Transcription
William Jin 0:07
Thank you. So we feel honored to have a chance to discuss about China market with some of our other colleagues together including from private equities from local multinational organizations and from local industries. So, we are happy to have this chance. I think today, people sitting here must be China market fan. I know China has a lot of challenges, but there are some big opportunities. So to start with, let's we can introduce ourselves each others I can take the lead. Okay, so I have two titles now. The first one is the partner of Medinnovation. You know, met innovation actually is a platform tried to introduce the oversea innovative Meditec into China, to the China piece, local players. That's what we do. My second title is the non Executive Director for HDDK medical, HDDK Medical is a full commercialization service in starting from pre Marketing Access registrations, logistic distributions, and to sales marketing's and they have like a 600 people on the ground. So that's me. My name is William, I forgot to mention. So maybe let's start here.
Jason Yao 1:41
I'm Jason Yao. I'm with a company called Grand Pharma. And growing Pharma is a Chinese local corporation that's under a large holding group. And we started our business as a pharmaceutical manufacturer with a long history. But we're getting into the medical device sector back in 2015. And ever since we have a rapidly growing our medical device business over the last eight years, and Grand Pharma is publicly traded on the Hong Kong stock exchange. So if you would like to learn more about us, there are public information that's available
Jimmy Jin 2:20
Jimmy Jin, VP, Business Development Becton, Dickinson China picks in decent is a top five medical medical medtech company in the world. We are the companies in China for all the Becton Dickinson, the business and our China size. They're like one bit 1.5 billion revenue and our global is like 20 billion. We are basically run most of our business is a consumers consumer business. Yep.
Christopher Shen 2:47
Hi, everybody. William, thank you for inviting me and the rest of the panel. My name is Chris Shen. I'm a managing director with CBC group. CBC is a Singapore domiciled private equity fund, or healthcare dedicated fund, probably the largest in Asia, we manage about 7 billion US dollars. And we do a lot of activity in Asia, our largest office actually in Shanghai, but we're quite global in terms of our reach. I think our belief is that healthcare really kind of spans all borders. Our strategy when it comes to med tech and other areas of healthcare is really to look for opportunities as a private equity firm to acquire certain companies. So in areas where we find particular market interest on medtech side, you know, we've been in the vascular space neurovascular Gi, ophthalmology, aesthetics, etc. How we interact with outside Asia companies, such as here in the US and in Europe is really to almost like a strategic to look for opportunities that have a fit with some of the companies that we have already acquired. So looking for more innovative products that could be in companies and have a pipeline that could be synergistic with our businesses over there in Asia.
William Jin 4:17
Thank you. So let's start with opportunities otherwise, other people will run away today. So Chris, maybe you start from you. What have you seen the biggest opportunities for medtech innovators in China market?
Christopher Shen 4:32
Yeah, I think there are really, some pretty key areas where, you know, innovators should be thinking about, I mean, obviously, there's a lot of challenges as well, but obviously, the markets are quite large. And, you know, if you know how to operate within that system, I think there's really some really attractive business opportunities. We kind of look at it from a you know, kind of clinical stage and you know, kind of indication. So interventional pulmonology is an area that we're quite interested in looking at urology ophthalmology, so essentially, areas where there's a major impact that you can have on more mortality or morbidity, those I think would be the places where you should really go.
William Jin 5:22
Okay, good. So, Jimmy, I see you jump in, you want to talk more about opportunities.
Jimmy Jin 5:30
Just last week, I talked to my US colleges about the China market, I just give them an example. China, our size, our our company size is 170 of us just compare with us. So market growth is two times smaller, but grow faster. And China is, as you know, which is a 12 to 15 hours behind you, as I just give you example, is behind not only about time, it's also about the market maturity market needs, compare with US, yes. Even much more. And then these clinical needs in China, that's I mean, 12 hours behind, look at us, we have much more room, and that needs to be addressed. However, the priority of addressing needs are different. The US market is more care, quality of life, care about people. China is telling us hours behind it's like 20 years ago, we care people but not as much as care the US people took care of the patient. The most part is to cure the disease. Right. That's I think the biggest opportunity is that huge, huge unmet needs here.
