Under the new policy tilt, how can MNCs increase their investment in China?

On August 13th, the State Council issued the "Opinions on Further Optimizing the Foreign Investment Environment and Increasing the Attractiveness of Foreign Investment" (hereinafter referred to as the "Opinions"). It mentioned the need to better coordinate the domestic and international situations, create a market-oriented, rule-of-law, and international first-class business environment, fully leverage the advantages of China's large-scale market, and attract and utilize foreign investment with greater efforts and effectiveness.

Many provisions in the "Opinions" have positive implications for the development of the biopharmaceutical industry. Specific provisions include: accelerating the landing and production of foreign-invested projects in the biopharmaceutical field, encouraging foreign-invested enterprises to conduct clinical trials of cell and gene therapy drugs that have been marketed overseas in accordance with relevant laws and regulations, and optimizing the application procedures for the registration of pharmaceutical products produced overseas and transferred to the domestic market.

The "Opinions" repeatedly mention the biopharmaceutical field and continuously strengthen the patent protection for drugs and medical consumables, aiming to provide a better environment for the development of foreign companies in China. In fact, the participation of foreign investors provides essential capital flow for the development of China's pharmaceutical industry and has a catalytic effect, improving the quality of domestic innovative drugs. In the first half of this year, several multinational corporations have increased their investment in China, promoting the development of the domestic biopharmaceutical industry.

AstraZeneca

AstraZeneca has been developing in China for 30 years, constantly increasing investment and building an efficient supply network. Last year, AstraZeneca added a new production line in Taizhou, with an expected annual output value of over 10 billion RMB. In March 2023, AstraZeneca established a new production and supply base for Bevespi Aerosphere (pMDI) in Qingdao, with a total investment of approximately 450 million USD.

After the release of the "Opinions," AstraZeneca further increased its investment in production and supply bases within a week. On August 14th, AstraZeneca signed a memorandum of cooperation and investment for the expansion of Phase II of the new production base with the High-tech Industrial Development Zone in Qingdao. According to the agreement, AstraZeneca will invest an additional 250 million USD in the pMDI production and supply base, further expanding its capacity for canning production and adding new inhalation aerosol packaging production lines to further increase production capacity.

On August 18th, the two parties officially signed a strategic development agreement for the production and supply base in Wuxi. AstraZeneca will accelerate the introduction of a new production line for Zirabev (zirconium sodium silicate granules), a drug for hyperkalemia, and complete the global production integration of the small molecule injection digestive drug Nexium (esomeprazole) by 2024. The estimated annual output value of these two products after reaching full production is expected to be 3.5 billion RMB.

On August 16th, AstraZeneca signed an investment cooperation memorandum with the Taizhou Pharmaceutical Industry Park, planning to increase capital to expand the production and supply base in Taizhou. This includes the construction of a new production line for Andajian (dapagliflozin sustained-release tablets) for diabetes, aiming to further expand production capacity and make Taizhou a global production base for AstraZeneca's diabetes products.

The Chinese market has always been AstraZeneca's second-largest market globally and an important engine for its development. In the first half of 2023, AstraZeneca's revenue in China reached 3.043 billion USD, a year-on-year increase of 9%.

Sanofi

For Sanofi, China is the world's second-largest market after the United States. In 2022, Sanofi's sales in China reached 3.12 billion euros (3.37 billion USD), a year-on-year increase of 6.2%.

In June this year, Sanofi's type 2 diabetes treatment drug Lyxumia (lixisenatide injection) was officially launched in China. Lyxumia will be produced at Sanofi's production base in Beijing, which is the largest injectables production base in the Asia-Pacific region. Pascal Soriot, CEO of Sanofi Greater China, promised to invest hundreds of millions of RMB to expand the factory's capacity to support the supply of Lyxumia.

For over a decade, Sanofi has been increasing its research and development investment in the Chinese market. The company established a global R&D operational center in Chengdu in 2018 and the Sanofi China Research Institute in Suzhou in 2021, focusing on basic research and drug development to meet medical needs in relevant fields, with a focus on cutting-edge biological research.

At the end of 2021, the Great Bay Area International Vaccine Innovation Center in Shenzhen was completed. Through its layout in the Greater Bay Area, Sanofi aims to further build an innovative upgrade of the vaccine industry's entire value chain. In addition, Sanofi will continue to increase investment in production bases. In addition to the Beijing production base, the Hangzhou production base is expected to invest 220 million RMB in the future to further improve drug production line capacity.

Sanofi has brought over 40 high-quality drugs in the fields of chronic diseases, specialty drugs, vaccines, and consumer health to China and will further accelerate localization innovation in the future.

Moderna

Moderna was founded in 2010 and went public on the NASDAQ in the United States in 2018. The company is headquartered in Cambridge, Massachusetts. Moderna focuses on mRNA drug development and, along with Germany's BioNTech, is considered one of the world's two pioneers in mRNA vaccines. Moderna's COVID-19 vaccine skyrocketed the company's market value to hundreds of billions of dollars, making it a superstar in the industry. Under Moderna's influence, the global biomedical industry's enthusiasm for the development of mRNA vaccines and related technologies has reached an unprecedented level.

However, due to a significant decline in demand for COVID-19 vaccines, Moderna predicted a possible loss in performance in 2023. Against this backdrop, companies, including Moderna, are seeking growth opportunities in the next phase, and investment in the Chinese market will become an important strategic development layout for them.

In May 2023, Moderna registered a biotechnology company in China named Meidena (China) Biotechnology Co., Ltd., with a registered capital of 100 million USD. Christoph Brackmann, the CFO of Moderna, serves as the legal representative of the company.

In April this year, Moderna's CEO Stéphane Bancel visited China quietly. During his speech in Shanghai, he mentioned accelerating investment and collaboration with Chinese partners in research, development, and production. Meidena may be an expression of Moderna's investment plans taking root.

Currently, Moderna has a combined vaccine for COVID-19 and influenza in early-stage clinical trials. Another vaccine to prevent influenza and RSV is also in early stages of clinical development. Moderna is also developing a three-in-one vaccine that can simultaneously target COVID-19, influenza, and RSV.

The current world landscape is undergoing unprecedented changes, and as the China-US trade war escalates, the domestic biopharmaceutical industry is also affected. Against the backdrop of uncertain prospects for China-US trade disputes, China must vigorously support the development of domestic pharmaceutical companies to tap into the long-term value of the domestic market. Attracting foreign investment is one of the core tasks of local governments in 2023. For the domestic biopharmaceutical industry, actively attracting foreign investors will clearly promote industry development.

References:

Opinions on Further Optimizing the Foreign Investment Environment and Increasing Foreign Investment Attraction (published on the official website of the Chinese government)

China Daily news website

Caijing Health ("Industry Observation | From Tentative Exploration to Increased Layout, the Path of Multinational Pharmaceutical Companies in China")

"The Influence of Utilizing Foreign Investment on China's Pharmaceutical Industry" by Liu Xue, Chen Wenxuan, et al.