Why investors should pay attention to biotechs focused on China
Chinese demand has sparked ASX-listed food and resources stocks — but health innovators may benefit most, says MTP Connect CEO Sue MacLeman.
How do Australian medtech and pharma stocks stack up against their global counterparts, particularly in Asia?
There’s no denying China is our largest trading partner, largest export market and largest import source.
The move towards that China economy that we have seen in the agriculture and resource industries has only in recent years reached biotechs and medtech.
Large Australian pharma the likes of CSL and Cochlear have already understood the value of that market and established a China strategy — and now the smaller players are following suit.
Combined, medtech and pharma was Australia’s 10th largest export in 2016 and added $4.9 billion in gross value to the Australian economy.
There have been several recent big deals between ASX biotechs and US or European partners. Will we see the same coming from China?
We have already seen interest from China in the buyout of Icon Cancer Care Group for $1 billion last year or the $1.7 billion sale of radiation treatment firm Genesis Care to China Resources the year before.
On a smaller scale, Oventus Medical (ASX:OVN) entered into a worldwide distribution deal with a Hong Kong-based group to push it into China last year.
The Chinese market is looking for solutions to their health challenges and there is no denying there is an appetite for the products we can create in Australia.
We took a strong delegation of Australian biotechs — the likes of small caps Regeneus (ASX:RGS) and Bionomics (ASX:BNO) — to an invest-and-partnering event in Hong Kong and Shanghai this week and the feedback was overwhelmingly positive.
What kind of Australian biotechs are most likely to get attention from Chinese investors?
There is a real focus on clinical trials and incubators in China as a pathway to success.
For any Australian medtech or biotech, linkages to global markets is critical. By comparison of population our market here is just a fraction of that offered in China and the broader Asian markets.
What makes our Australian innovations most likely to succeed in this market?
The diversity of the Australian population bodes well when it comes to clinical trials and that is certainly a drawcard for Chinese drug developers who have a largely mono-cultural population.
Further to that, our regulative framework for clinical trials is strong and is among one of the fastest places to get a clinical trial started.
Add to that our world-class infrastructure, good intellectual property protection and data integrity and security and it really is hard to dispute.
I think it resonates with Asia that we have a national innovations science agenda with solid incentives to invest.
We are positioned well in cutting-edge areas likes precision medicine, regenerative medicine and medical devices.
How do you see the future for Aussie small cap biotechs targeting China?
I think we will see more China-specific deals done for Australian tech.
While the multinationals are still the ones unlocking global value. I think the Chinese investors and companies are more than willing to take our tech and leverage it for the challenges they face.
The China-Australia free trade deal only encourages this further.
Flow is from investment side — rather than Chinese companies coming here. They bring inbound investment to Australia so they can progress those products for their own market.
Sue MacLeman is the CEO of the MedTech and Pharma Growth Centre (MTP Connect)and has more than 25 years’ experience as a pharmaceutical, biotechnology and medical technology executive with roles in corporate, medical, commercial and business development at Schering-Plough Corporation (now Merck), Amgen, Bristol-Myers Squibb and Mesoblast Ltd.
Sue has also served as CEO and Board member of several ASX and NASDAQ listed companies in the sector and is currently a non-executive director at RHS Ltd., veski and Oventus Medical Ltd.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.