Opportunities, Valuation, and Returns in BD: Insights from the 2024 Lecheng BD Conference

Amid a global landscape where the pharmaceutical and medical device industries are deeply intertwined, characterized by both competition and collaboration, a series of critical factors shaping industry development are becoming increasingly prominent.

Many overseas innovative drug and medical device projects that have entered Phase II or III clinical trials, or even achieved market approval, possess cutting-edge technologies yet suffer from funding constraints and a lack of partnership opportunities. Furthermore, the traditional, comprehensive drug approval processes make it difficult for them to rapidly enter the Chinese market. Conversely, many domestic innovative pharmaceutical and medical device companies with ambitions to “go global” face numerous challenges in their journey toward international markets. The stringent standards of international certifications and the complexity of establishing overseas sales channels entail significant upfront investments, posing considerable tests to corporate liquidity. Additionally, unfamiliarity with overseas market environments, insufficient accumulation of foreign trade experience, and the intricate, rapidly evolving nature of international rules make it difficult for these enterprises to accurately navigate the landscape. These intertwined factors render their path to expanding their international presence fraught with thorns and difficulties.

To fully leverage the policy and platform advantages of the Boao Lecheng International Medical Tourism Pilot Zone and help global biopharmaceutical and life sciences companies identify new growth drivers, the inaugural 2024 Lecheng BD (Business Development) Conference was held in Boao, Hainan, on November 24. Guided by the theme “Innovation and Collaboration,” this year’s Lecheng BD Conference aims to establish a highly open international platform for the exchange and transaction of innovative projects in biopharmaceuticals, medical devices, and special foods. It seeks to provide investment institutions as well as domestic and international pharmaceutical and medical device companies with a window into new development opportunities in Hainan Free Trade Port’s biopharmaceutical industry and the global health sector.

The conference was held simultaneously in both online and offline formats, with over 100 innovative biomedical, medical device, and special food-related products from China and abroad launched online. That afternoon, the Lecheng BD Conference kicked off three dedicated roadshow sessions for pharmaceuticals, medical devices, and special foods, establishing an efficient platform for dialogue between capital and products to facilitate the commercialization and implementation of more high-quality projects.

This article compiles the highlights from the main forum and roundtable discussions of the 1st Lecheng BD Conference 2024.

Main Forum Session,Zhang Ruohan, General Manager of Hainan Boao Lecheng Cooperative Development Co., Ltd.It provided a detailed overview of the development and construction of the Boao Lecheng Business Development (BD) Center, and promoted the innovation momentum of Lecheng’s life sciences sector by highlighting the integrated development of its innovation and industrial chains, as well as the Center’s one-stop service solutions.

Zhang Ruohan stated that Boao Lecheng has already emerged as a prominent player in the pharmaceutical and healthcare industry, demonstrating significant advantages. On the policy front, the special medical policies allow overseas-listed products to be introduced first at medical institutions in Lecheng, benefiting patients across China; the real-world data policy facilitates product registration, with increasingly mature application pathways, and in 2023, it even achieved a pilot program using real-world study data for medical insurance access. Additionally, the free trade port’s policies on liberalized and facilitated trade cover convenient foreign currency operations through EF accounts, “dual 15%” tax incentives, and visa-free entry for citizens of 59 countries, further invigorating industrial vitality. In terms of resources, Lecheng has introduced 450 specially approved drugs and medical devices covering multiple fields, some achieving remarkable results with substantial commercial returns; it has gathered 32 medical institutions offering comprehensive full-lifecycle services; and invested RMB 1.6 billion in building a medical-engineering translation platform, collaborating with Haikou High-Tech Zone to promote production implementation.

“BD Center focuses on the commercialization of mature projects in mid-to-late stages, connecting multi-party resources and providing end-to-end services to facilitate product launches,” said Zhang Ruohan. Following the official launch of the Lecheng BD Center’s online platform, the Lecheng Administrative Bureau will continue to offer tailored services for enterprises and investors by establishing membership benefits and hosting regular roadshows.

