Systemic Opportunities for Domestic Life Science Upstream Enterprises Amid Industry Transformation: Localization, Innovation, and Global Expansion
Life science tools, a critical sector close to upstream research yet distant from downstream applications, are now experiencing systemic growth opportunities as China’s biopharmaceutical industry enters a phase of large-scale industrialization.
Previously, this upstream sector was dominated by foreign manufacturers, with a scarcity of high-quality domestic upstream platforms. However, under the impact of the pandemic, a cohort of outstanding enterprises has begun to emerge and rise rapidly. Yet, as the effects of the pandemic recede, how can they sustain their competitive advantage? What tangible benefits has the COVID-19-related business actually brought to these companies?
What are these companies’ strategic considerations regarding their underlying business operations in the short, medium, and long term? To this end,VCBeat and VCBeat New Medicine, in partnership with Legend Capital, have invited representative companies from the niche sector of life science tools for biologics—Namicro Technologies, Hanbon Technology, and Biobase—to jointly explore “Reflections on Uncertainty in the Post-Pandemic Era.” The discussion aims to examine the opportunities and challenges facing the upstream segment of the biopharmaceutical industry chain from the perspectives of industry development, upstream and downstream supply chain dynamics, and capital market investment strategies.
In the past two years, due to the impact of the COVID-19 pandemic, the upstream industry for medical equipment and consumables has gradually come into public view. However, due to high technical barriers and technological blockades, the localization process of this industry in China has drawn significant attention.
“The advent of the pandemic presents a favorable opportunity for domestically produced equipment to replace imported alternatives.”Amid the pandemic, many international equipment suppliers will face challenges related to production capacity or supply chains, creating further opportunities for domestic biopharmaceutical companies to pursue import substitution with locally manufactured alternatives.
“As for when full localization of all components in the entire equipment suite can be achieved, I believe it will still take some time. Currently, domestic manufacturers may have begun to consider and attempt the assembly of fully localized equipment and component testing. However, once the equipment is assembled, not every biopharmaceutical company is willing to use its high-value-added active pharmaceutical ingredients (APIs) for trial runs. Therefore, this also depends on the impact of the pandemic era on supply chains and the process of compelling customers to adopt these solutions. In the short term, most companies remain reluctant to take such risks.”Li Shengying, Executive General Manager of Hanbang TechnologyThus spoke.
Liu Xuping, President of Bei Anjistated: “The pandemic has presented a significant opportunity for the cell culture media industry and the localization of cell culture media production in China. Firstly, pandemic-induced disruptions to global supply chains have driven a notable shift: many pharmaceutical clients, who previously hesitated, were reluctant, or lacked the incentive to adopt domestically produced equipment and consumables, have found the performance of Chinese-made products to be quite satisfactory after being compelled to use them. This reality has accelerated the pace of localization across the entire industry. Secondly, the pandemic has expanded the market size of the cell culture media sector. For instance, the production of current COVID-19 vaccines requires equipment and consumables throughout the upstream and downstream supply chain; inactivated vaccines, recombinant protein vaccines, and adenovirus vaccines all require cell culture media. This demand contributed significantly to Beianji’s revenue growth in 2021. Therefore, summarizing from the above two points,”The pandemic has presented a rare development opportunity for suppliers across the upstream and downstream segments of China’s biopharmaceutical industry. More importantly, the key lies in how to seize these opportunities and rapidly capture market share.”
Jiang Biwang, Chairman of NanoMicro TechDrawing on the company’s situation during the pandemic, he shared his views: “The first wave of localization for upstream equipment and consumables was influenced by international relations and centralized procurement policies, which spurred the willingness to adopt domestically produced equipment to reduce costs and ensure a secure supply. However, in my view, it was the pandemic that truly accelerated the localization of the upstream tools industry. Before the pandemic, China’s biopharmaceutical companies relied entirely on foreign suppliers such as Cytiva and GE. The outbreak of COVID-19 led to supply gaps from these foreign companies to Chinese pharmaceutical firms. Downstream customers were unable to place orders as scheduled and had to begin trying domestic products. Taking NanoMicro Tech as an example, the pandemic accelerated our development, with our performance nearly doubling last year.”
