Navigating Industrial Transformation: How Chinese Pharma Enterprises Break Through via Innovation and Sustainable Development

The pharmaceutical industry is undergoing profound innovation and transformation.

On one hand, the global biopharmaceutical capital market has cooled, with narrowing IPO pathways and a slower pace of corporate listings, while mergers and acquisitions in the healthcare industry have accelerated significantly. On the other hand, medical innovation is thriving, as the industry transitions from follow-on innovation to source innovation, with new opportunities continually emerging.

How to Unearth the Value of Technology and Innovation in an Uncertain Environment, Balance Risk and Return: The Investment Logic in the Healthcare Market Faces New Challenges. Whether Every Effort Yields Tangible Results and Enables “Sustainable Development” Poses a Critical Test for Innovative Medical Enterprises Regarding Innovation, Survival, and Growth.

In a challenging macroeconomic environment, financial services have become a key element in the ecosystem of medical technology innovation. Among these, fund-of-funds (FOFs), as the most suitable form of government-guided funds, have emerged as an important bridge linking scientific and technological achievements, small and medium-sized enterprises (SMEs), industry leaders, and financial institutions. They also represent a crucial measure for the government to guide, support, and empower industrial development.

On November 17, 2023, the 2023 Changping Pharmaceutical and Healthcare Financial Investment Innovation Forum was held in Beijing. Hosted by the People’s Government of Changping District, Beijing, and co-organized by the Administrative Committee of Future Science City (Life Science Park Administrative Committee), the Administrative Committee of Zhongguancun Science Park Changping Park, the Financial Services Office of Changping District, Beijing Changping Science and Technology Park Development Co., Ltd., Beijing Zhongguancun Life Science Park Development Co., Ltd., and VCBeat VB100, the forum brought together representatives from government departments, regulatory bodies, academia, industry, healthcare, and the investment community. Participants engaged in in-depth discussions on leveraging finance to drive technological breakthroughs, analyzing the current status and trends in pharmaceutical and medical device R&D, and exploring pathways to deepen the integration of government, industry, academia, research, healthcare, and finance. The purpose and significance of this forum, organized by Changping Development (Changfazhan), lie in seizing the synergistic development of finance and innovation, thereby unlocking a vital source of support for innovation.

Forum Site

In recent years, with a significant improvement in the overall effectiveness of China’s national innovation system and breakthroughs in key core technologies, the healthcare industry has made substantial progress in its innovation capabilities. A clear trend is that follow-on innovation in the healthcare sector is nearing its end, being replaced by original innovation as the focal point in the new era of Chinese venture capital.

As the national financial management center, Beijing boasts a comprehensive financial infrastructure and market system across institutional, project, and service dimensions. The formal establishment of the Beijing Stock Exchange in 2021 introduced more diversified and inclusive listing criteria, creating greater opportunities for innovative pharmaceutical and healthcare enterprises to access the capital markets.

Wu Yun, Director of the Beijing Stock ExchangeThe “19 Measures for Deepening Reform” of the Beijing Stock Exchange (BSE) were interpreted on-site. He stated that the most prominent feature of these measures is their focus on liquidity and market attractiveness—the issues of greatest concern to market participants—thereby creating room for sustained future development. As an emerging market, the BSE’s core task in achieving high-quality development is to expand its listings with high-caliber companies. He advised enterprises in Changping District to leverage the advantages of having this exchange on their doorstep and seize this valuable window of opportunity.

Director Wu Yun of the Beijing Stock Exchange Provides On-Site Interpretation of the BSE’s “19 Measures for Deepening Reforms”

The healthcare industry is currently at an inflection point for innovation and within a period of adjustment, requiring companies to chart a course for development that balances innovation with survival. Meanwhile, how to collaboratively build an ecosystem for original innovation and translate innovative achievements into industrial applications to benefit patients has emerged as a new imperative of the times.

In this regard,Wang Ying, General Manager of ChangfazhanIn the interview, it was stated that innovation and survival are not contradictory; only with solid survival can there be a foundation for innovation, and only through innovation can companies build core competencies for sustainable development. Currently, the global healthcare investment market has entered a downturn, which is precisely forcing companies to pursue more differentiated innovations that better address urgent clinical needs.

Furthermore, enterprises should develop mid- to long-term plans for value realization to focus capital, talent, and resources on teams and pipelines with genuine innovative potential. In this process, the government serves as both a stabilizer and an amplifier.