William Jin 6:42
Okay, good. But one thing I want to add over here, you feel China market is much smaller than US. But I can tell you, when I worked for Stryker for nine years, Stryker China, endoscopy business is just second to US market. Overtake Europe, overtake Japan. So based on which sector, we talking about some sector, China may even take over US. So it's big opportunities. Let's hear about local players Grand Pharma, what do you think are the biggest opportunities?
Jason Yao 7:20
Yeah, I totally agree with you. I think when everyone talking about thinking about Chinese market, the first thing comes to mind is the population we have a huge population. But if we're taking a closer look at the structure of this population, because over the years, China have this one child policy, so the structure of the overall population is marching towards the older generation, and it's an aging population. So what does that mean to us in our local payers? Is that there are more maybe like chronic diseases that needed to be managed through the healthcare system and, and things like these can be great opportunities down the road. And if now, even if it's not there today, but probably five years, 10 years from now, it can be rapidly growing.
William Jin 8:14
Okay, good. So as a veteran in this area in China market, I've been like for 30 years. What my observation, the opportunity in our industry is, you look at you look at the China, local player in medtech. IPO after IPO, pre IPO innovators, most of a company, their pipeline is very short. They only like two or three product five product graph armor is the exceptional case. Okay. But those companies, how can they survive in long term after IPO or pre IPO? How they can survive really have a successful IPO? They got to have a product. You look at the world wide, no company, they can survive within only with one or two products. That's what I see the oversea matter companies, the opportunities, there are a lot of needs for oversee innovative product, either licensing a JV or other kinds of, you know, opportunities. So that's my input from my side. So any any adding on
Christopher Shen 9:30
I mean, I'll just add to that. I mean, that's actually a great thing that a lot of these med tech companies in China actually went public. And you know, as a public company, it's always about what's next. And so pipeline, all of a sudden became super important. But a corollary to that is that all sudden IP became really important. So now you have like Chinese companies that are very focused on IP developing IP investing IP protecting IP. So I think it's actually been very good for you know, the industry.
William Jin 9:58
Yeah, good luck. Chris, you mentioned about IP, I think, let's talk about a challenge that I think opportunities is easy to see easy to say, populations, but challenges. China challenges is very unique compared with other advanced market, like you mentioned about IP. So I get a lot a lot of questions regarding China IP, or copy product imitation product. What do you guys think about IP protection in China, or any risk for oversea Medtech company, get into China will be soon get a copy of that?
Jimmy Jin 10:38
Let me I think the challenges, just multiple challenges, IP is definitely one of them. Generally speaking, US and European developed markets have hard protection of IP. We do observe, we do opposite. Quite a few Chinese company are just doing a copycat your I attend a U us Expo, I'll go to Europe and see the exhibition, I see your progress. I can make it in half a year. For the product. IP IP protection is the problem. We also see that Chinese companies sell the products to US, and they also lost you because you see are in China. It's hard to catch you. Right? If you sell to US. You will get a your ticket. Right? That's so I think but the second challenge, I will say that it's also in commercialization, how you commercialize how you regulation is different. China is not as same as the US the environmental, especially the government regulation the market, I will I will say IP is one thing, but how you make commercial success will be the second chapter.
William Jin 11:53
Okay. So Jason, what's your opinion?