Yu Chengqiang, Partner at Beijing Guosheng Asset Management Co., Ltd. and General Manager of the Lecheng Guosheng Health Industry Fund，Liu Yuxiao, Founder & CEO of Remax CapitalAs representatives of investment institutions, they discussed the importance of business development (BD) for the growth of biopharmaceutical companies, drawing on their respective successful BD case histories. They also outlined how the policy advantages of the Boao Lecheng International Medical Tourism Pilot Zone facilitate the rapid entry and commercialization of innovative overseas drugs and medical devices in the Chinese market.

Zhao Yun, CEO of BioSeedin and Vice President of Corporate Development at ACROBiosystems GroupandTang Renhong, Chairman and CEO of Simcere ZaimingAs representatives of biopharmaceutical companies, they delivered keynote speeches on the themes of “Building an Ecosystem to Accelerate Drug Development in an Era of Capital-Intensive Investment” and “How Boao Lecheng’s Real-World Study Initiatives Support Domestic Companies’ License-In Model: Case Studies on Accelerating Market Launch in China.” Against the backdrop of profound transformations in the global and Chinese biopharmaceutical industries, they shared insights into shifting investment preferences and R&D paradigms, as well as the opportunities created by Lecheng’s Business Development (BD) platform for biopharmaceutical enterprises.

The launch ceremony and signing event for the Boao Lecheng Business Development (BD) Center was held on-site. Hainan Boao Lecheng Cooperative Development Co., Ltd. entered into strategic cooperation agreements with Beijing ACROBiosystems Biotechnology Co., Ltd., Beijing Casma Consulting Services Co., Ltd., Xinxing Jihua Innovative Drugs and Medical Devices (Hainan) Technology Co., Ltd., Beijing Guosheng Asset Management Co., Ltd., and Sinopharm Holding Hainan Co., Ltd., respectively.

During the roundtable session, Zong Fang, Deputy General Manager of Hainan CMS Aesthetics and Deputy Director of the Public Affairs Center at CMS Pharmaceutical Group; Wu Huabing, Dean of the Haikou Institute of Biomedical Innovation; Wang Qiang, General Manager of Xinxing Jihua Innovative Drugs and Medical Devices (Hainan) Technology Co., Ltd.; Zhang Hua, Partner at Jinpu Chaochao Investment Management (Shanghai) Co., Ltd.; Zang Xin, Partner at Beijing Guofeng Law Firm and Convener of the Guofeng Medicine and Health Industry Research Committee; Zhang Dafeng, Founder and Chairman of Daoyuan Capital; and Wen Yaxin, Managing Partner of Suzhou Yuanming Xin Zhaoyuan Venture Capital Partnership (Limited Partnership), engaged in an in-depth dialogue. The discussion centered on building a multi-dimensional business development (BD) ecosystem, creating a model for international medical cooperation with the distinctive features of the Hainan Free Trade Port, and promoting the translation and industrialization of product technologies.

Host: Where lie the opportunities for Boao Lecheng to build a business development (BD) ecosystem?

Wen Yaxin: In terms of project and product evaluation and development planning, current investors place greater emphasis on two types of products. The first category comprises products in urgent clinical need, while discarding those that rely solely on conceptual packaging without substantive value. The second category includes projects with a relatively low market ceiling; although such projects have limited potential for market expansion, investment firms are still willing to make upfront investments. Taking the establishment of a CDM (Contract Development and Manufacturing) factory in Shanghai to pursue License-in projects as an example, if clinical trials are not required, obtaining a registration certificate may cost only one to two million RMB. While such projects are unlikely to achieve sales volumes in the hundreds of millions, they demonstrate strong profitability. By combining multiple such projects, it is possible to build a competitive enterprise.

For Boao Lecheng, the future focus will be on overseas companies. It can explore integrating products from overseas markets that individually have small scales, and by pooling resources and achieving synergistic operations, build a larger-scale business system. From the perspective of License-In, this approach is expected to create more development opportunities and enhance overall commercial value and market competitiveness.

Moderator: How do overseas pharmaceutical and medical device companies choose their partners for entering the Chinese market?

