The two competitors can complement each other going forward.

Author: Anthony Russo

The United States still dominates the biopharma sector, but, much to its chagrin, it has seen its number one global competitor narrow the industry gap in the last decade.

In 2010, China became the third largest biomedical sector globally, up from ranking ninth in 2006, according to research from the United States Cellular Corp. By 2018, China had emerged as the second largest, with a pharmaceutical market worth $137 billion, trailing only the U.S.

China Big Pharma Investment Pays Off

From 2008 to 2015, China invested significantly in research and development into its pharma businesses, which grew by 254% compared to the U.S.' 7% in those years, according to data from the Information Technology & Innovation Foundation. China also stepped up biomedical articles between 2006 and 2015, increasing from 2% to 11%.

China started its Health Reform since 2009 with the aim of establishing a universal basic health care system to provide safe, effective, convenient and affordable health services to all by 2020, according to World Health Organization (WHO). The government boosted its investment in drug spending dramatically, from $110.45 billion in 2009 to $268.76 billion in 2017.

In June 2018, the Chinese government launched national reforms on centralizing drug procurement through a new volume-based purchasing policy.

Known as the "4+7" drug procurement, this initiative helps the government cuts the price of generic drugs in four municipalities of Beijing, Shanghai, Tianjin and Chongqing and seven cities of Guangzhou, Shenzhen, Xi'an, Dalian, Chengdu, Xiamen.

The authority that implemented the policy was the National Health Insurance Bureau, which was for newly established drugs.

China's central government announced an official guidance report, the Reform of the Medical Security System, on February 25. The report showed that by 2025, the basic tasks will be basically completed, including the basic benefits, fund-raising operations, medical insurance payments, and fund supervision, medical service supply and medical insurance management services.

Longer-term, the country is eying a comprehensive medical insurance system by 2030.

Changes Caused by Coronavirus

The sudden outbreak of COVID-19 has unexpectedly accelerated the growth of online pharma in China. The Chinese have turned to online medical consultations or follow-up consultations, online purchase of drugs or medical items, and online reimbursement of medical insurance.

Frost & Sullivan said the market size of online health care in China should expand to $28 billion by 2026, almost 20 times its 2016 size of $1.6 billion.



The key players in online health care include giants like WeDoctor backed by tech giant Tencent (OTCBB: TCEHY; HKEX: 0700) and Alibaba Health supported by Alibaba Group Holding Ltd.'s (NYSE: BABA; HKEX: 9988).

Founded in 2010, WeDoctor claimed itself as "China's first internet-based hospital," connecting 27 million monthly active users and 2,700 million hospitals in mainland China, according to data from Harvard Business School.

Alibaba Health covered some 15,000 senior doctors to offer health consultation services through its marketplace and its payment app Alipay, according to Bloomberg.

Some small- and medium-sized players in the Chinese online health care sector are trading in New York.

For Healthcare, Dial 111

One such player in the online healthcare sector is 111 Inc. (Nasdaq: YI).

The Shanghai-based 111 Inc. became publicly traded in New York in September 2018, raising $130.2 million in its initial public offering. Since then, the company advanced in its mission to consolidate China's pharmaceutical industry and become the largest drug retailer connecting patients, pharmacies, and pharma companies. Its long-term goal is to build the largest online-offline integrated healthcare platform in China powered by technology.

The company worked through the eve of Chinese New Year to set up a virtual command center and deliver 100,000 masks to Wuhan to fight the epidemic.

"We feel very proud to join forces with the rest of the nation to fight the outbreak of the virus and we are still operating in the crisis mode," Junling Liu, the co-founder, chairman and chief executive officer of 111, told CapitalWatch in an interview last week. It also quickly mobilized to provide prescription drug delivery to chronic patients and free online medical consultation in partnerships with medical institutions, among other measures to help withstand the rises.

Another firm, China Pharma Holdings Inc. (NYSE American: CPHI), saw its stock price double March 2 on news that its subsidiary will sell a "wash-free" sanitizer.

CPHI is planning to produce disinfectants in response to the government's call to battle the deadly coronavirus through its subsidiary Helpson. The pharmaceutical production facilities will launch this sterilization product in a short time. Shares in CPHI has soared over 270% since 2020.

Chinese Pharma in U.S. Markets

There are some notable Chinese pharma companies trading in the U.S.

Since late January, pharmaceuticals provider BOQI International Medical Inc. (Nasdaq: BIMI) has traded up and down after a big jump in early February. After scoring a deal to obtain a full stake in Southwest China medical distributer, Chongqing Guanzan Technology Co. Ltd., BOQI's stock hit a three month high of $7.40 per share that month.





(Yahoo Finance: BIMI)

In the last month, BOQI has amended the terms for its acquisition of its China-based Boqi Zhengji Pharmacy Chain and entered a distributorship agreement with a Chongqing pharmacy company for Seradase.

Over the past week, Cellular Biomedicine Group Inc. (Nasdaq: CBMG) has seen some gains in the stock market, due to the company posting its 2019 highlights. Even though the company has yet to show profit, it made notable progress for its Knee Osteoarthritis therapies, as it has received approval from the China National Medical Products Administration Investigational New Drug application to move into Phase II of its clinical trials.

Last week, the stock of CBMG traded as high as $17.29 per share, that's up 6% from this year's open. The stock has since slipped on the overall U.S. market uncertainty.

CBMG, which is headquartered in Shanghai and New York expanded its U.S. presence by opening a new facility in Rockville, Maryland to support R&D and clinical studies. In November, CBMG received a buyout proposal from an investor group headed by the company's chief executive for $19.50 per share.





