Always curious about whenInternet TycoonWhat Sparks Will Fly from Joining Hands with Pharmaceutical Giants?
Recently, with 1 billion social media usersTencentRoche, with its patient base of 1 billion, engaged in a collision between “Internet Plus” and traditional healthcare. According to The Paper, Roche and Tencent signed a strategic cooperation memorandum at the China International Import Expo, whereby both parties will jointly explore the deep integration of the internet with the healthcare industry, leveraging big data,Artificial IntelligenceThe technology is applied to drug traceability, medication services, disease management, and medical science popularization, with both parties prioritizing the field of oncology. Tencent’s ambition to enter the healthcare sector is well known; what is the strategic intent behind this collaboration with Roche?
In the field of medical oncology, it has always been a tough nut for Tencent to crack.
Tencent since 2014WeChatThe launch of the Smart Hospital marked Tencent’s first foray into the healthcare sector. Leveraging its vast user base and robust internet technology, Tencent subsequently invested in a series of online healthcare platforms, including Youpin, DXY, and WeDoctor, establishing a certain competitive advantage in the digital health space. However, due to its late entry into the physical healthcare market, Tencent has been actively seeking breakthroughs in offline services. Examples include the launch of the “Tang Dafu” glucose meter to enter the chronic disease management sector and the introduction of its AI-powered diagnostic system, Tencent Miying. Despite its strong ambition to penetrate the healthcare industry, Tencent remains unfamiliar with offline medical operations and is still navigating this complex landscape through exploration and trial.
China is a major country burdened by cancer. According to data released by the National Cancer Center in 2017, China accounts for 27% of global cancer mortality rates and has the highest number of incident cases worldwide. The widespread success of the film "Dying to Survive" and the passing of former CCTV host Li Yong have further brought cancer into the public spotlight. Faced with such a large cancer patient population in China, Tencent, like other companies, has undoubtedly set its sights on the oncology market as it enters the healthcare sector. As early as June 2016, Tencent led the investment in Si Pai Network, a big-data company specializing in oncology. On August 5 this year, Tencent and the Chinese Society of Clinical Oncology (CSCO) held their first strategic cooperation expert meeting and established the inaugural Tencent-CSCO Strategic Expert Committee. Tencent’s artificial intelligence products are also focusing on oncology; Tencent Miying has made early screening for esophageal cancer its first project to enter clinical trials. Tencent’s frequent moves in the oncology market clearly demonstrate its determination to conquer this field. However, despite collaborating with numerous enterprises, it has not yet formed a true partnership with any pharmaceutical company specializing in oncology.
Roche is particularly dominant in the oncology field, and Tencent needs a point of entry. Founded in 1896, Roche entered the Chinese market in 1926. Its pharmaceutical portfolio spans multiple therapeutic areas, and it has long maintained a hegemonic position in the pharmaceutical industry. According to the "Top 10 Global Pharmaceutical Companies in 2018" published by lgeahub, the companies on the list include Roche, Pfizer, AbbVie,Johnson & Johnson, Sanofi, Merck & Co., Novartis, Gilead Sciences, GlaxoSmithKline, and Amgen. According to statistical data, the total sales of the top 10 pharmaceutical companies worldwide in 2017 amounted to $437.257 billion, accounting for 40% of the global market share, with Roche ranking first. Oncology has always been Roche’s core therapeutic area. According to “Top 10 Pharmaceutical Companies 2018 – Oncology” by the U.S. pharmaceutical consulting firm Lgeahub, Roche’s oncology business generated $25.09 billion in revenue in 2017, representing 43.73% of the company’s annual total, making oncology drugs the cornerstone of its portfolio. As a giant in the pharmaceutical oncology sector, Roche is undoubtedly the best partner for Tencent, which seeks to enter the oncology field through collaboration.
