Four trends are emerging for multinational pharmaceutical companies in China

The Chinese market has become the most exciting pharmaceutical market in the world today. 2009-2012, the Chinese pharmaceutical market entered a "hot" period of rapid growth; 2013-2015, the Chinese pharmaceutical market growth From 2013-2015, the growth of the Chinese pharmaceutical market "cooled down" and slowed down relatively; now, the Chinese pharmaceutical market is once again the focus of CEOs of large multinational pharmaceutical companies. Multinational pharmaceutical companies in China are ushering in four major trends.

First, the Chinese market has become an important source of revenue and growth for multinational drug companies. In fact, the pharmaceutical industry is not the only one facing this trend, as are the medical technology and automotive industries. According to forecasts, by 2030, China's contribution to global personal consumption growth will be equal to the combined contribution of the United States and Western Europe to global personal consumption growth. China is already the largest consumer market for many important products. This trend is evident in the quarterly earnings reports of most major multinational pharmaceutical companies: their performance in China is often very impressive and their results continue to grow. Some multinationals have even positioned China as a "key pillar for future growth. Data show that some multinational drug companies have the second largest share of revenue in China, after the United States, and for some of them, China is becoming a major growth driver. For example, at the end of the second quarter of 2019, several multinational drug companies disclosed data showing that their performance in China has grown by more than 30% since the beginning of 2019. Coupled with the large scale of their operations in China (several of them have revenues in the billions of dollars), their performance in China has a significant impact on the global performance of these companies, with some multinational drug companies' performance in China contributing up to 25% to their global growth.

China is a new source of product, portfolio and business model innovation Novartis' head of global drug development and chief medical officer said in an interview with China Daily that the company is committed to "having China covered from the beginning of every key drug development program. Many multinational drug companies are now following this path. At the same time, the State Drug Administration has introduced a series of reforms that have created favorable conditions for multinational drug companies to grow in China. In addition to managing new drugs in development and accelerating new drug launches, many multinational drug companies have integrated into China's innovation ecosystem. In the past three years, AstraZeneca has opened a commercial innovation center in Wuxi; Sanofi has opened a global research institute in Suzhou; Merck has opened innovation centers in multiple locations in China; Johnson & Johnson has introduced the JLAB (Johnson & Johnson startup incubation platform) concept in Shanghai; Novo Nordisk has opened the INNOVO innovation platform in Beijing; and Roche has announced the opening of a new early stage research center in Shanghai. The scope of operations and business models of these new facilities may vary, but they are often looking to partner with other players in the ecosystem to foster innovation.

Third, China is gradually playing a central role in the biopharmaceutical industry in terms of its role in the global supply chain, China plays a central role in industries such as advanced electronics, but in the biopharmaceutical industry, this trend is just emerging. We do see that China has the capability to manufacture small molecule organic compounds for both the domestic and export markets, but so far multinational drug companies have been reluctant to increase their investment in manufacturing large molecule organic compounds in China. There is more than one reason for this, but concerns about IP protection are the most obvious. They hope that over time, these uncertainties will become more manageable. The author notes that multinational drug companies such as Boehringer Ingelheim have already begun operating large-molecule organic compound manufacturing facilities in China, and others (such as Lonza) have announced similar plans.

Fourth, China is becoming an important source of capital and talent This trend is already clearly visible in the biotech sector, with Chinese venture capitalists showing a strong presence in global funding activities. In fact, about 40% of the financing in the U.S. biotech sector in 2018 came from China. Chinese pharmaceutical companies and investors, including Greenleaf Pharmaceuticals and Fosun Pharma, are making increasingly large strategic investments outside of China, although they are still in the early stages. On the talent front, a number of leading pharmaceutical companies have a number of executives based in China. For example, the current executive vice president of global AstraZeneca and president of international business and China, and the head of Novartis Asia Pacific, Middle East and Africa, all have Chinese roots and are based in Shanghai. I believe that the importance of China will continue to rise in the global development plans of many multinational pharmaceutical companies, and more and more of them see China as a special market. The scale of demand in China is so large that it is difficult for other countries and regions to reach it. In the past few years, some drugs have faced sudden increases in demand due to their inclusion in the medical insurance list, causing disruptions in the supply chain. Therefore, it is important to keep a close eye on the supply chain pressure on companies in China. Going forward, the allocation of drug supply in China is likely to be a complex strategic decision, and the topic of increasing local manufacturing capacity to meet the local market will be on the agenda. In addition, the integration of multinational drug companies' China innovation teams with their global R&D departments is still a work in progress, and success will depend on several key factors: first, the extent to which multinational drug companies can incorporate Chinese teams into their global product business leadership; second, whether there is strategic alignment and effective communication between global and Chinese product teams to enable both robust strategy and high quality and rapid execution; and third, whether the Chinese team is strong enough to ensure that the strategy is robust. Third, whether the China team is strong enough to integrate China issues into the global context and effectively influence decisions at the multinational's headquarters. In short, the rapid growth of the Chinese market is creating a unique environment for talented executives to capture the career opportunities of multinational and local biotech executives in China. For executives with global aspirations, the China experience is essential. The current CEOs of Eli Lilly, GlaxoSmithKline and Brigantine have all had experience as executives in China.