China's $20 Billion Diabetes market by 2025?

Is China looking to expand into the Global Life Sciences market or service its core internal market only?

November 2017

China's $20 Billion Diabetes market by 2025?

With several Chinese firms said to be poised in buying Johnson & Johnson’s diabetes businesses which include LifeScan, insulin pump business Animas, and the insulin pen business Calibra, it poses the question; Is China looking to expand into the Global Life Sciences market or service its core internal market only?


In recent years China has increased its investment in drug innovation, both in basic academic research and in industry research and development. To give this context, China’s pharmaceutical market is the third largest worldwide, behind only the US and Japan, generating $86 billion in 2017.


So why the investments? China is increasingly facing mounting medical needs as it is estimated that there are more than 700,000 new cases of lung cancer diagnosed each year on top of the ever-increasing number of Diabetic patients that currently sits at 114 million nationwide. These numbers are large, but let’s not forget the ageing population that only has one child per family to support them will continue to place a strain on medical goods and services sectors.


George Lin, the chief financial officer of Hua Medicine, a diabetes-focused drug developer, told Reuters last week that, ”the market right now in the world is already close to $50 billion,” referring to diabetes drugs. “In China, it is expected to grow from $6.6 billion in 2016 to $20 billion by 2025. This is a very large, fast-growing market.”

China’s pharmaceutical market is the third largest worldwide, behind only the US and Japan, generating $86 billion in 2017.


Analysts with knowledge of the Chinese market have stated that Asian buyers may be able to squeeze more out of the struggling Johnson & Johnson assets. “Could a Chinese company extract more value from this than a multinational? It’s possible because they have different expectations of profitability than multinationals so they can be happy with lower margins,” said Franck Le Deu, Hong Kong-based senior partner at consultancy McKinsey.


Another indication that investment is at the forefront of the Chinese Life Sciences Sector was with the announcement by Shanghai Pharmaceuticals Holding Co Ltd on Friday with plans to sell HK$3.13 billion ($400 million) worth of new shares to fund the development of its manufacturing and distribution businesses.


Where should those investment dollars end up? Firstly, you need to look at the bigger picture of where the talent is coming from. R&D talent can be broken down into three groups or pools. One is technical talent; China has a great talent pool and this group’s learning ability and implementation skills are second to none. The second is a very shallow pool, it is the “Leaders”. Returnees versus Homegrown? Both have their deficiencies, one has gained experience working in the local market conditions while the other has overseas experience. The third pool is CEOs. Currently, this group lacks talent in the biotech and pharmaceutical environment, which reflects the relatively short history of the industry in China compared with the more mature markets of Europe and the United States.


Considering the publishing activities of leading researchers and scientists, it is clear that China’s current strengths lay with its fundamental research capabilities. Chinese scientists are published in leading journals such as NatureScience or Cell, although those publications are mostly about nonhuman fundamental research. This leads us to where the gap is clearer to define, which is within the world of Clinical Research. China lags behind European and Americans whose works are published in far greater amounts in the New England Journal of Medicine and the Lancet then those written by Chinese authors. 


Soon it will be 16th February and the Chinese Lunar New Year will be upon us and we enter the Year of the Dog. According to the Chinese Zodiac, when people are born in the year of the Dog they are considered to be conservative and full of justice. It is because of their loyalty, “Dogs” are valued in the workplace. They rarely break rules, except for people important to them. In life, they only wish to live quietly with their family. Will this be a reflection of the year ahead?


As I finish this, it has been reported by Reuters today (23rd January) that Sinocare Inc are in preliminary talks with Johnson & Johnson’s diabetes businesses on a potential deal worth up to $4 billion. Sinocare who develop and manufacture blood sugar monitoring systems has said in a stock exchange filing that it had hired advisers to study the structure and pricing of a potential transaction. Is this the beginning of a stronger internally focused China meeting the needs of its people or a strategic plan to expand into the Global market at a lower price point?