However, in the chromatography resin industry where Nanomicro operates, technological innovation remains the core. Once technical bottlenecks are overcome and product performance reaches or exceeds international standards, market acceptance follows readily. We place great emphasis on achieving localization at the source; therefore, during the pandemic, our raw materials were predominantly sourced from domestic suppliers. This enabled us to provide consumables and separation and purification technologies to the biopharmaceutical sector in a timely manner, thereby driving corporate growth. Thus, there is no doubt that the pandemic has indeed accelerated the rapid development of China’s upstream equipment and consumables industry.”
Will the favorable impact of the pandemic on upstream life science tools accelerate the frequency of capital market investments in this sector?Wang Jianfei, Managing Director at Legend CapitalFrom an investor’s perspective, we offered the following viewpoint: “We believe that the pandemic was an unforeseen, black-swan event for the industry. Therefore, when assessing industry dynamics, we primarily analyze and judge based on factors such as the development and maturity of upstream technologies, customer acceptance, shifts in demand, and the introduction of healthcare industrial policies. At the onset of the pandemic, there were diverse opinions regarding its trajectory. However, we did not make substantial changes to our investment decisions based on simplistic judgments. The more profound impact of the pandemic has been deepening our dialogue with entrepreneurs, which has gradually enhanced our understanding of the industry’s underlying patterns. In our view, this sector will require a prolonged period of competition before true winners emerge.”
Amid the growing fervor in the upstream medical device and consumables industry, what exactly is capturing the attention of capital markets?
As a publicly listed company, NanoMicro Tech holds a certain degree of influence. Jiang Biwang shared his observations on the evolving dynamics of China’s capital market: “NanoMicro Tech has demonstrated strong stock performance since its IPO, indicating that we have gained recognition from the capital market to some extent. I believe this recognition stems not primarily from our current sales or profit figures, but rather from our technological innovation capabilities. This reflects a broader shift in China’s capital market, which is no longer focused solely on financial statements but places greater emphasis on foundational technologies. NanoMicro Tech is genuinely capable of overcoming world-class technical challenges, particularly in the precise manufacturing of microspheres, where we have achieved global leadership. It is precisely our unique technology that has highlighted our innovative strength and drawn the attention of the capital market.”
Wang Jianfei provided an analysis from the perspective of primary market investment logic: “At present, there is a consensus in the primary market that the life science tools industry is a valuable sector, and an increasing number of professionals will seek opportunities in this field in the future. However, since primary market investments tend to focus more on startups, we have also observed the development risks associated with these emerging enterprises. Leading companies such as Hanbang, Nanomicro, and Beianji will increase their investments in certain niche areas through strategies like equity investments and partnerships in the future. This poses greater challenges for startups and for investors operating in the primary market.”When evaluating a company, the capital market should not focus solely on revenue growth, as this can sometimes be driven by transient spikes in downstream demand. Instead, it is long-term technological accumulation and expertise that earn customer recognition and build mutual trust with clients in the biopharmaceutical sector, thereby securing a competitive position in the industry over time. Consequently, new entrants in this sector face considerable pressure.
“Given this current landscape, let us return to investment strategy. We do not chase short-term gains; instead, we focus on the growth of corporate value and the development of core technologies. In fact, we have found that the investment logic from 2018 and 2019 is no longer quite suitable for investing in startups. Therefore, we now prefer companies with high barriers to entry and long-term technological accumulation, as they are less easily replaceable and possess more solid value. At the same time, I believe that,”Companies that focus on accumulating technological expertise require long-term commitment; they should diligently engage in research and development as well as application promotion. Only by being fully prepared can they seize business opportunities.”
