HONG KONG (Reuters Breakingviews) - China’s drug companies could provide a boost to Big Pharma. This week’s New York initial public offering of Shanghai-based Zai Lab highlights a new breed of innovative eastern drug makers specializing in treatments made from living cells known as biologics. They are eyeing a slice of the $1 trillion-plus global medicine market.
Chinese companies mostly produce cheap generic drugs. But three-year old Zai, which is raising up to $106 million, focuses on higher-value medicines for cancer and autoimmune diseases. The company, backed by Qiming Venture Partners and Sequoia Capital, is led by former Pfizer executive Samantha Du. She’s part of a new generation of “sea turtle” entrepreneurs who have returned to China after working abroad. Going public will allow Zai to raise funds for research and development.
These new startups, Zai included, are still trying to win approvals to sell therapies in their home market. Friendly policies, like the expansion of health insurance coverage, and lower costs, make China an exciting place to experiment. And the pay-off could be huge. Total drug sales in the People’s Republic will jump from $124 billion in 2016 to $178 billion by 2021, according to Frost & Sullivan. Over a fifth of this might end up coming from biologics, which accounted for eight out of the top ten best-selling drugs in the world last year.
Big western pharmaceutical firms are already striking deals with their eastern counterparts, helping them fund costly clinical trials in return, among other things, for future rights to sell Chinese-discovered drugs abroad. Earlier this year, the $110 billion Celgene took a stake in China’s BeiGene, as part of a deal to distribute the latter’s cancer treatment in Japan and outside Asia. Eli Lilly and Johnson & Johnson have also placed similar bets on early-stage discoveries.
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