Phylion Bio: Seizing Global Opportunities and Accelerating Overseas Expansion

The pharmaceutical industry is currently in an era characterized by both opportunities and challenges.

According to statistics from Soochow Securities, the total revenue of 413 listed pharmaceutical companies increased by 8.28% year-on-year in the first three quarters of 2022, while the total net profit attributable to shareholders of the parent company rose by 1.53% year-on-year. From the perspective of sub-sectors within the pharmaceutical industry, CXO, in vitro diagnostics (IVD), and retail pharmacies demonstrated outstanding performance. The IVD sector was also one of the fastest-growing segments in terms of revenue growth in the third quarter.

The IVD industry is experiencing positive growth, with domestic in vitro diagnostic companies increasingly expanding into overseas markets. How to stand out from competitors, cope with the competitive pressure from international giants, gain recognition from customers in Europe, the United States, and emerging countries, and rapidly respond to customer needs are questions that every Chinese company going global must consider. Leveraging its 15 years of experience in deepening its presence in overseas markets, Fapon Biotech has provided its own answers.

Fapon Biotech is a leading upstream player in China’s life sciences industry and a globally leading upstream platform enterprise for in vitro diagnostics (IVD). Its core business involves the research and development, production, and sales of key raw materials for IVD reagents, while also providing customers with integrated solutions for IVD instruments and reagents. As one of the earliest domestic IVD companies to expand into overseas markets, Fapon Biotech has secured a certain share of the international market by leveraging its competitive advantages. According to its disclosed prospectus, the company’s overseas revenue from 2019 to 2021 was RMB 78.28 million, RMB 413 million, and RMB 803 million, respectively, accounting for 27%, 39%, and 35% of its total operating revenue, thereby achieving rapid growth.

According to the "Global In Vitro Diagnostics Market: Opportunities And Forecast, 2020–2027" published by Allied Market Research, the global in vitro diagnostics (IVD) market size was USD 67.111 billion in 2019 and is projected to reach USD 91.09 billion by 2027, representing a compound annual growth rate (CAGR) of 4.8% from 2020 to 2027. As a premium segment within the medical device industry, the global IVD sector is characterized by its large market size, high growth rate, and steadily expanding market share. Consequently, Chinese IVD companies are increasingly targeting overseas markets and pursuing international expansion strategies.

Currently, Chinese enterprises in the healthcare sector are poised for takeoff, a stage bearing many similarities to the earlier development of the telecommunications industry. For instance, while the timing resembles Huawei’s expansion into overseas markets in 2001, the underlying industry logic differs, as does customer acceptance; consequently, the challenges and opportunities facing Chinese companies going global are also distinct. The internationalization of China’s in vitro diagnostics (IVD) industry has encountered four main difficulties: first, brand recognition; second, understanding of clinical needs; third, regulatory registration barriers; and finally, and most importantly, product quality and stability.

The global IVD industry developed earlier, while China’s IVD industry only began to take shape in the late 1970s, resulting in a significant imbalance in regional development across the global in vitro diagnostics market. This imbalance is particularly evident in the upstream raw material production segment, which features high technical barriers. For the IVD industry, the quality of upstream products directly determines the quality and stability of in vitro diagnostic reagents. In terms of brand recognition, foreign companies have cultivated the industry for many years and have established strong reputations for technology and quality. As a result, domestic downstream manufacturers have long relied heavily on imported raw materials, creating an urgent demand for domestically produced alternatives.

In the clinical setting, the IVD industry emphasizes clinical testing, which is highly localized. Variations across regions and populations may impact product performance. This necessitates that the IVD industry adopt a clinically driven approach, implementing localized operations and validating product performance on-site.

Furthermore, the IVD industry has high regulatory barriers to entry. Expanding into overseas markets imposes new requirements on enterprises in terms of production and operations, marketing, and refined management. Additionally, Chinese companies must adapt to varying public perceptions of personal health management across different countries. For instance, while the United States and the European Union have different regulatory frameworks for IVD products, both maintain stringent entry requirements. The U.S. Food and Drug Administration (FDA) classifies IVD products as medical devices; therefore, Chinese IVD companies entering the U.S. market are subject to the medical device regulations outlined in the Code of Federal Regulations (CFR). In the European Union, medical device manufacturers must adjust their products, documentation, and production processes in compliance with the EU Medical Device Regulation (MDR) and the In Vitro Diagnostic Medical Devices Regulation (IVDR) before they can be marketed within the European Economic Area (EEA).

Beyond regulatory barriers, companies must possess strong core technologies and superior product quality to stand out in fierce competition and win the preference of overseas manufacturers. Meanwhile, in addition to high quality and advanced technology, enterprises must also ensure product stability and maintain a reliable supply chain.