Wang Qiang: For overseas pharmaceutical and medical device companies, selecting the ideal partner is crucial for developing the Chinese market. The following aspects should be prioritized: First, a deep understanding of the unique characteristics of the Chinese market is essential. Given the significant differences in regulations, policies, and culture between China and other countries, partners with profound insights into the Chinese market are indispensable. Second, emphasis should be placed on the partner’s resources and network. Successful product launch and market penetration in China rely not only on one’s own innovation and quality but also on the partner’s strong capability in resource integration and extensive industry connections. Third, attention should be paid to long-term cooperation potential. To achieve sustainable development in China, companies need to find partners capable of growing together, by assessing the alignment of strategies, visions, and other key factors. Fourth, it is advantageous if the partner possesses technological or innovative capabilities, which can facilitate synergy in technology development and expand future cooperation prospects. It is hoped that attendees will find their ideal partners through this forum.

Host: Which niche sectors will become the next hotspots or opportunities?

Zhang Dafeng: From a technological perspective, ADCs, nucleic acid drugs, and antibody drugs are currently the hotspots in business development (BD) transactions. From an indication perspective, beyond oncology pipelines, driven by the patent cliff crisis facing large pharmaceutical companies and continuous R&D breakthroughs by innovative biotech firms, self-developed pipelines—bolstered by venture capital and scientific expertise—have become and will continue to be key areas for major deal closures.

Moderator: What issues should overseas companies pay attention to when localizing in China?

Zhang Dafeng: In business expansion, the selection and strategic layout of partners are critical. For instance, local partners should leverage their deep familiarity with the domestic market environment, extensive networks, and industry channels to play a pivotal role in resource integration, thereby achieving efficient aggregation and optimal allocation of technology, capital, and market resources. At the level of localized production, rational site selection is equally important; regions such as the Yangtze River Delta are preferred due to their talent concentration, complete industrial chains, and efficient production implementation, which help reduce costs and enhance product quality. Finally, commercial partners must possess diversified capabilities, providing capital and strategic synergy as both investors and collaborators. They should respond to market changes with advantages in cost leadership and supply flexibility, accelerate regional localization by leveraging the benefits of a complete industrial chain, deeply integrate into the industrial ecosystem, and strengthen market expansion capabilities and business sustainability.

Host: What differentiated opportunities can the “R&D and Application in Boao Lecheng + Manufacturing in Haikou” model bring to overseas pharmaceutical and medical device companies?

Wu Huabing: First, this model can accelerate the market launch of innovative international pharmaceutical and medical device products in China. Second, it can reduce product costs, improve accessibility, and ensure supply chain security.

Leveraging the “R&D and Application in Boao Lecheng + Manufacturing in Haikou” model, we focus on small and medium-sized enterprises (SMEs) from overseas markets, particularly the United States, Europe, and Japan. Our evaluation centers on three key dimensions:1. **Innovation**: Products must demonstrate global first-in-class characteristics or significant clinical value, with no comparable competitors in the Chinese market, thereby establishing a foundation for differentiated advantage.2. **Value**: Products must possess substantial market potential. Given a 3–5 year market cultivation and ramp-up period, future output value must be sufficient to cover costs and achieve profitability; therefore, the scale of output value must reach an appropriate level.3. **Team**: The management team should exhibit strong operational expertise. Furthermore, having an established product R&D and manufacturing system in the United States facilitates regulatory approval. Ultimately, the core determinant of approval remains the intrinsic key value of the product itself.Additionally, introduced products must be implemented in Boao Lecheng and manufactured in Haikou, creating a dual-drive effect that promotes the development of Boao Lecheng while stimulating the growth of the biopharmaceutical industry in Haikou High-Tech Industrial Development Zone. In this process, the Boao Lecheng Administrative Bureau plays a pivotal bridging and coordinating role, effectively facilitating successful approval by the National Medical Products Administration (NMPA), thereby creating favorable conditions and providing solid guarantees for the synergistic development of the overall industrial ecosystem.

