1、Building Bridges to Innovation CONFIDENTIAL AND PROPRIETARY Any use of this material without specific permission of McKinsey Press search; McKinsey analysis Key topic 3: Dedicated drug regulation 1 From To Key topic Key topic 1: Sharpening concept of “big health” Key topic 2: Enhanced BMI management

2、 Besides organizational changes in major healthcare government authorities marked by consolidation of decision making 1 2 3 4 5 6 1 Most functions except for NRCMS (New Rural Cooperative Medical system). 2 Function responsible for implementation of “WHO Framework Convention on Tobacco Control” 3 Occ

3、upational Safety and Health Supervision Management. 4 URBMI (Urban Resident Basic Medical Insurance) and UEBMI (Urban Employee Basic Medical Insurance). 5 NRCMS (New Rural Cooperative Medical system). 6 Management of medicine and healthcare service prices. 7 Medical Assistance 7 9McKinsey long term

4、impact remains to be seen (The NMPA) reform used to proceed at a very fast, even radical pace. After all these events, we do not see the reform going backward. Instead, we believe it will continue to take place, but in a more steady and thoughtful way. We are quite positive on that” GM interview SOU

5、RCE: CDE; press search; team analysis 1 National Medical Products Administration Supplementary CTA NDA 10McKinsey with high priced team analysis 13.7 15.2 13.0 15.1 0.8 17 0.9 2016 0.2 1.2 0.3 1.3 2018 Q1-Q3 14.8 16.8 10 yrs since 1st registration 5-10 yrs since 1st registration 93%91%86% Share of b

6、rands 10 years since 1st registration however, several key facts point to 2019 as potentially being the “year of reckoning” Mature brands continue to be essential to the performance of leading MNCs 12McKinsey press search; team analysis AS OF OCT 31 2018 13McKinsey Press search, team analysis, exper

7、t interview 4 2019 Building China and emerging market new BU 2017 Promoted China EVP, Leon Wang, to oversee international commercial business from China 2017 Relocated Asia Development Center from Singapore to Shanghai 2019 Reorganizing into three businesses with the leadership team of Established M

8、edicines business based in China 2017 Promoted China GM XuDong Yin to lead APMA business 14McKinsey press search, team analysis Transfer of talents from MNCs to Locals is also visible at mid level management, and will particularly impact Development, Medical and Access functions 15McKinsey office of

9、 United States Trade Representative; Press research Ongoing US-Sino dispute involves more than USD200 billion worth of China and US goods, which are subject to 5-25% additional tariff V.S US charge on ChinaChina charge on US USD34 bn (25% tariff) 818items incl. medical products1 USD16 bn (25% tariff

10、) 279items USD34 bn (25% tariff) 545items USD16 bn (25% tariff) 333items USD60 bn (5-10% tariff) 5,207items incl. medical products USD200 bn (from 10% to 25% by the end of 2018) Incl. illumination products, consumer goods First round Second round Third round 1 122 out of 1300 separate tariff lines i

11、nvolving biomedical products. 32 lines on medicinal chemicals, 38 on drugs or biological products, 52 on medical devices and related products 8 17McKinsey however, digital touch points become an essential pillar for customer engagement Talent war for biopharma companies is underway with continuing e

12、xpansion of Chinas pharma market and boom of innovation ecosystem Companies, especially MNCs, march toward innovative assets driven portfolio; however, aggressive reimbursement negotiation may erode value of innovation 1 Off patent originator GQCE and reimbursement reform exert pricing pressure on O

13、PO1products, creating more funding for innovation and overall shifting China toward a developed market profile Importance of China market likely to remain steady, driven by growing innovative business but offset by pressure on mature products 0102 030405 20McKinsey we expect to see OSD and IV for su

14、re, but not biosimilars in next 3 years Current 4+7 policy will push MNCs out of the market, which will be detrimental for China pharma industry. We expect government to make further changes along the way QCE is a good thing for China. But it will bring unprecedented challenge to MNCs GQCE progress

