Source: Sina Securities
Li Ling, Peking University Development Institute: The new crown epidemic has accelerated China's pharmaceutical innovation, and detection agents and new crown vaccines have given Chinese medicine the opportunity to go overseas
Sina Finance 2023 Pharmaceutical and Capital Forum was held in Beijing on December 21 (Thursday), with Tan Yong, Li Ling, Liu Guoen, Yu Rong, Zhong Yong, Anny Liu, Liu Jipeng, Ma Xuejiao, Yin Ye, Cai Lei, Lao Zhiming, Lin Yuan, Zhu Guoguang, Luo Jiarong and other big names gathered together to discuss the high-quality development and investment opportunities of the pharmaceutical industry.
Li Ling, professor at the National School of Development at Peking University and director of the China Health Development Research Center, looked forward to the future development of pharmaceutical innovation in China. She said that China's pharmaceutical industry is actually facing the first new opportunity, and the entire Chinese industrialization is in the process of transformation and upgrading, and high-quality development. Pharmaceuticals are our shortcomings, and various national policies are helping the development of China's pharmaceutical industry, especially the new crown epidemic has accelerated the innovation of China's medicine. Because we didn't have it this time, we couldn't import the test agent at first, so we had to make it ourselves, but the Chinese one was good and cheap. In particular, this nucleic acid test is a great inspiration for everyone, because we used Roche in the past, including the United States, and now their nucleic acid test is still about 200-300 US dollars for a test, because of their high cost, they have been from more than 3000 US dollars at the beginning to two or three hundred US dollars now, and we have such a large-scale government procurement in China, and the last 10 people mixed it is basically cheaper than the price of cabbage, less than 1 yuan, and 16 yuan for a single tube, and all the companies of the testing agent are making a lot of money. Therefore, in a country with a huge population like China, we can not only have leading technology in pharmaceuticals, but also provide high quality and low price.
The second is the epidemic, and the detection agent and the new crown vaccine have given Chinese medicine the opportunity to go overseas, because everyone knows that medicine was not easy in the past, and there are many barriers, which are much larger than general trade barriers. But this time, in the three years of fighting the epidemic, it has become the main product of our exports, and it has greatly improved the development of China's pharmaceutical industry. From 2018 to 2021, we are developing rapidly, from revenue to profit, to patents applied, to R&D expenditure. In particular, as Chairman Tan Yong said just now, some of our local research has been at the forefront, such as BeiGene, Hengrun, and Fosun, and their R&D investment is also increasing. Therefore, we can say that China has gone from almost zero pharmaceuticals at the forefront to now gradually moving from following to now some can run alongside or even lead. Therefore, the development of our whole medicine and the research and development of new drugs are really booming now.
And a lot of our new drugs are in the process of being approved, so we should expect that the next three to five years may be a period of accelerated development of China's pharmaceutical industry.
The following is the full text of the speech:
Li Ling: Good afternoon, President Tan Yong gave a very good opening just now, and it seems that he has finished talking about a lot of what I want to talk about. What I would like to share with you today is a new opportunity for high-quality innovation and development in the pharmaceutical industry.
2023 is coming to an end, and the good news we see at the end of the year is that the research report of a well-known think tank in the United States shows that China's seven strategic industries are leading the world, and they are not ordinary leaders, but far ahead. What does that mean? That is, China's production capacity is much more than that of all other countries combined. A world leader in computers, electronics, chemicals, machinery and equipment, motor vehicles, base metals, metal products, electrical equipment, China is now the world's most powerful manufacturing country. However, the weaker one is the pharmaceutical, so the United States still maintains its advantage in pharmaceutical, information technology, and information technology services. But the report also says that while the rest of the world has surpassed China in pharmaceuticals, information technology and information technology services, this dominance is unsustainable. Because they have probably read our "14th Five-Year Plan", our country's innovation has added a focus on people's life and health, so in the entire "14th Five-Year Plan", our biopharmaceutical industry and artificial intelligence are our key development industries. In other words, China has an opportunity for the rapid development of the pharmaceutical industry.
Just now, President Tan Yong said that we are now facing an uncertain world, but the pharmaceutical industry is actually certain, the economy is good, you need to take medicine, and the economy is not good, there are more medicines, because there will be more patients. So you can see that the international trend of the global pharmaceutical market is all the way up, and this is a definite event. People's yearning for a better life is getting longer and older, and the global drug market is rising. At present, the global pharmaceutical market is still the United States, Europe, and Japan, and they are the main ones. But we, China, are catching up. The top ten drug R&D are all from multinational companies, when we were in China's medical reform in 2009, the total sales value of pharmaceutical companies in the country was not as good as Pfizer's, but now this situation has changed, and our R&D is also increasing, but after all, they have a longer history, so the main R&D investment is still them, so most of the R&D is from developed countries, but at present, the R&D of non-OECD countries led by China is rising rapidly. You see, our R&D in 2016 was 14 billion, and in 2022 it is already 16.6 billion US dollars. We look at the world's top 500, China's pharmaceutical industry was not in the past, now we have China Resources, China Medicine, Guangzhou Medicine, although our current medicine is not the same as foreign medicine, we are mainly sales, but after all, we can enter the top 500, I believe that in the future China will have more world-class enterprises, real pharmaceutical companies into the top 500.