Jason Yao 11:56
Yeah, so I think IP protection, what has some history is off being their companies, they just trying to copy a product and then bring the product to the market quickly. But I think right now, the government see the problem of having a weak IP protection over the entire country. So now they're putting more emphasis in the IP protection. And those ways have seen a lot of cases so far, that infringement do have a big fine. And on top of those, so when, from Grand Pharma standpoint, we're when we're doing due diligence, we are taking the Chinese IP very seriously. So not only the US IP, European IPs, we also want to make sure that you have a good IP protection within China. And as we all know that, so IP information is still public, there are trade secrets. So when we're working with our partners, I think under these confidentiality agreement, and it's our shared responsibilities to protect our core, IP or court or intellectual, the core technologies, that so that we can still bring this product to the country safely. So as then that's my comment for the IP. And can Jimmy comment about the regulation challenges an MPA is, is very different than FDA or C regulators. So as an as a local player as well about stress is really to help companies that are outside of China to getting our regulatory approval. That's, that's definitely one of our strengths. And I think a newer challenge that's just coming in recent years is a warrant based procurement. So what warrant based procurement or we're just calling WBP for sure, is that the government trying to modulate certain product categories that really trying to exchange the market share by this all the manufacturers coming together who can offer the lowest price? So what that what that means is that the cost, pressure become really high. Yeah, and that was a lot of pressures for these local startups or startups, though, who used to partner with
William Jin 14:25
Yeah, I understand. I think volume based procurement or some other pricing process is happens worldwide. I think China in its unique way. So I agree this is a big challenge by water adding on this the challenges regarding IP for different perspective. I know IP registration in China is a must. However, your product itself need to be high tech enough. Not easy to be copied. Secondly, when you have a joint venture or local partner in, in China, I suggest you to find a reliable, trustworthy, or at least you can show the major component or major technology of your product. That's what I want to say. Yeah, I
Christopher Shen 15:20
would agree with that, you know, I think we are always evaluating, while the fundamental technology of a company, you know, if it has like an electronics component, or some type of algorithm based component to the technology, that's very hard to reverse engineer. So that's always a good thing. You know, if there's a specific type of manufacturing process that, you know, as a trade secret, difficult to do, that's also a good thing. But, you know, fundamentally, we always ask, is there IP in China have you actually filed? It's funny, I mean, there's, you know, public companies now that we've talked to that, you know, have not filed any IP in China. And it's, it can be, you know, pretty tough sometimes. But I would say another piece of this, that's very important is, you know, never underestimate how fast the market shifts in China. So, you know, you have a huge competitive advantage. If you are, you know, first to market with an innovative product, and you are, you know, you basically set the rules, you know, for clinical trial for what the hurdle would be endpoints, etc, right. So, you got to be in the game in order to have a chance to win. But you will have a much better chance, if you're in that, you know, if you're, you know, at the beginning and the front of the line, you know, if you're, you know, coming into the market late or you decide, hey, you know, I'll be there in two, three years, you're going to be at a severe disadvantage, I think. So. Just keep that in mind.
William Jin 16:54
Thank you. So today's panelist, I think we all from different perspective. So and our audience, mainly from innovators. So my question will be, what are you looking for, as a player in China, pe firm investors, multinational local organizations, local players, you're definitely looking for investment or collaboration or licensing or acquisitions. For medtech innovators? What are you looking for? What kind of type? What type of innovators? Are you looking for all you prefer? To think about it, I never tell you, I'm going to ask you this question.