According to Wang Ying, as a key hub for Beijing’s efforts to build an innovation engine for the pharmaceutical and health industries, Changping District is focusing on sci-tech finance, accelerating the development of a multi-tiered capital market and a cluster of mother funds for Changping’s technology industries, creating a full-lifecycle matrix of fund products, and further attracting diverse financial resources and social capital to actively participate in regional development.

As of now,Changping’s Technology Industry Fund-of-Funds Cluster Has Established Strategic Partnerships with 23 High-Quality Healthcare Investment Funds, Reaching a Total Fund Size of RMB 16.7 Billion, with a strategic focus on innovative pharmaceuticals, precision medicine, and high-end medical devices. It has successfully facilitated the public listings of nearly 30 healthcare companies, including BeiGene and InnoCare Pharma, thereby providing strong support for Changping District in building a globally competitive hub for the healthcare industry.

At the forum, innovation and global expansion emerged as frequently mentioned keywords.

In the realm of innovative drugs, China has achieved numerous milestone accomplishments in R&D following more than a decade of “rocket-like” catch-up growth. Nevertheless, a significant gap remains compared to Europe and the United States, particularly in terms of a severe scarcity of source innovation. The industry has clearly recognized the importance and urgency of source innovation. Any discussion of source innovation must address clinical needs and industrial chain layout.

Innovative Medicine Roundtable Forum

At the forum, multiple companies regarded clinical value as the paramount merit of innovation, with close collaboration with clinical practice emerging as the most critical source of innovative ideas. Zhang Yi, Managing Partner of Huagai Medical’s early-stage fund, stated that, first, source innovation must address robust demands, whether they stem from clinical needs or industrial development requirements. Second, source innovation requires support from the industrial ecosystem; for instance, the development of cell and gene therapy (CGT) relies on the infrastructure provided by contract research, development, and manufacturing organizations (CXOs). Finally, innovation demands a long-term orientation, embracing failure while maintaining effective risk control.

Meanwhile, in today’s world where global supply chains remain fragile, supply chain capabilities have become a critical focus that enterprises cannot afford to overlook. Shang Yuanfang, Founder and CEO of CytoNiche Biosciences, stated that the impact of the previous pandemic highlighted the vulnerability and competitive dynamics of supply chains. Currently, upstream suppliers are more proactive, while downstream partners are more open, with industry players actively building their own industrial chain systems to engage in global competition.

In the medical device sector, although China has become the world’s second-largest market after the United States, over 90% of high-end medical equipment in the country has relied on imports over the past few decades. Driven by both policy support and technological innovation, Chinese medical device companies need to seek new opportunities in “import substitution” and “going global.”

Medical Device Roundtable Forum

Yi Hongxiang, Partner at the Shenzhen Capital Group’s Hongtu Healthcare Industry Fund, stated thatThe domestic policy is import substitution,After a golden decade, many sub-sectors of China's medical device industry have achieved import substitution, yet investment opportunities remain.The international policy is to pursue export upgrades,Going global does not necessarily require innovative companies to go it alone; they can acquire established foreign firms to leverage their resources.Finally"Leveraging external resources to expand globally"，Startups can establish connections with publicly listed companies to leverage their resources and enter markets with which they are unfamiliar.

Compared with other industries, the healthcare sector has a greater need for innovation while also facing higher risks. Li Qichen, Co-founder and General Manager of ImmuneOnco, believes that amid the capital winter and fluctuations in the industry cycle, the value and significance of innovation will become even more prominent. To mitigate risks, companies should focus on their core competencies, while the market requires greater inclusiveness and policy support.

“Innovation is notOneObjective,and“It is a process. One must enjoy this process, delving deeper and venturing into uncharted territory.”Zhou Yixin, Director of the Department of Orthopedic Surgery at Beijing Jishuitan Hospital, Capital Medical University, and Professor and Doctoral Supervisor at Peking University and Capital Medical University, stated.

Against the backdrop of the nation’s promotion of technological innovation and industrial transformation and upgrading, a large number of industrial parks have begun to actively explore new pathways. For these parks, possessing professional industrial operational capabilities has become particularly crucial.

As industrial parks gradually move towards specialized development, the pain points in investment promotion, operations, and services also lie in the cultivation of a professional talent pool. Wang Hui, founder of Hongrun Health Group, stated,Professional Investment Promotion and Operations Teamto better identify servicesProjectneeds at different stages of development, thereby providing targetedService.Meanwhile, it is difficult for specialized industrial parks to break away from the broader regional industrial context in their investment promotion efforts. How to leverage the advantages of these parks by aligning with local industrial policies is a key issue that requires careful consideration.