15、likely delayed given current status; Local manufacturers may face challenges in meeting GQCE quality bar 17 4.6 17 4.6 SOURCE: McKinsey 2018 Pharma MNC GM Survey 22McKinsey McKinsey analysis CDII scores China 2018 avg. = 5.0 China 2015 avg. = 4.02 B Funding for start-ups E Integration with global A

16、Policy environment 4.0 3.1 5.5 3.1 5.4 5.0 4.8 4.4 4.1 5.2 3.6 Market access Regulatory 2015=4.012018=5.01 China 2015 China 2018 Assumed US x.x x.x Key takeaways Significant growth in healthcare investment since 2015, with 2018 growth slowing down HKEX shaping up as new financing channel and exit op

17、tion for biotechs / investors CCapabilities R clear opportunity to increase differentiation In-licensing a key venue for Chinese biopharmacos to rapidly expand pipeline China increasingly attracting global talent Reform has made transformative progress (e.g., accelerating review and approval) and co

18、ntinues to catalyze biopharma innovation in China Reimbursement for innovative drugs improving; however clear gaps remain 0102468 4.6 29McKinsey China leading biotech CEO interviews; McKinsey analysis Effectiveness of drug review/ approval process Overall rating on China regulatory reform Score dist

19、ribution 14% 68% 18% Rating 60-85 2016 Rating 85 Rating 85% survey participants remain confident on mid-to-long term prospects of reform SOURCE: 2018 CDII Survey (n=109); China leading biotech CEO interviews; McKinsey analysis “ Q: Which of the following statement on the 3-year outlook of regulatory

20、 reform resonates most with you? Regulatory reform policies in China are becoming more targeted and effective, in both drug approval and post-launch regulations. I think joining the ICH will further help China adopt international regulatory practices. In the long run It will bring more opportunities

21、 to drug companies “No doubt that the reform will continue, despite some short term uncertainties not necessarily headwind for industry, actually giving some time to better adjust and implement A POLICY ENVIRONMENT 34McKinsey McKinsey analysis Clear progress has been made in improving reimbursement

22、over past few years yet questions remain around coverage of public insurance, provincial implementation, and economic implications What kind of innovative drugs are more likely to be reimbursed? How will provincial authorities implement reimbursement updates? (e.g., hospital expense cap, oncology dr

23、ugs out of stock in many hospitals) Single national payor State Medical Insurance Administration was set up in May 2018 What are the economic implications to innovative pharmacos? How quickly can new drugs be included? Emergence of private payors like Ping An, Taikang, and MNC insurance companies Ch

24、ina 2015 China 2018 Assumed US x.x x.x 3.1 0102468 4.0 2015=4.012018=5.01 A POLICY ENVIRONMENT 35McKinsey McKinsey analysis Level of ease for Chinese biotechs to finance through following channels? (1=most difficult; 10=easiest) China 2018 avg. = 5.4China 2015 avg. = 4.6 0102468 3.52.9 6.45.9 6.55.1

25、 5.85.1 5.0 4.9 2015=4.012018=5.01 China 2015 China 2018 Assumed US x.x x.x VC and PE investments have seen significant surge while other sources have stayed on par B FUNDING FOR BIOTECHS 36McKinsey Nasdaq; Bloomberg; press search Potential near term IPOs (submitted prospectus to list on HKEX unless

26、 otherwise mentioned) Full service CRO FrontageHansoh Pharma Focusing on apoptosis, targeted small mol. therapeutics Ascentage Biotech company focusing on antimicrobial therapeutics MicuRx Vaccines company Cansino Bio Drug discovery platform Viva Biotech HKEX3SZSE2NASDAQNEEQ1 NOT EXHAUSTIVE 1 Nation

27、al Equities Exchange and Quotations; 新三板2 Shenzhen Stock Exchange 3 Hong Kong Stock Exchange Beyond Spring Raised USD54M 2017.32018.8 Ascletis Pharma Raised USD400M Listed on NEEQ in 2015; submitted prospectus to list on HKEX 2015.6 Junshi Biosciences 2017.6 WuXi Biologics Raised USD511M BeiGene Rai

