00:00I mean, you have, perhaps, of everybody, a really good pulse of what's going on in the Chinese healthcare space,
00:07the entire sector.
00:08If you had to pick one or two trends that you think a global audience should be paying attention to,
00:12what would be those one or two trends?
00:14The ability, the Chinese biotech industry is addressing one of the most important bottlenecks in creating new drugs, which is
00:25speed and cost.
00:26So China has come in to address that challenge.
00:30And the other trend I'm looking at is how excited everyone is talking about AI in healthcare.
00:37But we still have to understand, you know, what AI in health can do and cannot do.
00:43In terms of drug development, which seems to be where most people are attaching AI to,
00:49are there any tangible sort of measures of progress that have really told us that there has been a value
00:56out there?
00:57Oh, yeah.
00:59When we think about cost, the number is pretty daunting.
01:03It's about $2 billion on average to create a new drug.
01:06But the two-third of that number is related to clinical development and associated with manufacturing costs to manufacture clinical
01:20materials.
01:22AI has done a lot in the first part in designing a new drug.
01:30So even though AI has done a lot, but it is not able to address the whole $2 billion ticket
01:38size.
01:39Okay.
01:39Yeah.
01:40So two-thirds of that is related to clinical and clinical manufacturing.
01:44Which seems to be structural in nature, which is why I want to talk about regulation in China in particular
01:50with you,
01:51because you're familiar with that.
01:52But certainly in the regulatory environment has been very supportive of what we see today,
01:57just global leaders in terms of biotech and drug development,
02:01and that showed up in the form of out-licensing deals over the last two years.
02:05What are your thoughts, the outlook on both, regulation and out-licensing?
02:10Regulation-wise, I think China does have a very efficient approval regime.
02:17The reason being that China came into the picture late.
02:21How is it a good thing?
02:23Because you could learn from prior failures.
02:25Okay.
02:26So China kind of established an approval regime 15 years ago.
02:31So brought in a lot of global talents and learned to design a process that is more efficient.
02:40It is able to do away with a lot of the inefficient part of it.
02:44So it has a workable and efficient approval regime.
02:49That's one side of the picture.
02:53The underlying reasons for China biotech to be doing so well,
02:57that it's out-licensed revenue accounted for 50% of the global total as of last year, end of last
03:05year.
03:06Actually, it's caused by three fundamental reasons.
03:08One is R&D leadership.
03:12China has conducted the highest number of clinical trials on innovative drugs last year.
03:19And according to Nature Index, China ranked number two in the world.
03:25And again, according to Nature Index, eight out of the ten top research centers are in China.
03:32So China has the ability to innovate, whether it's ultra-fast following or, you know, zero to one.
03:41And the second fundamental reason is that China has a pool of very talented researchers and engineers.
03:51China has been investing into applied science for two decades.
03:57So you need to have R&D and industrialization.
04:01R needs to be there, and more importantly, D needs to be there.
04:05So we have raised, and we have invested in applied science.
04:09We have raised a team of, you know, applied science researchers and engineers.
04:13And the last factor is for any biotech industry to thrive,
04:21we need to have infrastructures, mainly composed of CIOs and CDMOs.
04:27So with these three, it is, you know, it is what it is today.
04:33It seems unparalleled in terms of, you know, the scale, scope, depth, speed, even on the cost side,
04:40unparalleled to what China brings to the table.
04:42I'm trying, I'm struggling to find what the risk is.
04:45Is the risk that you're just coming up with very competitive companies,
04:48and is it just them competing with one another, which is similar to the GANAP we're seeing in other industries?
04:55The risk of mining comes from within.
04:58Because, you know, multinationals are, not only multinationals,
05:03multinationals are independent biopharmers or smaller biotech companies in the U.S.
05:08still, they've all come to China to source early stage assets,
05:12whether it's buying outcry, outlicensing, or form a new cause.
05:17So a lot of the biotechs in China are following that trend, following buyer's trend.
05:23So there are clusterings on the same indications, on the same targets, on the same indications.
05:31That kind of goes against the spirit of zero-to-one breakthroughs.
05:38Okay.
05:39I want to ask a final question for you.
05:42Valuations on the VC front, and just your thoughts on the exit market,
05:45particularly the public market.
05:47You used to be with Goldman, you're familiar,
05:48and we've had this really big moment in the spotlight with a lot of the listings here in Hong Kong.
05:53How are valuations looking?
05:54Valuations are becoming more realistic for public market.
06:01When I say realistic, as opposed to 2018, 2020, that period,
06:08then Hong Kong just introduced Chapter 18A
06:12to allow now pre-revenue biotech companies to listing in Hong Kong.
06:19So there was then a scarcity of companies that can be introduced to the public market.
06:26So that kind of drove valuation off the roof.
06:30And also at that time, the quality of the biotech companies were not as good as they are today.
06:39So I think public market valuation will become more reasonable for two reasons.
06:44Investor learned a lesson, and the supply of China biotech, the quality of the supply is better.
06:51Step 6 for one.
06:51Step 6.
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