:

Pressrelease;Wind

McKinsey&pany20

SI

NOV

NC科兴

Brii

Bio

sciencesMore

IPOsqueueing

up–examplepaniesfilingfor

IPO1.Asof

Nov

10,

20202.

BeiGene:

Nasdaqand

HKEX;Junshi:

HKEXand

STAR;Zailab:

Nasdaqand

HKEXoutof

183RaisedJul-20

799Dec-18

604食Re

me

Gen

Nov-20

511Jun-20

487Jul-20

460Oct-20

448Oct-

18

424Sep-19

411Aug-18

402Dec-

18

395samu

med

Aug-18

438Apr-18