Jimmy Jin 17:37
I can start first. So, we do have a son our screening criteria, but let me summarize the external version. Now, I cannot tell you the internal external version very simple. We are looking at the big disease, a big disease a lot of patients right, in China market number one, number two, so medtech companies are innovators solve a particular problem in that disease or song toward a particular a specific problem, not all the problems, you can you just sell one problem, sir, the one you do significant better than the current solution, you address unmet needs, this is three criterias big disease, big portion of a patient pool, you solve a particular problem, a specific problem, we don't expect you solve all the problems in these just solve one problem, but you solve a very smartly, very significant better signal even better you we are not drugs by you using a first class, but I don't think you can you be immune to at least be much much better than current solution you address a particularly unmet clinical needs, this is true criterias
William Jin 18:54
Any comment
Jason Yao 18:55
on so if we're looking at this more specifically, that I think one thing that could be have a great potential is a combination product right. So the the jack device combination, or the products that combine or collaborate between the drugs and devices and these kinds of treatment have certain advantages, especially in like cancer treatment or cardiovascular treatments. And so while the regulatory requirements might be different between the drug and devices, but how to manage these effectively that could be a great way to to get into the market. And so from going from standpoint, we are closely looking also looking or study or observe these are new upcoming therapies. For example, like digital therapeutics, robotics AI is we're kind of looking at those but we don't have any investment in these areas, yet. If we take a step back more generally speaking, when we're looking at investment opportunity, we are going to look at if this product is looking or targeting towards a large market. What I mean by a large market is that, so we have to look at the, the health care system is pretty much established within China. So I can give an example like coronary cardiovascular disease versus neuro vascular disease, the cardiac care system within China over the last 20 plus years have become pretty much mature. So, it is a really big market. But if we're looking at the other side, diseases like stroke, which requires shorter treatment window, the healthcare system still underdeveloped. So, as a result, I will definitely limit the growth potential as a manufacturer or as an innovator. And so overall, I think we're looking for product that's looking at targeting a large market and also have a short learning curve, a lot of broad application and also bring a good clinical benefit, I can probably give a quick example from our current investment. So with our current investment, there is a company called Fastwood medical. facility medical is based in Minneapolis area, who is developing intravascular lithotripsy, which provides on when are effective procedures and also cost efficient on tremors. And, and, and it's a short learning curve, right, just push a few buttons and, and also, from what we have learned from shockwave medical, the clinical outcome of IVF treatment is pretty promising, that it doesn't really damage the end Aetherium as verified by OCD. So that will allow the physician to have an option to treat the lesion with products like a drug called a balloon and then manage the patient medically, they don't really need to put a stent in. Right. So that was a great benefit to the patient. Yeah,
William Jin 22:24
sure. Thanks, Chris, as you just mentioned, some kind of similar topic, but would you have anything to add?
Christopher Shen 22:34
Yeah, just very quickly, I think on you know, from an investor perspective, you know, I think it all comes down to people. I mean, it sounds like a very kind of, you know, shopworn phrase, but either from companies that we acquire, you know, in Asia, or, you know, potential US or European company, partners, you know, these, you know, trying to bridge any type of technology over to a different market requires a lot of coordination, and you have to have people who have the right type of attitude to work together, you know, you can't throw it over the fence never works that way. The other thing I would just mention, is just, you know, I think related to what we were just talking about in terms of the market size, you know, oftentimes you can, you know, competition in the market. And being able to, you know, work well, even in your space can be very good. By itself, I mean, because you may have a lot of competitors, but you may not even the market is so large, you might not even encounter your competitors in some of these different provinces, etc. So keep that in mind. Last thing, I think is, which I think is kind of interesting, too, is, you know, we struggle oftentimes with you know, multinationals trying to, you know, sell products as imports into China, the margins tend to be not so good for the manufacturer, and then the end user price tends to be way too high, you know, on the China side, so oftentimes, we think very hard about how we can localize some of that manufacturing because that way you can get the cost of goods down you can get the overall cost of the product down as well. And that's very important. You know, you can have a great product but if it's too expensive, it's not going to be adopted well
William Jin 24:33
Yeah Chris Be careful because who sits next to you is multinational. Okay, so I just adding on that all the oversea Medtech company they want to get into China. What are the preferred collaboration models in your experience or in your experience? What are your you know, preferred collaboration models?