28、sed USD760M Also listed on NASDAQ in 2016 2016.11 Betta Pharma Raised USD106M Raised USD150M 2017.9 Zai Lab Raised USD400M Innovent 2018.9 Hua Medicine Raised USD110M 2018.102018.8 China biopharma focusing on Oncology, Psychotropic, Antidiabetic, etc. B FUNDING FOR BIOTECHS 38McKinsey team analysis

29、Level of agreement to each statement (percentage) Statement Key takeaways Majority of industry experts remain optimistic on outlook of HKEX in becoming one of preferred financing channels for biotechs Going forward more emphasis put on quality of biotechs assets (e.g., addressing meaningful unmet ne

30、eds, high differentiation) In addition, more specialized investor expertise needed (e.g., equity analyst with deep biotech expertise) to conduct evidence-based rigorous value assessment Assessment of biotechs listed on or in process of filing for HKEX HKEXs position B FUNDING FOR BIOTECHS 39McKinsey

31、 team analysis Quality of R quality of R China leading biotech CEO interviews; McKinsey analysis China 2015 avg.3= 4.1 China 2018 avg.3= 4.4 PI2 CRO2 Sponsor2 Discovery research Clinical development2 0246810 4.23.8 4.54.3 4.4 4.2 5.4 4.9 Clinical development capability and capacity is a key pain poi

32、nt for whole industry, especially for early stage “ Still very few true innovation in China. The only recent example is the Ebola vaccine “Hard to catch up with the U.S. in the next 5 years, as they have invested much more into R CFDA; McKinsey analysis # of innovative assets1from local pharmacos2,

33、# of molecules 1 Innovative assets include Chem 1 (and Chem 1.1) and Bio 1 class molecules 2 As of 31st Oct, 2018 +8% +38% +77% +65% CAGR 15-18xx% D LOCAL INNOVATION OUTPUT 42McKinsey CFDA; EvaluatePharma; Press search; McKinsey analysis NON-EXHANSTIVE D LOCAL INNOVATION OUTPUT 43McKinsey Press sear

34、ch; McKinsey analysis 1 Glucokinase D LOCAL INNOVATION OUTPUT 44McKinsey ChinaBio 2018 Report; McKinsey analysis 1 CDII overall average score across all metrics 2 Cross-border contribution tested as a combined metric in 2015 Chinas ability in attracting/retaining global talent China 2015 score2= 3.6

35、 China 2018 avg. = 5.2 0246810 3.9 5.8 5.8 2015=4.012018=5.01 China 2015 China 2018 Assumed US x.x x.x E INTEGRATION INTO GLOBAL 45McKinsey Press search; McKinsey analysis OUTSIDE-IN PERSPECTIVE Ivosidenib Selinexor, Eltanexor, Verdinexor, KPT-9274 FGF401 Neratinib HLX02 NON-EXHAUSTIVE SHR0302 SHR14

36、59, SHR1266 (BTKi) REMD-288 REMD-290 Cross-board collaboration becoming one of the key sources of China innovative pipelines A significant surge of licensing deals in 2018 by 47% compared to 2017 China companies start to export innovation, though not yet reaching the scale of in-licensing 1 As of 20

37、18/10/31 Selected highlights of 2018 licensing deals ETX2514 E INTEGRATION INTO GLOBAL 46McKinsey however future momentum could be overshadowed by looming Sino-US trade tension As the Sino-US trade conflict escalates, you will expect SOURCE: 2018 CDII Survey (n=109); team analysis 1 Include response

38、s from CEO/Founder, Senior mgmt./investor and Middle mgmt./investor (n=93) 2 Include responses from CEO/Founder, Senior mgmt./investor and scholars (n=86) Fewer in- licensing deals from US to China1 Other markets (e.g., Europe) more favored by investors1 Researchers and talent exchange less active2