Li Shengying believes: “From the perspective of the upstream equipment sector, I think pharmaceutical companies primarily focus onDevice Stability, ensuring safety in material production.
Second,Accuracy. The requirement for each production run is the reproducibility of spectra and data, which places stringent demands on the system’s accuracy and reproducibility. Any deviation may be interpreted by regulatory authorities as a different outcome, leading to regulatory challenges and the potential loss of the entire batch of materials.
Third,Regulatory Challenges, regulatory compliance and validation requirements for the software, among others, are all points of concern during actual customer use.”
Liu Xuping also provided insights: “For cell culture media, the core concerns of pharmaceutical companies mainly include four aspects:
First,Product Performance, culture media have their own specificities; different media can lead to significant variations in product expression levels, which reflects differences in the performance of culture media products. Therefore, BeiAnJi must prioritize source innovation in research and development to ensure that its products maintain a leading edge in performance.
Second,PriceAfter all, culture media are part of the upstream supply chain. No matter how superior the product performance is, if the price is too high, it will not be adopted. Currently, domestically produced culture media in China are generally priced at 60-70% of imported products, offering a certain price advantage.
Third,Stable Supply, currently, relying on imported products carries a risk of supply disruption and involves longer procurement cycles. However, if switching to domestically produced products fails to improve the procurement cycle, there can be no assurance of supply security or stability. Therefore, when selecting products, customers prioritize supply stability and examine whether upstream raw material suppliers are also localized. The onset of the pandemic has made supply chain stability particularly critical.
Fourth,Quality System"Consumables are long-term use products, especially after the drug is launched, they may be used for 10-20 years. Therefore, whether the quality of each batch of products is consistent and reliable in the long term is a key focus for enterprises. Currently, China does not have a unified standard for serum-free culture media. It is recommended to follow an international route first, such as Beianji, which is currently undergoing FDA registration and EU ISO13485 quality system certification. In the future, it can support partners in achieving declarations in China-US and China-EU, and also enable the sales of culture media products in European and American markets. Of course, it would be best if China could introduce its own standards for serum-free culture media in the future."
With the emergence of novel therapies such as cell therapy and nucleic acid-based drugs, the upstream equipment and consumables industry will face new demands as well as challenges in expanding into international markets. What is the optimal strategy to address these developments?
Jiang Biwang believes that technological innovation remains the optimal choice: “There is no ceiling for truly innovative enterprises in China today. Although dedicating oneself to developing foundational technologies and pursuing breakthrough innovations over the past decade has been a long and arduous journey, the path actually grows broader as one progresses. Therefore, I believe Chinese companies need to reflect on how to drive innovation and develop foundational technologies; only in this way can they seize continuous opportunities.”
Li Shengying mentioned: “I believe the priority now is to refine, detail, and stabilize our products, thereby enabling us to compete effectively with international brands."Another point is to form an alliance with domestic upstream and downstream partners, advancing and retreating together. Only through this approach can we systematically mitigate risks when facing the comprehensive competition from international giants."
In the post-pandemic era, how to consolidate one’s market position remains a challenge. Liu Xuping added, “First, we must prioritize technological innovation and refine our products; second, we should differentiate ourselves in terms of marketing, cost-effectiveness, and quality, while ensuring robust international certifications and audits. I believe that ‘"Smart Manufacturing in China"“Internationalization is certainly the way forward.”
Wang Jianfei concluded, “It is difficult to win through a defensive strategy alone; we have now entered a stage where pursuing internationalization requires an offensive approach. How should we go on the offensive? Companies need to consider strategic issues, such as which countries to enter first, what types of partners to collaborate with, and which segments of the industry chain to target. The domestic market has provided Chinese enterprises with a historic opportunity. Over the two years of the pandemic, Chinese companies have rapidly enhanced their capabilities, laying a solid foundation for them to compete in the international market.”
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