GaoTek Investment's Wang Haijiao: Pandemic Positively Impacted IVD Industry; COVID-19 Testing Likely to Become Routine

As cost-containment measures under China’s national medical insurance scheme shift focus from pharmaceuticals to medical consumables and then to laboratory tests and diagnostic procedures, whether the in vitro diagnostics (IVD) industry will be subject to centralized volume-based procurement has become a hot topic of discussion. Although many industry insiders argue that implementing volume-based procurement for IVD products is extremely challenging, preliminary steps are already underway—such as the implementation of standardized coding and pathology-based payment systems—indicating that centralized procurement for IVD is imminent. Wang Haijiao, Executive Partner at GTJA Investment Group, stated, “In the long run, national medical insurance policies will exert downward pressure on the IVD industry.”

In the world, things wax and wane. While centralized procurement has posed significant challenges to the in vitro diagnostics (IVD) industry, the sudden outbreak of the novel coronavirus pneumonia epidemic during the 2020 Spring Festival ushered in a highlight moment for its development.

What impact has the epidemic had on the IVD industry? What development opportunities does the IVD industry face under the influence of the epidemic? Which sub-sectors deserve attention in the post-epidemic era? Will COVID-19 testing become routine? What are the market value and investment potential of COVID-19 testing? On March 12, 2020, VB Group Interview invited Wang Haijiao, Executive Partner of GTJA Investment Group, who shared his insights on these issues. VCBeat has compiled his key viewpoints.

Wang Haijiao is an Executive Partner at GTJA Investment Group. He holds a Master’s degree in Biology and an MBA from Fudan University, as well as an EMBA from Shanghai Advanced Institute of Finance. Previously, he served as Assistant to the General Manager at Boyang Biological Co., Ltd. and as Investment Director at Suzhou Longyue Venture Capital. With over ten years of experience in healthcare entrepreneurship, corporate management, and investment, he has cumulatively invested more than RMB 6 billion. His investment portfolio includes Hotgen Biotech, BioSis, and Annoroad Gene Technology.

During this epidemic, the IVD industry demonstrated unique advantages. “If I were to rate the performance of China’s IVD companies during the epidemic, I would give them a score of over 100—more than full marks,” said Wang Haijiao.

From a clinical perspective, domestic IVD companies have independently developed diagnostic reagents, ensuring the supply of test kits to the front lines. At the national level, the in vitro diagnostics (IVD) industry has garnered significant attention from the Chinese government as a result of this pandemic. It has been proposed that “third-party diagnostic services should be prioritized, leveraging third-party testing laboratories to address sample testing needs.”

Furthermore, Chinese IVD companies demonstrated a strong sense of social responsibility during the pandemic, completing product R&D and production under significantly greater pressure than usual during the Spring Festival holiday. “When the outbreak emerged, many IVD companies were not focused on how to create commercial value, but rather on what they could contribute. This is the primary reason why IVD companies were able to rapidly mobilize for R&D and swiftly deploy to the front lines.”

Taking GTJA Capital’s investment portfolio as an example, Sansure Biotech and Zhejiang Bio-Tech developed some of the first domestically approved nucleic acid testing kits for SARS-CoV-2, making significant contributions to frontline disease diagnosis and prevention and control; Hotgen Biotech was the first in vitro diagnostics (IVD) company listed on the STAR Market and the first among publicly listed companies to complete the development of SARS-CoV-2 testing kits; Boscience developed China’s first chemiluminescent immunoassay kits for SARS-CoV-2 IgG and IgM antibodies to receive emergency approval from the National Medical Products Administration (NMPA); Huayin Health was one of the earliest independent clinical laboratories to support Hubei Province in its fight against the epidemic and one of Guangdong Province’s earliest designated institutions for SARS-CoV-2 screening; Microcyte was the first Chinese company to export SARS-CoV-2 testing kits to the European Union.

Wang Haijiao stated that the COVID-19 pandemic has had a highly positive impact on the IVD industry, elaborating on its beneficial effects from three perspectives.

First, the status of in vitro diagnostics has been significantly elevated.In the past, the clinical laboratory was often regarded as a subordinate department, occupying a marginal position within hospitals and wielding limited influence. During this pandemic, however, the primary task has been to diagnose whether patients are infected with the novel coronavirus (SARS-CoV-2). Consequently, the status of clinical laboratories in hospitals has significantly improved, and various diagnostic reagents have provided strong support for epidemic prevention and control efforts.

Second, product R&D has shifted from imitation to innovation.For a long time, the diagnostic reagent menus of most domestic IVD companies were essentially imitations of those offered by overseas leaders such as Roche and Abbott, providing them to users at lower prices. Few companies developed products based on domestic clinical needs. However, through this pandemic, Wang Haijiao noted that all novel coronavirus testing reagents were independently developed in China. These not only met the domestic demand for nucleic acid testing reagents but also achieved exports, assisting in the global fight against the epidemic.

Third, the relationship between product development and clinical needs has evolved from loose to tight.Previously, IVD companies paid little attention to clinical needs. During the pandemic, many companies rapidly obtained product certificates through emergency approval channels because they maintained close ties with clinical settings, enabling them to identify clinical needs early, quickly develop test kits for specific diseases, and conduct product validation. Wang Haijiao believes that this pandemic will drive a shift in mindset among IVD practitioners, making clinical needs the guiding principle for product development.

Amid the Positive Impacts of the Epidemic, How Can SMEs Seize Development Opportunities? Wang Haijiao believes that innovative small and medium-sized enterprises should prioritize technological innovation and clinical needs, conduct customer research and analysis by country and region, identify unmet needs, and develop related innovative products. For companies pursuing a generic drug strategy, Wang Haijiao advises that they must consider economies of scale and compete on cost.

Many people judged that, like the SARS outbreak of years past, this epidemic would be transient and thus hold little investment or market value. Wang Haijiao held a contrary view. He pointed out that while SARS had very high rates of severe cases and case fatality, the novel coronavirus, despite its strong infectivity, results in a large proportion of mild and asymptomatic cases, with a relatively low fatality rate. Therefore, COVID-19 testing may become routine, making this sector worthy of attention from investors and enterprises alike.

The pandemic has also enabled many people to identify new opportunities. For instance, it has spurred rapid growth in China’s internet healthcare sector, with the National Healthcare Security Administration issuing policies that explicitly include internet-based medical services within the scope of reimbursement from the basic medical insurance fund. In this context, many professionals in the in vitro diagnostics (IVD) industry have begun to consider whether internet healthcare can be integrated with the IVD sector. Wang Haijiao commented, “The challenges are substantial. Internet healthcare primarily targets consumers (B2C), whereas few IVD products are designed for direct consumer use; most are supplied to professional institutions. At present, the more viable approach is the integration of consumer genomics with internet-based services.”

Which niche sectors and innovative technologies deserve attention in the post-pandemic era? In response to this question, Wang Haijiao stated, “The pandemic has exposed our weaknesses in the field of microbial testing. Microbial testing is a long-underestimated area, and opportunities often lie within such undervalued domains.” It is evident that many next-generation sequencing (NGS) companies specializing in microbial analysis leveraged their technological advantages during the outbreak. Wang Haijiao believes that fields related to infectious and contagious diseases, such as microbial testing, are poised for significant growth in the near future. In addition, molecular diagnostics and point-of-care testing (POCT) also warrant close attention.

Click the link to watch the replay of the exciting live VB Group interview with Wang Haijiao, Executive Partner at GTJA Capital:https://m.qlchat.com/topic/details?topicId=2000008612076674