(Yahoo Finance: CBMG)

Market Woes

One of the biggest losers has been the industry's giant, BeiGene Ltd. (Nasdaq: BGNE). Since trading at $173.19 per share on Feb. 19, it has closed as low as $153.31 per share last week. That was because the biotech giant reported a 3% decline year-over-year in revenues which were $56.89 million in the fourth quarter. The stock was trading at $154 per share as of Tuesday, Mach 10.





(Yahoo Finance: BGNE)

Beijing-based BGNE also expects the coronavirus epidemic to impact its operations in China, including sales and clinical trials in the first quarter. Despite that BeiGene hopes to launch tislelizumab, a cancer drug it developed and tested together with its partner Celgene Corp. It also expects to announce other uses for tislelizumab in the near-term.

It's been a tough last month for Hong Kong-based clinical-stage company Aptorum Group Ltd. (Nasdaq: APM) in the stock market. After pricing its $10 million direct offering, Aptorum has continued to tumble to historic lows. As of Tuesday morning, March 10 it was trading at $3.65 per share, representing a 72% decrease from its close on Feb. 25.





(Yahoo Finance: APM)

However, last month it announced the commercialization of its dietary supplement for women undergoing menopause and experiencing related symptoms. It also announced positive data and development for its repurposed drug candidate, SACT-1, for the treatment of neuroblastoma, which is a rare childhood cancer.

Another biopharma company, China SXT Pharmaceuticals, Inc. (Nasdaq: SXTC), lost 11% Wednesday and then rebounded slightly. The company engages in the research, development, manufacture, marketing, and sale of traditional Chinese medicine piece tablets. The stock is trading around 9 cents per share as of Mach 10.

Another traditional Chinese herbal medicine products seller Shineco Inc. (Nasdaq: TYHT) gained 4% on Friday afternoon, while shares in Happiness Biotech Group Ltd. (Nasdaq: HAPP) jumped 2%. As of Tuesday, the two stocks were trading at and 53 cents and $4.15 per share, respectively. Shineco sells its Chinese medicinal products and western medicines through wholesale customers; and its 13 Ankang retail pharmacies operating under the Sunsimiao Pharmacies name, as well as 66 pharmacies operated by third parties.

Headquartered in Nanping, China, Happiness reported that online sales jumped 694% last month, mostly due to the addition of the much coveted disinfectants to its lineup of nutraceuticals as customers vie to get their hands on anything to potentially thwart COVID-19 infection.

Pharma Suspensions

In February 2019, Nasdaq suspended Sinovac Biotech Ltd. (Nasdaq: SVA) from trading on the stock market. That was due to a slew of legal issues, which included Sinovac activating a poison pill defense so a certain group of stockholders that owned more than 15 percent of the company wouldn't be able to take control. But that was short lived, as in the following month court orders combated its poison pill attempt.

The group that amassed the stake in the company included 1Globe Capital LLC, Chiangjia Li, OrbiMed Advisors LLC, and additional shareholders. According to Sinovac, 1Globe filed a complaint against the company in April 2018, but was dismissed by a judge in the Antigua Court. Sinovac also filed a lawsuit in the Court of Chancery of the State of Delaware to determine if the shareholders had triggered the Rights Agreement.

"The Exchange Shares are expected to remain in a trust for the benefit of the Company's shareholders who did not trigger the Rights Plan until, at least, the conclusion of the appeal against the Antigua Judgment and final disposition of the Delaware litigation or further order of the Delaware Chancery Court, Sinovac said in its third quarter financials.

The stock exchange has said trading will remain halted until Sinovac fully satisfies its request for additional information. The Beijing-based company last traded at $6.47 per share.

In the three months through September, Sinovac's sales hit $64.3 million, up 19% year-over-year on a net income of $11.6 million. This year, it expects commercialize the launches of its Quadrivalent influenza, Sabin Inactivated Polio and Varicella vaccinations.

Partners Rather Than Foes

Competition is inevitable. But there is healthy competition and there is unhealthy competition. Can the U.S. and China engage in a healthy competition with one another, and even partner with one another? The two countries' massive resources in Pharma would benefit both patients and investors if more teamwork and less rivalry would take place,

Neil Warma, I-Mab's general manager for its U.S. team, believes it is important for the two nations to complement each other. Founded in 2014, I-Mab conducts the discovery and trials, as well as the commercialization, of medical treatments of cancer and autoimmune diseases; the company entered the U.S, market via IPO at Nasdaq in January.

"It's not a [China] versus [the U.S] kind of thing, you complement each other and we know how to leverage data, that's kind of important to not just doing clinical trials in the U.S. and data taking them forward separately, its taking data from the U.S. into China," said Warma.

He added, "Then [take] Chinese data into the U.S. and leveraging that. That's not easy, but if you can figure that out, it's a huge advantage

He also said that the future in biotech is in the U.S. but noted not to underestimate China.

"If you ignore it [China] if you try to fight it, it's probably your peril, but if you embrace it and try to partner with China talented people in the markets; it will be a huge success."

In January, the U.S.-based biopharma company Amgen Inc. (Nasdaq: AMGN) finalized a deal to acquire approximately a 21% stake in BeiGene for $2.8 billion. Under the partnership, BeiGene said it would be responsible for the commercialization and development in China for three of Amgen's oncology medicines.

Helping to complement each other, China ranked second among countries that export drugs and biologics to the United States by import line at 13% in 2018 according to research from the Food and Drug Administration (FDA). It also ranks first among nations that export medical devices to the United States by import lines.

By 2022, China's biopharma segment is forecasted to reach $175 billion and sales on pace to exceed $50 billion, according to research from Pharmaceutical Online