Host: We also look forward to collaborating with the Haikou High-Tech Industrial Development Zone to promote the “Lecheng R&D and Application + Haikou Manufacturing” model, thereby facilitating the business development (BD) strategies of domestic and international enterprises. But how should this be achieved?

Zong Fang: Since 2021, following one to two years of in-depth research into the Hainan Free Trade Port and the Boao Lecheng International Medical Tourism Pilot Zone, and after comprehensively analyzing the industry landscape, accurately interpreting national policy directions, and gaining insights into the development trends of innovative drugs, CMS Pharmaceutical Group decisively chose to launch its products in Lecheng and establish a production line in Haikou. The advantages presented by Hainan are highly systematic and structured, far exceeding what can be covered by single measures such as tax incentives or green channels.

Now, the development of Boao Lecheng has entered the 2.0 era. The policy innovation pilots of the 1.0 era successfully established the foundational framework for medical institutions, healthcare service capabilities, and the clinical research environment. Currently, there is an urgent need to achieve large-scale implementation and application of innovative products, deeply integrating them into the “Lecheng R&D and Application + Haikou Manufacturing” ecosystem. Taking ruxolitinib cream, which we have introduced, as an example: as the only drug globally with a clinical indication for vitiligo, it demonstrates exceptional qualities in terms of clinical performance, practical implementation, and innovation. It received rapid approval from both the U.S. FDA and the European Union, and its subsequent product pipeline shows strong momentum, undoubtedly possessing the characteristics and potential of a strategically innovative product.

Boao Lecheng has already established a well-adapted market and commercial ecosystem for innovative products. For various small- to mid-scale products from small and medium-sized enterprises (SMEs), a gradual, steady, and agile “small-step, fast-run” strategy can be adopted. Whether it involves building reasonable product valuations, accurately managing market expectations, or effectively maintaining product stability, these enterprises can find suitable development paths by leveraging Lecheng’s phased implementation and progressive advancement model. This approach covers a diverse range of product types, with market scales ranging from RMB 500 million and RMB 1 billion up to RMB 10 billion.

The Boao Lecheng BD Platform established today features distinct Chinese characteristics. Furthermore, the model of conducting research and application of innovative drugs in Lecheng while manufacturing them in Haikou presents numerous opportunities. First, policy innovation creates opportunities; policies such as the “National Nine Measures” have spurred effective organizational innovations in response to practical needs during implementation. Second, the Lecheng model is unique, with its specialized service-oriented institutions creating conditions for breakthroughs in the application of technological innovations, aligning well with the technical innovations of new drugs and facilitating the introduction of a wide range of achievements. Additionally, business model innovation will drive continuous collaboration among many biopharmaceutical companies through License-In, agency, or licensing models.

Moderator: What factors should be considered when valuing targets in business development (BD) transactions? In practice, what factors are often overlooked?

Zhang Hua: In business development (BD) for innovative drugs, the following key points should be considered: First, how to assess drug value? Chinese innovative pharmaceutical companies are currently under significant financial pressure. When facing BD opportunities, inaccurate valuation of drug assets may lead to undervaluation and sell-offs. Moreover, transaction prices vary significantly across different development stages: the deal value after completing Phase I clinical trials may be ten times higher than the upfront payment, while completing Phase II clinical trials could result in a 5- to 10-fold difference. Of course, in the challenging environment of fundraising and entrepreneurship, companies may choose to sell early at lower prices to secure funding for subsequent R&D, thereby maximizing overall value.

Second, the robustness of the BD project’s own research is critical; it must withstand rigorous and repeated scrutiny.

Third, legal and tax factors cannot be overlooked during the business development (BD) process. For instance, the choice of signing location—whether in China, Singapore, or Denmark—can result in significant differences in tax implications.

Moderator: What investment returns can investors expect after a company completes a business development (BD) deal?