Industry Ecosystem Roundtable Forum

Chang Development is committed to being industry-savvy professionals. Wang Ying stated, “Our team possesses professional and industrial backgrounds in medicine and health across business attraction, industrial services, the development of specialized technical platforms, and investment. This enables us not only to understand the industry and corporate needs from the client’s perspective but also to earn greater trust and establish a common language with our clients.”

“Chinese enterprises are not lacking in innovative ideas or original products; what they lack is clinical application.TrialDesign ofand advancement。”Zheng Xiaoyu, Executive Dean of Beijing Gaobo Hospital and Beijing Gaobo Boren Hospital, noted that the challenges faced by innovative drug companies are commonly attributed to difficulties in securing funding and slow progress in clinical trials.

Pharmaceutical innovation companies need to engage with clinical principal investigators (PIs) and researchers as early and as quickly as possible, focusing on the interrelationships among clinical trial design, dosing, effects, and exposure. From this perspective,Can industrial parks build an industrial end andInteractive Platform for Clinical CommunicationSignificant Implications。

In the early stages of industrial park development, compared with assessment indicators such as control rate and occupancy rate,Tenant CompaniesWhether or not withIndustrial Positioning of the ParkMatching Is More Important. Only by promoting the aggregation of industrial resources and projects on this foundation can we attract capital and talent, thereby driving the development of service systems across the entire industry value chain.

Chang Development has also built core advantages in this area. According to Wang Ying, as a connector between the government and the market, Chang Development possesses differentiated advantages and the ability to integrate resources. "We actively leverage government resources, based on our in-depth understanding of the industry, on the one hand, it can convey recommendations for optimization and improvement to the government; on the other hand, it can also gain greater trust and support from the government when introducing cutting-edge innovative projects. Finally, we adoptMarket-oriented operational mechanisms integrate diverse expert resources across the industrial chain and professional partners through symbiotic co-development and diversified open collaboration.“Wang Ying said.

Currently, whether viewed from the macroeconomic perspective of the tail end of the US dollar interest rate hiking cycle, or from the valuation pullback across the entire sector, the pharmaceutical industry has entered a “bottoming-out phase.” Although many listed pharmaceutical companies have achieved stable or even substantial earnings growth, and numerous innovative drug developers have reached a new stage where their pipelines are beginning to yield results, these objective realities have not been adequately reflected in the capital markets. How to survive through the cycle has now become a consensus among biopharmaceutical investors and enterprises alike.

Capital Inquiry Roundtable Forum

Zheng Yufen, founder and chairwoman of Yueyin Medical Fund, believes that industry cycles also present major opportunities for sector reshuffling, with risks and opportunities always coexisting. “Adversity breeds innovation; if the primary market becomes increasingly challenging, one could consider shifting towardPrimary private market and even secondary marketGoExpansion.“Tranquility breeds wisdom. The industry adjustment period is also an opportune time to strengthen internal capabilities, allowing for reviews of past performance as well as forecasts and research on the future of the healthcare industry.”

Liu Yu, General Manager and Managing Partner of BGI Win-Win, also stated that amid the cold snap, the essence of investment will ultimately return to value, in an ever-changing macro environment,Innovative Technologies, Superior ProductsandExcellent OperationsAll are unchanging core logics.。

In an era defined by innovation and transformation, enterprises are facing intensifying competitive pressures, and the industry has put forward entirely new requirements for investors’ capabilities. It is no longer sufficient to merely enhance one’s own investment prowess; investors must also possess a robust fund management system and strong value-added service capabilities. Against this backdrop,Post-Investment Empowermentand industrial ecosystem layout capabilitiesCompletedBecomeCapitalCore Competitiveness。

Wang Ying also stated in the interview that post-investment services are becoming increasingly important in this era. Leveraging its professional team, Changfa Zhan will help enterprises optimize capital planning and talent acquisition. “This year, we established specialized executive search and consulting firms focused on human resources to help scientists attract more professionals with industrialization experience during the innovation commercialization process. In light of the cautious approach many take toward fixed-asset investment, we have also set up a dedicated company specializing in the fit-out of laboratories and GMP-compliant cleanroom production facilities, as well as the operation and maintenance of related equipment and infrastructure. By harnessing professional expertise, we aim to help early-stage innovation teams accelerate the industrialization process with lower investment, higher efficiency, and greater cost-effectiveness.”

