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In 2022, China's total international trade exports of raw materials reached 51.79 billion US dollars, occupying a pivotal position in the global raw material drug market and serving as a "ballast stone" for the internationalization of China's pharmaceutical industry

On December 6, 2022, Kangfang Biotechnology announced that it had reached an overseas equity authorization transaction cooperation with Summit Company for AK112 (PD-1/VEGF bispecific antibody) with a down payment of 500 million US dollars and a total amount of up to 5 billion US dollars, setting a new record for overseas authorization of domestic innovative drugs

In recent years, as Chinese enterprises in the three tracks of raw materials, generic drugs, and innovative drugs have fully utilized their own advantages and actively laid out international development, the era of local pharmaceutical enterprises collectively going global has arrived.

In recent years, the international competitiveness of Chinese pharmaceutical enterprises has greatly improved. Enterprises in the three tracks of raw materials, generic drugs, and innovative drugs have shown their respective strengths on the road to international trade, pursuing their respective star seas.

From the perspective of segmented industries, the overseas mode of API companies is relatively simple. As long as the products are compliant and cost-effective, and have obtained international certification, foreign pharmaceutical companies will actively come to seek cooperation.

Compared to generic and innovative drugs, local raw material drug companies started their journey overseas the earliest. Since Haizheng Pharmaceutical obtained its first FDA certificate from the United States in 1992, Chinese enterprises have successively obtained international trade market passes and gradually entered the high-end raw material drug market abroad. After years of development, local enterprises have now undertaken about one-third of the global raw material supply. According to statistics from the China Chamber of Commerce for Import and Export of Medical and Health Products, the total export volume of raw materials in China reached 51.79 billion US dollars in 2022 (see table for details), occupying a pivotal position in the global raw material drug market and serving as a "ballast stone" for the international development of China's pharmaceutical industry.

In terms of generic drugs, since conducting quality and efficacy consistency evaluations and centralized procurement of generic drugs, China's generic drugs have entered a period of rapid development in the European and American markets. According to BCG (Boston Consulting), in 2021, the average overseas revenue of international leading pharmaceutical enterprises will account for more than 60%, while Fosun Pharmaceutical, which has the highest proportion of overseas revenue of Chinese pharmaceutical enterprises, will only account for 35% (including cash flow from overseas acquisitions and overseas sales of COVID-19 vaccine). In addition, at present, the pharmaceutical products exported by Chinese pharmaceutical enterprises are mainly hormones, heparin, antibacterial drugs, artemisinin, etc., which reflects the weak core competitiveness of Chinese pharmaceutical products going overseas. It can be seen that the international market influence of Chinese pharmaceutical companies in the field of pharmaceutical preparations still needs to be further improved.

In the field of innovative drugs, in 2006, Microchip Biotech transferred the overseas equity of Xidabenzamine to Shanghai Asia Biotech for $28 million, achieving a "zero breakthrough" in the export of innovative drugs in China. In 2017, China's drug regulatory authorities joined the International Committee for the Coordination of Human Drug Registration Technology (ICH), promoting the integration of China's drug regulatory system with international standards and greatly accelerating the pace of innovative drugs going global. Public information shows that in recent years, the number of innovative drugs launched in China in the form of License out has rapidly increased. On December 6, 2022, Kangfang Biotechnology announced that it would grant Summit an exclusive license to develop and commercialize Ivosi in the United States, Europe, Japan, and Canada with a down payment of $500 million and a total amount of up to $5 billion. This cooperation has once again set a new record for overseas authorization of domestic innovative drugs, both in terms of down payment and total amount. The independent development of innovative drugs in China has already started, and the future is promising.

Overall, significant progress has been made in the internationalization of China's pharmaceutical industry, but it is still at the mid to low end of the value chain in terms of international division of labor. The prospects for the internationalization of China's pharmaceutical industry in the future are bright, but there is still a long way to go.

International development faces multiple challenges

Currently, in the context of globalization, the internationalization development of Chinese pharmaceutical enterprises still faces many challenges.

International pharmaceutical regulatory cooperation and collaboration need to be strengthened

In recent years, China's pharmaceutical industry chain has been continuously extended, industrial cooperation has evolved in depth, new formats such as MAH and CDMO have flourished, and the pharmaceutical regulatory environment has undergone profound changes, greatly increasing the difficulty of regulation. China's drug regulatory authorities officially joined ICH in 2017, but the current drug regulatory system is still on the way to align with international standards in product approval, standard management, inspection, testing, and certification. In addition, China's drug regulatory authorities have not officially joined the Drug Inspection Cooperation Program (PIC/S), and GMP standards have not been recognized by more standardized markets. In this situation, overseas pharmaceutical companies must repeatedly invest in certification, which consumes a lot of funds and time.

The level of internationalization awareness needs to be improved

Internationalization is a systematic concept with rich connotations, including internationalization of research and development, production, sales, talent, and supply chain. Once an enterprise determines its internationalization development goals, it must maintain strategic focus and adhere to long-term investment. It not only requires investment in funds and talent cultivation, but also requires time and experience accumulation. Many enterprises that have achieved international development achievements have gone through years of exploration and accumulation, making it difficult at first. However, once they achieve development results, their sustainability and stability are relatively strong. At present, China's pharmaceutical enterprises still need to improve their understanding of international development. They need to abandon the short-term thinking of "investing today and reaping tomorrow" and establish a correct understanding of international development.

