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Article02 Sep 2022

China Healthcare: Five Emerging Themes

A recent report by a Citi Research team led by John Yung picks five themes that could shake up the global healthcare industry, examining prospects for their commercialisation in China versus peers elsewhere in the world

Citi’s new Super-Sector analysis identifies five themes that could reshape the future of the global healthcare sector, namely:

  1. Gene therapy:
  2. siRNA
  3. cell therapy
  4. artificial organs
  5. AI drug development.

Commercialization of these themes in China looks promising, the Citi report says, supported both by government policies as well as capital investments. By comparing leading Chinese companies in these areas with their overseas counterparts, the full report argues that with enhanced tech advantages Chinese companies can in turn transform the global market. The themes were chosen based on their total addressable market, primary-market funding and technology breakthroughs in therapeutics.

Primary-market financing for the five segments has leapt by >70% CAGR since 2015. And in China’s buoyant VC/PE investment market, capital has been flowing into gene therapy, siRNA, cell therapy, artificial organs, and AI drug development sub-segments since 2013. Their share in China’s total healthcare financing surged to 21% in 2021 from 1.4% in 2013.

Additionally, the government has introduced supportive policies, which tend to bode well for faster regulatory approvals and municipal government endorsements. Affordability in these emerging areas is also expected to improve as more cities introduce secondary payment structures.

China healthcare primary market financing structure and trend

Figure 5. China healthcare primary market financing structure and trend Source: Citi Research, Pharmcube If you are visually impaired and would like to speak to a Citi representative regarding the details of the graphics in this document, please call USA 1-888-800-5008 (TTY: 711), from outside the US +1-210-677-3788.

 

Source: Citi Research, Pharmcube

  • Big addressable market in China and the rest of world: The TAMs of gene therapy, cell therapy and siRNA will climb to US$2.8bn, US$1bn and US$300m by 2025 in China, respectively, according to Frost & Sullivan and CIC. The global TAM for artificial organs will grow to US$29.2bn in 2027, according to Technavio, and for AI drugs to US$1.4bn in 2024, according to marketsandmarkets.
  • Meaningful breakthroughs in therapeutics: Cutting-edge technologies in siRNA and in gene and cell therapies are being explored to cure so-far incurable illnesses with common medicines. For example, RNA therapy can target almost any genetic component within the cell, many of which may be considered beyond cure using small molecules and antibodies. Artificial organs critically provide alternatives for patients awaiting organ transplants and save lives. AI drug development is also showing promise to significantly improve efficiency/success rates of molecules before clinical trials.

 

Supportive policies and improving affordability should give a fillip to the five themes, says the Citi report.

Along with public medical insurance, which has broad coverage (97% of China’s total population), the widely introduced Huiminbao (government-backed, urban customized health insurance underwritten by commercial insurance companies) now provides extra coverage to participants for more expensive therapeutics.

The full report examines in depth each of the five themes including the scientific context and background along with greater detail on financing and several company profiles.

Please read it here China Healthcare - Five Emerging Themes Set to Shake Up Sector

Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

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