Zhang Hua: This has been the most frequently discussed topic between investors and investees this year. Most venture capital firms in the pharmaceutical sector struggle to endure exit cycles exceeding ten years, yet many drugs require more than a decade, or even two decades, of development to fully demonstrate their value. With the emergence of business development (BD) and license-out transactions, profit distribution funds are limited as stipulated by the Company Law. There is currently no industry-standard best practice for how innovative pharmaceutical companies should allocate proceeds from BD deals or how investors should exit; however, it is anticipated that more cases will soon emerge.

Host: What efforts has the state made in terms of intellectual property protection for pharmaceuticals and medical devices?

Zang Xin: In the knowledge-intensive pharmaceutical industry, the critical importance of intellectual property (IP) cannot be underestimated. From the perspective of China’s legal and regulatory framework, multiple laws operate in parallel at the national level—including the Patent Law, Trademark Law, Copyright Law, and Anti-Unfair Competition Law—providing comprehensive and detailed regulation and protection for IP across different sectors and levels of the pharmaceutical industry, thereby effectively safeguarding the legitimate rights and interests of rightsholders.

Taking Hainan as an example, its intellectual property (IP) protection system at the local level also features notable highlights. The Hainan Free Trade Port Law and the Regulations on Intellectual Property Protection in the Hainan Free Trade Port set high standards and stringent requirements for IP protection. Furthermore, the Foreign Investment Law elevates the protection of intellectual property rights for foreign enterprises operating in China to a statutory level, enabling various entities, including small and medium-sized enterprises (SMEs) and distributors, to fully benefit from comprehensive and robust legal safeguards for intellectual property when conducting business in China.

At the implementation level, significant progress has been made in recent years in both administrative and judicial aspects. Judiciously, China has established specialized intellectual property courts in Beijing, Shanghai, Guangzhou, and Hainan. The specialized intellectual property court in Hainan plays a crucial supporting role in promoting the development of trade business in the Hainan Free Trade Port and the introduction of pharmaceuticals and medical devices in Boao Lecheng, greatly enhancing the professionalism and efficiency of judicial protection for intellectual property rights. Administratively, considering the needs of pharmaceutical and medical device companies for patent protection and rapid authorization after product introduction, the Intellectual Property Office established an Intellectual Property Protection Center in Haikou this August, building on the experience gained from previous pilot programs. This layout gives Hainan a unique natural advantage in the introduction of pharmaceuticals and medical devices as well as in intellectual property applications, enabling it to provide efficient and convenient professional services to relevant enterprises.

Host: In cross-border business development (BD) transactions, how can companies navigate the differing regulatory frameworks across countries?

Zang Xin: In the process of pharmaceutical and medical device companies “going global” and “bringing in,” intellectual property protection is a common key issue.

From the perspective of patent layout, it is crucial for enterprises to conduct patent risk assessments and strategic planning before making decisions, whether for outward licensing or inward acquisition. Regarding the introduction of pharmaceuticals and medical devices that have already obtained marketing approval abroad, it is necessary to confirm in advance whether there are any patent applications for similar products in China, as intellectual property rights are territorial; a U.S. patent grant does not automatically take effect in China. Therefore, during the import and export of pharmaceuticals and medical devices, it is indispensable to conduct thorough risk assessments of product patent protection in the destination countries. Failure to do so may result in serious infringement allegations and rulings at both administrative and judicial levels in the local jurisdiction. Furthermore, comprehensive patent searches related to relevant technologies must be conducted during the project initiation and implementation phases of R&D. If existing mature technologies and patent layouts are identified, proactive design-around strategies must be formulated. As the product approaches the commercialization stage, it is also essential to examine whether relevant patents exist in the target market. If the risk of infringement is high, alternative pathways must be sought to mitigate such risks.

Furthermore, given that pharmaceutical and medical device transactions involve both licensors and licensees, key elements such as the determination of intellectual property rights ownership, identification of defects, allocation of liabilities, and payment terms must be established through rigorous and meticulous negotiations and communications between both parties, assisted by professionals. This ensures the legality, compliance, and reasonableness of the transactions, minimizes the risk of intellectual property disputes to the greatest extent, and promotes robust international exchange and cooperation in the pharmaceutical and medical device industry.