International market access and marketing network construction capabilities need to be improved

The pharmaceutical industry is closely related to human life and health, and is a highly regulated industry. Enterprises going overseas first face the issue of international trade market access. In terms of registration documents, professional talent accumulation, and achievements in international access, China still has a significant gap with its main competitor India. In terms of overseas marketing network construction, China also lags behind India. Taking Africa as an example, Indian pharmaceutical companies have established a large number of branches and established comprehensive sales networks in Africa, such as Ajanta having branches in 19 African countries; Strides has sales teams in over 40 African countries. In addition, many Indians have established pharmaceutical wholesale enterprises, retail pharmacies, hospitals and clinics in Africa. It can be said that in the pharmaceutical ecosystem of Africa, Indian enterprises are ubiquitous and have formed a layout and synergy of the entire industry ecosystem.

Innovation ability and brand influence need to be improved

The layout of international development means facing fierce global competition, which puts higher demands on pharmaceutical enterprises. The raw materials and pharmaceutical intermediates are close to the chemical industry, and the brand adhesion is weak; The preparation products are mainly entrusted processing and original equipment manufacturer. Most enterprises have obtained the approval of foreign generic drugs and the GMP certification of their preparation production lines in Europe and America, but only a few enterprises have realized the standardized marketing of their own brand products in the true sense; There are few original new drugs, and the independent development of innovative drugs faces great challenges... It can be said that insufficient innovation and low brand added value are the weaknesses of China's pharmaceutical enterprises' international development. The pharmaceutical innovation ability and brand influence need to be improved.

Internationalized talent resources urgently need to be developed

Developing international talent resources is a practical problem that Chinese pharmaceutical enterprises must face when going overseas. At present, some pharmaceutical companies have gradually realized the importance of talent internationalization and have carried out a series of institutional reforms and beneficial explorations in the development and use of talent resources. However, they have not yet truly considered the issue of talent resource construction from the perspective of global economic development. This has led to a general lack of international professionals in China's pharmaceutical enterprises who are familiar with the industry, possess strategic thinking, international vision, and cross-cultural operational abilities, and are familiar with the "rules of the game" of the international economy.

Improve internationalization level through multiple approaches

Faced with multiple challenges, China's drug regulatory authorities, pharmaceutical enterprises, and third-party institutions need to collaborate and implement precise policies to help the international development level of the pharmaceutical industry rapidly improve.

Continue to promote the integration of standards and regulations with international standards, and further integrate into the international pharmaceutical regulatory system

Regulatory internationalization is an important guarantee and necessary condition for enterprise internationalization. Relevant departments should actively participate in the negotiation of international pharmaceutical standards, with joining relevant international mutual recognition institutions as the entry point, establishing an integrated regulatory coordination mechanism, and participating in and influencing the formulation and implementation of international mainstream pharmaceutical regulatory norms. At the same time, strengthen the exchange of drug regulatory certification policies and technologies with countries and regions along the "the Belt and Road", gradually realize the sharing and mutual recognition of clinical trial data, inspection standards and results, and accelerate the promotion of the listing and clinical use of innovative drugs in countries and regions along the "the Belt and Road".

Strengthen top-level design to support pharmaceutical enterprises' 'going global'

In order to promote the high-quality development of the pharmaceutical industry and actively help enterprises "go global", relevant departments can consider giving some funds to feed domestic enterprises to develop outward, build public service platforms, help solve common problems faced by enterprises "going global", encourage and support local enterprises to explore overseas emerging markets such as countries and regions along the "the Belt and Road", so as to achieve sound development of domestic and international double cycles. At the same time, encourage enterprises within or across industries to form overseas alliances, gather advantages such as capital, technology, production capacity, logistics, and talent, and systematically explore international trade overseas markets, in order to better establish the overall brand image of Chinese pharmaceutical enterprises.

Enhance the internationalization layout level and global resource integration ability of the entire industrial chain

On the one hand, support domestic pharmaceutical enterprises with strength to strengthen the division of labor and cooperation throughout the entire industry chain through direct investment, overseas mergers and acquisitions, strategic alliances, and other means, drive the coordinated development of upstream, downstream, and related industries, expand enterprise scale, reduce market risks, and obtain international pharmaceutical product production, manufacturing, and registration platforms; On the other hand, we adhere to the equal emphasis on "bringing in" and "going out", and use the vast domestic market to attract high-end technology and overseas excellent enterprises to join China's pharmaceutical industry chain cluster. Chinese pharmaceutical enterprises actively participate in the construction of pharmaceutical industry chains in relevant countries and regions, and actively integrate into the global pharmaceutical industry chain.

Strengthen the construction of enterprise R&D capabilities and attach importance to the cultivation of international talents

The relevant national departments provide strong support to domestic pharmaceutical enterprises in terms of policies and funding, encourage them to increase innovation and research and development efforts, promote product development towards segmented categories with complex structures and high added value, and achieve reasonable pricing of payment terminals, opening up the entire industry chain closed-loop from research and development to pricing of innovative drugs. At the same time, strengthening basic scientific research and talent cultivation, expanding talent introduction channels, and providing policy support for enterprises to introduce and train international talents; Further relax the restrictions on settling overseas talents and create conditions for foreign high-level and cutting-edge technical talents to work in China.

Fully leverage the role of third-party intermediary organizations

Encourage the cultivation of third-party service institution ecosystems that support the international development of pharmaceutical enterprises, and provide support services for pharmaceutical enterprises' 'going global'. Fully leverage the professional advantages of third-party service institutions to provide policy consultation and technical training for enterprises in registration, certification, market access, etc; Efforts will be made to create a professional public service platform for pharmaceutical intellectual property rights, technology transfer, and other aspects, promoting deep exchanges and cooperation among pharmaceutical enterprises in product introduction, contract customization, joint research and development, and international mergers and acquisitions.