Jimmy Jin 25:05
I can share a real example not prefer one, but it's I think it's relevant. Last year, we acquired a UK company. It's a UK, very innovative company. They also have a distributor in China. So they register in not FDA CE, the USA in China by themselves, but they hire professional distributor who distribute the Temperance. So they are very specialized that distributor, but they only do distribution, they are doing a sales job. So we acquired the UK company after several rounds. And we say, yes, we want the BD wants to these your products in China, the UK company told us yes, you can, because based on the contract, as long as our control share has been changed, the contracts tribution contract were expired, you will have a no issue to take over the distribution rights. And well, we made the made the acquisition that you just said Chinese UPC? No, you cannot. Although I agree, although I agree, I signed the contract, but you cannot take out take away the baby from me. It's very, it's very funny. So I think William, the moderator said the reliable trustable integrated uponor is very important. If you connect with someone, even through your through your friends, okay, someone you know, but these people, they are relative small company. They're carrying multiple brands, not not your very small numbers small, very specialized, but they only do distribution, okay? They do not care about their reputation. They don't respect the contract. They don't respect the law. So they only care about the money distribute, it's only cable. So this the UK Mr. BD, give me money, otherwise, I will not agree.
William Jin 27:06
I gave you another real example neuro vascular side of MIKO vanishing, they went this small in China, they find the similar, you know, distributors, and then they have exactly same issues. And then finally they came over to HDD K medical, we helping them to the law case, and then solve all the problems. So that's go back again. So I think collaboration is very initial collaboration is pretty important. So any other?
Christopher Shen 27:39
Yeah. I mean, we prefer to have a relationship with the innovator company, you know, whether or not it's a JV or licensing type of deal, or if we're a minority shareholder in the company. I mean, it's, like I said, before, it's all about the people we evaluated from that standpoint, fundamentally, I think that, you know, for advice out to the audience, here, I think you as the management team have to think very hard about, you know, how much you want to be involved, how much time how much resource, you really want to, you know, invest into a market like China, it's, you know, very vast market, it's very complicated, even complicated for people on the ground there. So, you know, my recommendation, and, you know, you could say, I'm biased, but, you know, we think that the best path to success is to work with, you know, a good partner out there who's aligned, in terms of, you know, the same interests as you, right? If it's about, you know, building value about, you know, increasing revenue, it's about increasing market share, you know, you got to really understand what are the motivations of the partner you have in China, I think that's a very important step, in terms of validating, you know, who is a good partner, doesn't matter, you know, if it's a JV or license, and, you know, for us, we do this model a lot, you know, on the pharma side, on the medtech side, so, we, you know, do not want to mess up, you know, this, you know, this kind of system that we built, so, our reputation is kind of the most important thing. So, that, you know, in some ways ensures that, you know, we're we want to keep this going and we're going to, you know, work well with others.
Jason Yao 29:32
As as a local player, I agree with both what you say is that reputation of the company and the trust between the partners are really important in these kinds of deals, in terms of the specific deal structures, because right now, you know, the the geopolitical tension and the policies that's developed within China, for example, in China for China policy. So for grandfather or what kind of Moving away from simply just licensing in the technology were more moving towards technology transfer. And that is definitely under, like I mentioned earlier, back to the IP conversation that because once we build up a relationship to that level, it's really our shared responsibilities to protect the product to protect the technologies within the Chinese market. And that way we can become more successful. And the other benefit of doing this kind of deal is that we can help the companies to tap into the Chinese manufacturing ecosystem, right. So eventually, that way now that they can probably significantly reduce the cost of your product and eventually make the product more competitive, even globally.
William Jin 30:54
Okay, thank you. So because today, I think we are talking about Chinese market, the opportunities, the challenges, and from different perspective from investors from multinational local operations from local players. So my last question will be, do you have any Do or do not suggestions for any of the overseas tech companies if they want to get into China?
Jason Yao 31:27
As infadoos, the first thing that came to my mind is make sure your foreign IP in China, that's really important.