After years of overseas development, Fapon Biotech has overcome the aforementioned challenges, accumulated certain technological and market layout advantages, and secured a notable share of the international market. Currently, its products are sold to 61 countries and regions worldwide, serving more than 1,500 customers. Leveraging the performance advantages of its core products and deep insights into local market demands established through localized operations, Fapon Biotech has gained favor among numerous top-tier IVD manufacturers in Europe and the United States. Recognition under the highest standards in the European and American markets has laid the foundation for Fapon Biotech to further expand into emerging markets and explore new platform-ecosystem business models.

Currently, the sales model for in vitro diagnostic (IVD) equipment in China is predominantly based on the bundled sale of “instruments + reagents.” Equipment manufacturers provide testing instruments to end-user medical institutions and stipulate a committed purchase amount for reagents over a specified period, thereby driving subsequent reagent sales. While this marketing strategy helps ensure customer stickiness to some extent, it also results in a more closed business model, leading to market monopolization by a few leading enterprises.

Currently, individual manufacturers in the IVD industry often struggle to provide a comprehensive portfolio of high-quality reagents. As a result, healthcare institutions typically need to deploy instruments from multiple vendors to ensure full coverage of premium testing menus, leading to additional costs and burdens. Therefore, there is a tangible market demand for testing platforms that are compatible, scalable, and offer a complete test menu.

Since its inception, Fapon Biotech has progressively established a tripartite business layout integrating “core reagent raw materials + reagent solutions + open instrument platforms,” gradually building an IVD open-platform ecosystem. By adopting an open-operation model, it connects upstream developers with mid- and downstream applicators, meeting the diverse needs of IVD companies and end customers while enhancing the efficiency of the IVD supply chain. Fapon Biotech has rapidly promoted the implementation of this open-platform ecosystem model in overseas markets, comprehensively providing technology empowerment to customers and becoming an “enabler” for local diagnostic manufacturers.

Taking India as an example, the country has long been a key focus in global malaria prevention and control efforts. However, due to constraints such as limited technological development and local conditions, it has suffered from a longstanding deficiency in diagnostic testing capacity. Since 2010, Hytest Bioscience (Fapon Biotech) has leveraged its innovative raw material technologies to assist local enterprises in successfully developing diagnostic products tailored to local needs, thereby addressing the shortage of local testing capabilities. Building on years of in-depth collaboration in projects related to tropical diseases and infectious diseases, Hytest Bioscience has established deep and enduring partnerships with multiple Indian in vitro diagnostic (IVD) companies. As a result, its IVD raw materials now hold over 50% of the local market share.

In Brazil, Fapon Biotech has evolved from initially establishing connections with only a dozen local manufacturers to engaging in deeper collaborations with Brazilian partners in fields such as molecular diagnostics and chemiluminescence, while also assisting in the incubation of local brands. Within less than three years, Fapon’s raw material solutions have rapidly risen to become the industry leader in Brazil’s in vitro diagnostics (IVD) market.

As an “enabler” of the IVD industry in emerging markets, Fapon Biotech has developed a comprehensive understanding of industrial customers. Building on this foundation, the company is continuously enhancing its insight into the clinical sector and leveraging localized operations to support clinical end-users at the regional level. Furthermore, Fapon Biotech’s robust technological foundation provides it with raw material advantages, enabling top-down vertical integration and generating industrial momentum.

Meanwhile, Fapon Biotech has consistently pursued a dual-pronged strategy to expand its international presence from multiple angles. In developed countries and regions such as Europe and the United States, Fapon Biotech has established a certain level of brand recognition. Moving forward, it will forge partnerships with local manufacturers to achieve complementary growth, develop differentiated products with greater efficiency, secure enhanced technical support, and reduce reagent development and healthcare costs, thereby enabling earlier and more accessible diagnostics. In emerging markets, Fapon Biotech will fulfill its role as an “enabler” by actively participating in local public welfare initiatives and collaborative industry development, providing comprehensive technical empowerment to customers and accelerating the growth of the local IVD industry.

Overseas governments are shifting their focus to the public health and medical sector, with corresponding changes in their emergency response mechanisms for public health incidents. These governments are providing relevant medical platforms and resources while emphasizing self-managed health care. Given the limited medical resources, there is a growing need to continuously strengthen individuals’ self-health management capabilities within public healthcare, where in vitro diagnostics (IVD) can play a significant role.

Chinese products offer high cost-performance ratios, and companies demonstrate rapid responsiveness to customer needs, providing them with certain advantages in overseas markets. Currently, as global awareness of public health continues to rise and healthcare expenditures increase, this presents a critical period for Chinese in vitro diagnostics (IVD) enterprises to achieve market breakthroughs. These companies can leverage their cost-effectiveness to meet customers’ immediate demands and enhance brand recognition.

Global expansion requires years of dedicated effort; no company’s success in overseas markets is accidental. Persistence is the key to victory.