1. Presentation title UNCLASSIFIED

2. 2 China Healthcare & Lifesciences Roadshow

3. Life Sciences in China 2015 Presentation title UNCLASSIFIED

4. Agenda for today Background to China Life Science & Pharma sector Commercial Challenges Opportunities for UK Companies & Research Organisations

5. In general, a small percent of people account for a high percent of spending Distribution of health expenditures for the U.S. population, by magnitude of expenditure (2009) 1% 5% 10% 45% 65% 22% 50% 97% $90,061 $40,682 $26,767 $7,978 Annual Mean Expenditure In the United States, 10% of patients account for 65% of costs Efforts should be focused on patients with the highest costs The situation may be quite similar in China

6. In China, total healthcare expenditure is growing rapidly…

7. Healthcare expenditure is growing rapidly… but remains below OECD average (China targets 7% by 2020) China: 5.4% of GDPOECD: 9.3% of GDP

8. Out of pocket expenditure is decreasing as government expenditure is increasing.

9. China is a major contributor to global pharmaceutical market growth IMS Analytics

10. There has been double digit growth in drug spending for many years in China Standard Chartered. (2014) “China health care”. Equity Research.

11. China will soon be the world’s second largest drug market after the US, larger than Japan the top 5 EU countries by sales value

12. Drug spending still constitutes close to 40% of total healthcare expenditure(THE) but is slowly falling

13. Drug spending as a percent of THE in China is far higher than in the OECD, even after the declines of the last several years Source: OECD Health Statistics and China Statistical Handbook 2013

14. 740-50% of both inpatient and outpatient costs Center for Health Statistics and Information, 2013; Meng et al., 2005

15. Background: There are many ministries, commissions, and organizations involved in healthcare There are many different bodies responsible for different aspects of healthcare in China (see next slide for org chart) –NHFFC, NDRC, MoHRSS –MOF, MoCA, MIIT, MOFCOM, CIRC –CFDA, SIPO, SAIC, SATCM These agencies can sometimes have conflicting goals, which can complicate the reform process (i.e. MOF limiting the amount of government subsidies NHFPC calls for)

16. Rationalizing prescribing: Declines in antibiotic sales growth A sample of 420 hospitals showed declines in growth of second/third line antibiotics (and more use of more appropriate first line drugs) following national campaigns. Tao et al. (2013) “Analysis of the Current Situation of Antibiotics Use in China: A Hospital-Based Perspective”. Therapeutic Innovation & Regulatory Science, 47(1), 23-31. First-line Second-line: Third-line:

17. Standard Chartered. (2014) “China health care”. Equity Research. Market Fragmentation: Multiple distributors and wholesalers cause price to go from RMB 20 to RMB 98 between wholesaler and patient

18. Factory price (RMB 20) increasing many times before getting to patient (RMB 120) from Chinese colleagues

19. Market Fragmentation Significant fragmentation exists at the manufacturing level, as well as along the distribution chain. In 2011 there were: –4,629 drug manufacturers –13,853 drug wholesalers –440,248 drug trading enterprises This fragmentation has led to significant problems with quality; China’s GMP standards do not meet international standards

20. UK Life Science Sectors Pharmaceuticals Genomics MedTech Big Data

21. Pharmaceuticals What’s Included? Drug Manufacture/Services use technology to R&D - innovative skills and knowledge lead drug development. Fundamental and applied research from UK Universities. Why is it a Priority? China has an increasing requirement for new drug therapies and clinical services to meet the needs of its aging population. A population exposed to an increasingly western life style and with it many of the concurrent conditions e.g. heart disease and cancer. China’s own Pharma industry is seeking opportunities to license and JV with innovative technologies. China current spends less than 1.5% of its GDP on life science/Pharma R&D. Size of Market China plans to spend 75 Billion RMB ($11.8B) on its biopharmaceutical and medical technology sectors under the 13th Five Year Plan China’s $50 B pharmaceutical industry is dominated by generics and TCM it is under pricing pressures. Government is pushing the industry to move up the value chain e.g. biologics Companies/ Stakeholders Enigma Diagnostics & Beijing Leadman Biochemistry Co., Ltd signed a £50m joint venture agreement to support the growing healthcare needs of China’s population. Phynova, market approval for a traditional Chinese medicine (TCM) from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for its product, Phynova Joint and Muscle Relief Tablets Recent Activity

22. Genomics Working with industry and government partners to develop both technology lead solutions to Data capture and use and construct appropriate data management policies for gathering and sharing health information. Why is it a Priority? 1.China has invested in the basic research of genome science Newborn screening programs are mandated throughout the country but vary between provinces and territories Genetic tests are encouraged while there are only one accredited state laboratory and few territorial laboratories in China. 2.China needs to develop a fully integrated and quality driven screening service deploying latest UK technology. Size of Market Analysts estimate the market to be worth 50 billion Yuan ($8 billion) a year, based on the number of expected births and a testing fee of 3000 Yuan ($480) each. In the United States, the comparable market is estimated to be worth upward of $1.3 billion a year. Enigma Diagnostics & Beijing Leadman Biochemistry Co., Ltd signed a £50m joint venture agreement to support the growing healthcare needs of China’s population.

23. Presentation title UNCLASSIFIED UK Life Science Organisation https://www.gov.uk/government/organisations/ukti-life-sciences- organisation We help UK life science companies to do business overseas We help foreign life science companies to invest in the UK. We provide support from the earliest stages of research and development through to clinical trials, commercial operations and business partnerships

24. Contact the UKTI team for more information Visit: www.ukti.gov.uk/www.ukti.gov.uk/ Email: alan.muir@fco.gov.ukalan.muir@fco.gov.uk Mobile (China) : +13901014332 Mobile (UK): 07957860939 WeChat: AlanJMuir Presentation title UNCLASSIFIED

25. Thank You 谢