Jimmy Jin 31:36
my point is that Doom and Doom is, is the same. So if you're mad tech company, your aim, your and your goal is to eventually sell yourself, please, please be very careful to select a Chinese partner. I'm saying, if you want to sell eventually sell your whole company to someone else. Right? If you're, it's your goal, it's your exit plan. Please do that be very careful to select Chinese partner, don't select a partner so they are his history or referral for friends. utility of the reputation, especially the size of the company, some of our company is a pure distributor, they really don't care about the contract, they say, they will agree with you every term, as long as as long as they don't pay you, you will agree with every term you will propose. And when it comes real, they will say, Yes, I sign, but you should give me money. At that time, you will have a trouble because you are. It's not just China, we also have one case, we are discussing acquisition of a global firm, they have a Chinese partner, we stuck in Chinese steel, because our Chinese China team say, if your deal out of China, just no deal. Right? If you don't have the deal, including China is a global company, we cannot acquire a car, we cannot acquire a company without China market. There is no deal, we do have the another case that we say no deal. So that's my that's my suggestion. So please, very careful to select a partner, don't rush, don't rush. And don't just trust the referral of a friend. Or you just say, Hey, you have been very experienced, the more experienced he is, The later you will have a more trouble because in China, and you're not very experienced.
Christopher Shen 33:38
I think that's like, you know, any partner you have anywhere in the world, right? I mean, if you pick a you know, venture investor and you don't properly diligence, that partner or the firm, you don't know how they act. I mean, they give you money now, but they put super onerous terms. As soon as things go bad, I mean, these things can happen. So you always have to do your due diligence, on on these types of things. thing I would really focus on is just, you know, know, you know, be open minded in terms of knowing, you know, the market opportunity and the challenges of entering new markets. It's not always going to be the same. I think, you know, my colleagues here, talked about this a little bit, but, you know, I would suggest if you can, you know, if you're really interested in the market over there in China, spend some time over there. You know, if you're working with physicians in the US see if they can introduce you to, you know, some of their colleagues in China, visit them understand the environment in which they work, types of patients, the patient flow, the training level, their facilities, all of that and you know, I mean, I think you'll get a lot of education just from understanding those pieces of it, but like my partner said here, you really want to just, you know, go in with eyes wide open.
William Jin 35:13
Okay, look at that guy. I also have some comments for do is, I suggest you guys, you must you do consider China market. If you don't consider China market. You our board members is going to ask you, I'm sitting several companies board in China medtech companies, I always ask what are your expansion plan for the world wide? So if you are US base or your base, you are board members is going to ask you, what are what is your plan for China market. So please do considering China market early enough, have your plan, the plan not has to be investment JV or whatever you can hands off, you can hands on. But you need to have a strategy. Do not is please do not underestimate the complication of Chinese healthcare system. Compared with us, China is totally different. There's 90% More than 90% hospitals belong to the government or the doctors or semi government employees. The system within the hospital, the treatment system, the diagnose system, the follow up system, totally different from Europe, from US. So do not underestimate the complication, the differences of the Chinese system. So that's my, you know, do and do not. So any other suggestions maybe helpful for the audience?
Christopher Shen 37:01
I would just say, you know, I feel really, you know, glad that there's been some good comparables that have, you know, been executed in the market in the last couple of years. If you look at, you know, publicly traded companies like Penumbra or Shockwave, right, they've done China deals, and they've, you know, they've done a, you know, license with local manufacturing, they've done a joint venture in the case of Shockwave. You know, Highlife did a deal with my friends company. I mean, so there, there have been some high profile deals have been done. And I think that's another thing, go, you know, talk to the CEOs of those companies understand what, you know, what thought processes they went through, to have negotiations. But, you know, and I think, to a large extent, those partnerships have gone very, very well. And so, you know, we're giving you a lot of watch outs and cautionary tales. But there are real opportunities out there. But like any opportunity, you know, you have to be very thoughtful about how you enter in there.
William Jin 38:12
Thank you. So it's a little bit challenging for us because we try to have a put in a nutshell, regarding China market opportunities and the challenges. But I think all panelists will be here for a minutes and if any questions we can continue to discuss or welcome to China to take a visit to understand the China market challenges and opportunities. So thank you very much. Thank you for the panelists, and thank you for the audience, your attention and your fine to the China market. Thank you
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