(Lgeahub, a US pharmaceutical consulting firm, "Top 10 Pharmaceutical Companies 2018 - Oncology")
China has consistently remained Roche’s second-largest market; however, given its substantial patient population, Roche has been actively strategically positioning itself in the Chinese market. During his visit to China last year, Severin Schwan stated, “It is entirely possible for China to surpass the United States as Roche Pharma’s largest global market. This pertains not only to sales volume but, more importantly, to its overall contribution on a global scale.” The immense potential of the Chinese market has generated heightened expectations for the global head of Roche Pharma. At the recently concluded ASCO annual meeting, Roche reviewed data from its oncology pipeline to demonstrate to the industry how it leverages clinical trials and gene sequencing to identify opportunities in the field of lung cancer. Rather than focusing excessively on new drugs or expanding indications for existing medications to maintain its oncology market share, Roche has shifted its focus toward biomarkers and digital health tools. Despite Roche’s strong financial performance, the company faces rising competition in oncology from other pharmaceutical giants such as Novartis and Sanofi, as well as challenges from domestic biosimilars. Consequently, pursuing digital healthcare has become a significant trend. In February of this year, Roche acquired full ownership of Flatiron Health, an oncology big-data company, for $1.9 billion. In China, Tencent, an internet giant that originated as a social media platform, possesses considerable technological advantages in data management. Roche’s current “empty-nest” phase in China has presented Tencent with a strategic opportunity.
Roche, or Tencent: A Test Ground for Conquering Oncology
Tencent, a company that started out as a social media software provider, has now reached a "bottleneck" in its social platform business. On August 15, Tencent released its unaudited financial report for the second quarter of fiscal year 2018. According to the report, Tencent's total revenue for the second quarter was RMB 73.675 billion, representing a 39% year-on-year increase. However, Tencent's net profit declined during the same period, with net profit amounting to only RMB 17.8 billion, down 2% year-on-year and 23% quarter-on-quarter — marking the first negative growth in 13 years. Among these figures, QQ’s monthly active accounts reached 803 million, a 5.5% decrease compared to the same period last year. In an effort to cross into new industries and seek fresh opportunities in untapped markets, Tencent has been continuously exploring other sectors. Public information shows that Tencent Cloud already has more than 2,000 partners and offers over sixty industry-specific solutions, covering areas such as government affairs, healthcare, industrial manufacturing,Retail, transportation, finance, and other sectors have all created successful case studies in digital transformation.
However, Yi Min from Intelligent Relative Theory believes that the most direct reason for Tencent’s partnership with Roche at this juncture is the difficulty of breaking into the oncology field; thus, a springboard and a testing ground are needed. In 2017, Tencent launched an AI-assisted diagnostic product called Tencent Miying. Tencent Miying selected early screening for esophageal cancer as its first project to enter clinical trials. As an AI-assisted diagnostic product, Tencent initially focused on early cancer screening. Currently, Tencent Miying primarily supports early screening for lung cancer, esophageal cancer, cervical cancer, and breast cancer, as well as the observation of diabetic retinopathy. Early tumor screening typically targets asymptomatic high-risk populations, who tend to place greater trust in familiar pharmaceutical companies rather than emerging AI technologies. Roche has long been a dominant player in the oncology sector. Among the top 10 brands by sales volume in China’s anti-tumor chemical drug market, Roche accounts for three: Xeloda, MabThera, and Herceptin. The annual sales of each of these three products exceeded RMB 1 billion in 2013.
In addition, Tarceva and Avastin have also achieved annual sales exceeding RMB 100 million. Roche’s pharmaceuticals developed for breast cancer, colorectal cancer, gastric cancer, and non-small cell lung cancer hold a significant share in the oncology market, enjoying strong patient reputation and substantial market presence. Furthermore, as an upstream player in the gene sequencing industry chain, Roche Diagnostics—manufacturing gene sequencers and配套 reagents—has long maintained a considerable market share in the field of in vitro diagnostics. Through its collaboration with Tencent, the latter can leverage Roche’s esteemed reputation in oncology to expand into early cancer screening services. If all proceeds smoothly, this pilot initiative is expected to yield fruitful results, creating a “bandwagon effect” that will facilitate rapid market expansion.
