Bo YU: The Healthy Development of Pharmaceutical Industry Relies on Strict Management
Bo YU (Exclusive Interview): The Healthy Development of Industry Relies on Strict Management
Pharmaceuticals Investment Weekly: Currently the environment of Chinese medicine and health field is complex. The rapid expansion of market capacity and fast industry growth result from huge market potential and health demands. Meanwhile, the new medical reform policies such as bidding, reduction of drug price, limitation on health insurance reimbursement, etc. exert a negative impact on the industry. Are you optimistic about the development of the Chinese medicine and health field in 2013? Why?
Bo YU: The medicine and health industry will definitely enjoy good prospect and huge development space in view of the aging of population, urbanization, natural growth of population, change of disease spectrum and great benefit from consumption upgrading. The needs of medical market will be tripled in the next ten years.
Pharmaceuticals Investment Weekly: You ever said: “The investment in medical industry is like swimming in deep water. The expertise in this area is required.” Does this refer to the particularity of policy environment of medicine industry or the professionalism of medicine industry? How do you evaluate the current policy environment of domestic medicine industry? Which policy do you think exert the greatest influence on the industry?
Bo YU: The influence of policy is certainly of most importance. Currently many policies are considered to bring negative effects to this industry. However, I think that the strict industry management will be beneficial to the healthy development of this industry.
All of the following trends such as the strict regulations on market access and drug registration, standardization of the orders of production and circulation, promoting the optimization, upgrading and technical progress of medicine industry, development of modern logistics and chain operation and accelerating the integration of pharmaceutical production and circulation enterprises constitutes the overall situation of medicine industry. The policies on medical reform will result in the shuffling and integration of medicine production, circulation and medical service industry chain.
At present, the domestic medicine industry features low concentration rate. The small enterprises will be quickly eliminated, and the brand and product advantages will be crucial.
Pharmaceuticals Investment Weekly: The development of subdivided trades is varied in the recent years. Some are under management by painstaking efforts due to the adverse impact brought by policies, while some are booming owing to favorable policies. Which segment do you think is most promising? Why?
Bo YU: First, the traditional Chinese medicine is the most valuable field. It has better effects than western medicine in some therapeutic areas. At present, the imitation of traditional Chinese medicine is not supported by policies. Less and less applications for the imitation of traditional Chinese medicine are approved year by year. Considering the exclusive status, the unique variety covered by medical insurance and the few manufacturers of some essential medicines will have particularly high investment value. The manufacturers of Chinese medicine decoction pieces and Chinese patent medicine with monopoly of upstream resources such as the enterprises with GAP geo-authentic crude drug planting base, or the drug planting base with breeding capacity possess investment value.
The chemical drugs also have investment opportunities, for instance, the manufacturers of characteristic BPC with strong ability of imitation and rush registration (high gross margin and high added-value); the certified BPC exporters that undertake international industrial transfer; preparations manufacturing enterprises with good variety structure and strong marketing capacity; base medicine manufacturers with cost advantage, scale advantage and quality advantage.
The bio-pharmaceutical is a hot investment area. With the higher difficulty in innovation of small molecule drugs, the macromolecular drugs drawing more attention of investors. In addition, the monoclonal antibody, vaccine and blood product industry have great investment value.
There are also investment chances in the field of IVD. From the aspect of market scale, the domestic IVD market still enjoys large development space. The compound growth rate will be higher than 22% in the next few years. Compared with drugs, IVD has the advantages of fast innovation and short registration process. Moreover, a large number of small enterprises in this industry provide favorable conditions for industry M&A integration. The manufacturers of high-end diagnostic reagents which can be substituted for imported products, the enterprises with strong research capacity and new product development ability, the one with advantageous channels and the manufacturers of IVD reagents including instruments and reagents have investment value.
Other subdivided fields such as medical service, medical equipment, pharmaceutical adjuvant, pharmaceutical equipment, pharmaceutical circulation and chain drugstores are worthy of investment.
Pharmaceuticals Investment Weekly: CEO of China Association of Enterprises with Foreign Investment R&D-based Pharmaceutical Association Committee Joseph Cho said that he did not suggest investment in biological medicine due to unfavorable policies in the field of Chinese biological medicine. The investment may be lost for the intellectual property protection for new methods and products are unavailable at present. How do you think?
Bo YU: His comment on the domestic situation makes sense in some aspect. However, the investment in biological medicine is a long process. The problems that he raised will be greatly improved in a period. In my opinion, the policy conditions for biological medicine are not so bad.
Pharmaceuticals Investment Weekly: The field of medical devices is comparatively more popular with investors. But, someone put forward that although it is hot now, few enterprises in this domain can achieve large-scale development due to strong substitutability. How do you think?
Bo YU: Currently, the imported products take a leading role in the field of high-end medical devices, while the home-made medical devices are still innovative fields with many innovation opportunities. Thus, we have made a decision on VC in this field.
The field of medical devices features fast grading and emergence of new technology and new breakthrough. Meanwhile, the registration period of medical devices is short, so it is not easy to realize market exclusivity. Currently, there are few large-scale medical device enterprises, but some special fields such as orthopedics and traumatology, high-value consumable and heart stent have large development space.
Pharmaceuticals Investment Weekly: After overheated investment, the risk follows. Currently, does overheated investment exist in the medicine and health field? What kind of risks are there?
Bo YU: At present, almost all investment companies make a big investment in this field. Based on the investment situation in the past three years, it is relatively overheated. Thus, I recommend the professional investment in accordance with the value formation rules.
Pharmaceuticals Investment Weekly: May you share a classic investment case and your suggestions on investment? What factors do you consider when making an investment, for example, sub-industry, advanced technology, leaders or teams? How do you think about the importance of these three factors? Why?
Bo YU: The process of investment is to seek for the “potential champion”. Our investment in Er Kang Pharmaceutical is a successful case, for we found the champion in the field of pharmaceutical materials.
The entrepreneur factor is of great importance when making an investment in the field of medicine. It is not a totally innovative field with regard to the domestic whole medicine market, so the quality of the entrepreneur is very crucial. It is actually an investment in people.
In addition, the product structure shall also be considered. We will make analysis on price, product catalog and competitive products. Only by confirming enterprise competitiveness, can you get high return.
(Source: Pharmaceuticals Investment Weekly)
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