In fact, China's pharmaceutical industry is facing the first new opportunity, and the entire industrialization of China is undergoing transformation and upgrading, and high-quality development. Pharmaceuticals are our shortcomings, and various national policies are helping the development of China's pharmaceutical industry, especially the new crown epidemic has accelerated the innovation of China's medicine. Because we didn't have it this time, we couldn't import the test agent at first, so we had to make it ourselves, but the Chinese one was good and cheap. In particular, this nucleic acid test is a great inspiration for everyone, because we used Roche in the past, including the United States, and now their nucleic acid test is still about 200-300 US dollars for a test, because of their high cost, they have been from more than 3000 US dollars at the beginning to two or three hundred US dollars now, and we have such a large-scale government procurement in China, and the last 10 people mixed it is basically cheaper than the price of cabbage, less than 1 yuan, and 16 yuan for a single tube, and all the companies of the testing agent are making a lot of money. Therefore, in a country with a huge population like China, we can not only have leading technology in pharmaceuticals, but also provide high quality and low price.
The second is the epidemic, and the detection agent and the new crown vaccine have given Chinese medicine the opportunity to go overseas, because everyone knows that medicine was not easy in the past, and there are many barriers, which are much larger than general trade barriers. But this time, in the three years of fighting the epidemic, it has become the main product of our exports, and it has greatly improved the development of China's pharmaceutical industry. From 2018 to 2021, we are developing rapidly, from revenue to profit, to patents applied, to R&D expenditure. In particular, as Chairman Tan Yong said just now, some of our local research has been at the forefront, such as BeiGene, Hengrun, and Fosun, and their R&D investment is also increasing. Therefore, we can say that China has gone from almost zero pharmaceuticals at the forefront to now gradually moving from following to now some can run alongside or even lead. Therefore, the development of our whole medicine and the research and development of new drugs are really booming now.
And a lot of our new drugs are in the process of being approved, so we should expect that the next three to five years may be a period of accelerated development of China's pharmaceutical industry.
Just now, Chairman Tan Yong also said that the new medical reform has also given us a very big opportunity for pharmaceutical manufacturing, because our government and our medical insurance are constantly increasing their ability to pay, and the income level of the people is also rising. So you can take a look, if since SARS in 2004, the medical reform began, until now the changes in the entire Chinese pharmaceutical industry can be said to be earth-shaking, and the new medical reform is also giving us new opportunities for the development of the pharmaceutical industry. This is the development of the total output value of the pharmaceutical industry in the mainland, you can see that the yellow part below the two lines is the growth rate of our GDP, and the blue part above is the growth rate of the total output value of the pharmaceutical industry, which is much higher than GDP. So it can be seen that our industry has really developed very well over the years. Although there is a gap with developed countries, we are in the process of catching up quickly. There are also statistics on pharmaceutical sales in the mainland, and now the market size is nearly 1.8 trillion.
Of course, health care reform has also brought us challenges. I believe that people in the pharmaceutical industry know that our centralized procurement and price reduction are relatively powerful. But you can take a look, I think that after the exploration of the past few years, the rules should have been basically stable, and the knife has become more and more blunt, and it is not so exaggerated, so it has entered a relatively stable state. It can be predicted that centralized procurement can greatly promote the development of domestic leading enterprises. Because China is a huge market, as long as we get this market, in fact, we can have a stable expectation for the development of our pharmaceutical industry in the future.
With the high-quality innovation and development of the pharmaceutical industry, I think our new opportunities are still linked to the development of the whole of China. Especially for a country with a huge population like ours, giving full play to economies of scale and promoting the development of our pharmaceutical industry may be a path that China can explore. Because since the epidemic period, we have seen that whether it is nucleic acid testing or vaccines, after the scale is huge, it can actually have good income and profits on the basis of the price of cabbage.
So we have to make full use of: the first is our economy of population size, China has a huge population base, has a large number of medical needs, and also has a rich clinical trial and gene pool, which we must make good use. The second is the economies of scale of medical security, our medical insurance level is constantly improving, although the government has reduced the price after centralized procurement, but from another point of view, as long as you enter the reimbursement catalog, into the centralized procurement, more people will come to use this drug. In fact, the market size is expanding.
The third is that we have the advantage of production scale, the domestic demand for generic drugs is concentrated in the current centralized procurement, in fact, to increase the concentration of our market, to concentrate this demand on a limited number of enterprises, in fact, we can expand our production scale, to reduce the cost of our unit, to ensure the quality of production at the same time, can make the profits of the enterprise to maintain his needs for research and development, and then development. There is also the scale advantage of R&D, the government can through industrial policies and the construction of the park, and now there are innovative drugs and biological drug bases in the high-tech zone, through the joint efforts of the government, the market and capital, to promote the agglomeration of the pharmaceutical industry, and integrate the upstream and downstream of the industrial chain and university scientific research institutions to form the advantages of the industrial chain to improve the R&D and innovation capabilities of our new drugs.
There is also a new opportunity for high-quality development in the pharmaceutical industry, which is to make full use of new technologies of big data and intelligence. In the fourth industrial revolution, our country has been far ahead of intelligence. It is far ahead in terms of application, R&D and future industrial layout. We should empower this to our pharmaceutical R&D, production, and marketing, and we should innovate the model, which is to rearrange the situation of intelligence, informatization, and intelligence. The leading position of all multinational companies is the idea after industrialization, and our future is the R&D and innovation model of informatization, intelligence, big data, and AI, especially when China has such a big data advantage. Therefore, the innovation and development of our pharmaceutical industry should closely follow the national strategy, and we may have to enter the developed countries, but our main trading partners are already the countries along the "Belt and Road", so the current strategy of the "Belt and Road" countries is also health first, and send them health along the way, and our medicine should follow the national strategy, so that we can expand the scale even more.
In addition, people's health is an important symbol of our socialist modernization, and Chinese-style modernization serves the people's health. I think our pharmaceutical R&D and production should go towards this goal. Therefore, I think that if these advantages and opportunities are combined, a number of world-class Chinese pharmaceutical companies should emerge in China in the near future. At that time, I believe that all of you will be the frontrunners in it.
Thank you.
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