Certainly, the first step requires Tencent to leverage AI technology to accelerate targeted drug development. As the national government tightens control over healthcare expenditures and introduces an increasing number of policies, regulatory requirements are becoming more stringent, particularly concerning the interplay among revenue, risk, and product costs. The pharmaceutical industry is facing a significant decline in profit margins. Major healthcare giants are actively devising response strategies, with R&D expenses constituting the largest portion of pharmaceutical companies’ expenditures. Drug development is a lengthy process, taking 7–10 years from successful research to market launch, while patent protection lasts only 20 years, making it difficult for pharmaceutical companies to recoup their costs.
Theoretically, the collaboration between Roche and Tencent, leveraging AI, will help shorten the R&D cycle for new drugs. The highest cost in pharmaceutical R&D lies in clinical trials, where the success or failure of oncology targeted drug trials depends on whether the candidate drugs lack efficacy. The key to efficacy is the accuracy of the target selection. Traditional methods of selecting targets for clinical trials require continuous hypothesis testing and subsequent validation. This process consumes significant human and material resources. Moreover, since the human body carries approximately 500 cancer-related genes that can generate thousands of genetic mutations, designing multiple signaling pathways and drug targets is prone to misjudgment and omission when interpreted manually. In contrast, AI, through deep learning, can rapidly identify targets with specific molecular characteristics and biomarkers from vast tumor target databases. It then quickly screens for effective candidate drugs through intensive computational analysis, significantly shortening the R&D cycle.
Entering the Oncology Space? Tencent Still Lacks a Genomics Strategy
Despite the newly forged partnership with Roche, Yi Min from AI Relative believes it is still premature for Tencent to dominate the field of early cancer screening.
In the tumor screening industry, setting aside the fierce competition within China’s genetic testing sector, companies such as Da An Gene, Berry Genomics, Anke Biology, Burning Rock Biotech, and Novogene currently possess the capability to obtain sequencing reagents through either technical collaborations or independent research and development. Compared with early screening methods based on genetic testing, Tencent’s Miying is still in its early stages.
As is well known in the field of oncology, the general approach to clinical genetic testing involves the following steps: testing institutions collect DNA samples from patients, perform sequential sequencing to detect typical mutations associated with cancer, compare these mutations against known cases in databases, and finally, physicians provide treatment recommendations based on the aforementioned information.
Deciphering the mysteries of genes has become a major challenge in contemporary life sciences. Furthermore, leveraging big genomic data to identify disease-related variants and pathogenic genes, thereby formulating targeted treatment plans, constitutes a core component of precision medicine. At the "First Summit Forum on Precision Therapy," Professors Zhou Caicun and Shen Lin concurred that the approval and application of multi-gene testing in oncology not only represented the most significant achievement of 2017 but also pointed to the future direction, promising transformative effects. At the foundational level, gene sequencing underpins precision medicine. If Tencent utilizes AI technology to establish a presence in genomics, its entry into the oncology sector would indeed become a reality. Although Tencent recognized the importance of life sciences to future healthcare at this year's WE Conference, it has yet to make significant moves in the genomic field. In contrast, Alibaba has long been active in the genomic industry: it invested in BGI Genomics as early as 2012 and partnered with the major domestic genomic company Berry Genomics in 2015. With the development of targeted drugs and the rise of bioimmunotherapy, Tencent will need to increase its investment in life sciences if it aims to enter the oncology field in the future.
In short, the partnership between Tencent and Roche is merely a starting point for Tencent’s foray into the oncology sector. By leveraging Roche’s brand to expand its influence within the healthcare industry, Tencent is expected to collaborate with more pharmaceutical companies in the future. While market sentiment toward the internet sector remains predominantly negative, if Tencent can break through bottlenecks to develop its healthcare business and continue to deepen its engagement in this field, it may well secure a share of the market.