Moreover, the government has provided substantial support in terms of production and innovation factors. For instance, Beijing Municipality established a dedicated task force for the pharmaceutical and health industry, while Changping District set up its own district-level task force. These initiatives integrate resources across industrial, regulatory, and application-scenario departments, enabling enterprises to streamline the entire industry chain encompassing R&D, clinical trials, regulatory approval, and hospital access.

Furthermore, the Beijing Drug and Medical Device Innovation Service Station has been established within the Zhongguancun Life Science Park. By introducing pre-consultation services into the industrial park, it facilitates close communication between enterprises—particularly those with innovative products—and regulatory authorities, thereby guiding and driving regulatory innovation. Following product approval, health insurance and hospital administration bodies also conduct preliminary assessments to expedite the entry of innovative products into hospitals, thus benefiting patients more rapidly. Overall, this market-oriented platform integrates government resources to help companies navigate the current downturn and overcome challenges.

Amid the harsh winter, new forces are accumulating the energy to break through. The emerging trend in the healthcare industry is to invest early and in innovation.

At the forum, Bi Yuanfeng, Co-founder and COO of VCBeat, released the "2023 Global Healthcare Industry Capital Report." The report shows that as of the third quarter of 2023, the financing amount in the primary market of the global healthcare industry was approximately RMB 330 billion, a year-on-year decrease of 23%. AsChangping District: The Main Hub for the Development of Beijing’s Pharmaceutical and Health IndustriesThe healthcare industry has witnessed a surge in financing. Data shows that,2020–2023, Changping DistrictHealthcare IndustryA total of over 300 healthcare financing deals were completed, maintaining high activity with financing projects occurring every month. The cumulative financing amount reached nearly $3.7 billion (approximately RMB 27 billion), with both the number of financing deals and the cumulative financing amount hitting historical peaks.

VCBeat Co-Founder and COO Bi Yuanfeng Releases the "2023 Global Healthcare Industry Capital Report"

The report also points out,Despite the growing caution among investment firms, early-stage and small-scale investments remain the dominant trend, with innovation and R&D capabilities emerging as the key breakthrough points for startups.State-owned capital, represented by local government guidance funds, has made a strong entry into the market, becoming a significant driving force for investment allocation and the development of industrial clusters.

Changfa Zhan has consistently adhered to the strategy of investing in early-stage and small-scale enterprises, building diversified asset portfolios, strengthening and supplementing industrial chains, and fostering an integrated industrial ecosystem. In this domain, it has established unique core competencies. “Financial capital, as a vital source of liquidity, can support and leverage the development of the real economy. This relationship is one of mutual growth and reciprocal promotion.”We have invested in more than 20 specialized healthcare sub-funds, covering over 300 projects across China, including more than 80 enterprises in Changping District. Additionally, we have attracted approximately 40 companies to establish and develop their operations in Changping.“Moreover, the high-potential quality enterprises in Changping District have provided a robust pipeline of investment opportunities and generated strong returns for our cooperative sub-funds, including our own direct investment fund,” introduced Wang Ying.

For instance, Chang Development’s investment in Aier Medical’s pre-IPO round not only yielded strong returns in the capital markets, but also led to the subsequent establishment of a direct-investment fund jointly with Aier Medical. This partnership focuses on building an extended ecosystem in the ophthalmology sector, spanning high-value consumables, medical devices, and pharmaceuticals. It serves as an exemplary case in terms of both financial returns and strategic significance.

For another example, in the realm of early-stage projects, Chang Development invested in TopEye Medical, an ophthalmic OCT device company spun out from Tsinghua University. Chang Development recognized the team’s forward-looking learning and growth capabilities at an early stage. Subsequently, TopEye Medical achieved multiple milestone accomplishments and secured multiple rounds of investment from leading institutions, thereby validating Chang Development’s expertise in evaluating and selecting early-stage and small-scale ventures.

A capital winter is precisely the season for sowing seeds. Although investment strategies in the capital market may tighten, investors will not cease investing. More importantly, the capital winter will endow investors with greater rationality in their judgment and drive entrepreneurs to build genuine core competitiveness, enabling them to weather the寒冬 and welcome the spring.

As innovative enterprises and capital become more rational and cautious, only teams with genuine core technological capabilities and commercialization potential will thrive against the tide. Investment institutions are no different; profound industry insights and robust post-investment value-added services enable them to identify and invest in a cohort of promising companies based on relatively reasonable valuation and pricing logic during this period.

“Amidst crisis lies opportunity; the key remains toBuild Your OwnCore Competitiveness.” Wang Ying concluded.