39、63%67%64% E % of agreement INTEGRATION INTO GLOBAL 47McKinsey team analysis 0.5 1.1 1.5 2.5 201820151617 Deal value USD bn New records set in 2018 for biotech fundraising, including Brii Biosciences (USD260m in initial round), CStone (USD260m in series B), and I-Mab (USD220m in series C), etc. Total

40、 funding raised by biotech has skyrocketed1 USD260min series B USD157min series B Selected top deals in 2018 USD150min series C USD260min initial funding round USD220m largest series C in China USD150min series E 1 Includes China-based biotech companies only and does not include traditional pharma c

41、ompanies with innovation pipelines. Data as of Oct 2018. 50McKinsey although biotech has not been targeted thus far DVC deals completed in the U.S. USD bn 52McKinsey CFDA; Press search; Team analysis 8 13 18 8 8 8 8 8 11 17 12 28 36 23 49 67 95 2015 6 6 7 5 3 1617 140 6 6 2018 Oct 67 59 +45% p.a. 3

42、3 3 3 3 4 8 10 13 Others3 PI3K ADC EGFR 53 PD-1/PD-L1 Oncology CDK4/6 HER-2 PARP FLT3 VEGF 103 Oncology Anti-infectives Blood CNS Alimentary Others2 Innovative1assets approved for CTA by local players, # of molecules 1 Innovative assets are defined as Chem 1 (or 1.1 for 2007 classification) and Bio

43、1 drugs 2 Other TAs including: systemic hormones, sensory, musculo-skeletal, CVS, dermatology, respiratory, various, and undisclosed TAs 3 Based on WHO ATC classification where L01 (and some of L02/03) is defined as oncology 4 Based on the total number of CTAs approved by molecules from 2017 to 2018

44、 Oct 5 Other MoAs including: c-MET, MEK, CAR-T, CD47, CDK9, HDAC, Topo I, ALK, Bcl-2/Bcl-XL, OX40, Src, MDM2, BTK, EpCAM/CD3, CD20, mTOR, NOD2, IL12, uPA, IAP, IDO, HER-3, and undisclosed MoAs Oncology assets3approved for CTA by MoAs4, # of molecules Share of oncology asset, % 34524861 53McKinsey Pr

45、ess search; Company websites; McKinsey analysis 1 Defined as Chem 1 and Bio 1 drug class 2 As of 2018/10/25 54McKinsey Clinicaltrials.gov; Press search; Company websites; McKinsey analysis NON EXHAUSTIVE SELECTED EXAMPLES 88 82 170 Developed in China only Developed in China and other countries 1 Com

46、pany headquarters located in China, data based on estimation in Pharmaprojects as of Oct. 31st, 2018 Including US, Australia, and New Zealand 1+trials 23+trials for 5 assets Including US, UK, France, Italy, Australia, Japan, and Korea Including US and Australia 5+trials for 3 assets Including US, Ta

47、iwan, and Singapore 2+trials for 1 asset 55McKinsey overtime expand to FIC/BIC A B Level of innovation Time Generics Incremental innovation (Me-too/Me- better) Break- through innovation (FIC/BIC1) BA Diseases have not been eradicated or are without appropriate medical solutions Affordability barrier

48、s hindering broad adoption of innovative therapies A B 1 First in class / Best in class 56McKinsey Institute for Health Metrics and Evaluation; press search; Literature search 1 Including chemical/biologics oncology drugs 2 Take into account of PAP (Patient Assistance Program) 3 Assume 30% of househ

49、old income spends on healthcare xx 15-30 CAGR, % High-value oncology drugs1available as targeted therapy choices NRDL negotiation BeforeAfter Each patients out-of- pocket cost2per year treatment 150-200K RMB40-60K RMB High and growing in disease burden across chronic and life- threatening diseases Accessibility remains challenging despite recent reimbursement improvements Diabetes prevalence, Mn CVD prevalence, Mn All cancer incidence, Mn 106 131 20152030 1.5% 263 345 High and growing disease burden in China 4 6 2