Opportunities and challenges in the Life Sciences and Healthcare circuit

The curtain has opened in 2023, with the gradual remission of the novel coronavirus epidemic, in the context of the aging population and the deepening of healthcare reform,

The potential of "life science and medical health" has been accelerated and released, becoming a hot track that attracts much attention in the venture capital circle.

In the post-epidemic era, what will be the pattern and trend of the life science and medical health track? What opportunities will policies bring to its development? How should the relevant companies raise funds? With these questions, Chuangbang specially invited Chen Penghui, founder of Boyuan Capital, and Zhang Suyang, founding partner of Volcanic Stone Investment, to bring you a wonderful "knowledge feast".

In 2022, with the impact of the epidemic, the life sciences and medical health circuit experienced a roller coaster of ups and downs. What will happen to the track in 2023? The two guests respectively expressed their unique observations and reflections.

Mr Chan described the past year as one of "drama".

Observing the development curve of the life science and medical health track, it can be seen that it reached the peak from 2020 to 2021, but entered the trough from the second half of 2021 to 2022, and the adjustment amplitude was almost "cut off along the knee", but the index of the entire track at the end of 2022 also welcomed the rebound of the valuation, even if the rebound was far below the historical peak. Chan expressed his confidence in the Life Sciences and Healthcare circuit, talking about two very big drivers behind the development of this circuit.

The first driving factor is people's attention to life and health, and the demand for quality of life is growing. The second driving factor is the technological revolution, from small molecules to macromolecules, cell therapy, gene therapy to medical devices, the combination of continuous technological breakthroughs and expanding demand, so that investors are very optimistic about the prospects of the industry. However, Chen Penghui also mentioned that the current primary market is still relatively cautious when investing, the valuation will be very rational, and many investment institutions are changing to innovative projects.

Coupled with the impact of short-term policy factors such as medical insurance costs and volume procurement, investors are highly risk-averse, more inclined to invest in early projects with lower valuations, and tend to invest in medical devices, synthetic biology, biological manufacturing and other enterprises that are easy to create income and profits.

Looking at the future of the life sciences and healthcare circuit from a macro perspective, Chen observed the following trends.

The first trend is that medical insurance costs will continue, which is related to China's aging population and industry policies, but the overall trend is easing. The second trend is that companies are increasingly going overseas. At present, some Chinese enterprises are "borrowing ships to go to sea", granting the right of products to large international pharmaceutical companies or medical device companies; Some are "shipbuilding", such as Mindray Medical, whose overseas sales reach $1 billion a year. In the future, more and more Chinese enterprises will choose to "buy ships to go to sea", enter the international market through acquisitions and mergers, and at the same time, due to the international situation and the restrictions of the epidemic, more new opportunities for supply chain localization will be born. In the longer term, Chen sees two new opportunities.

The first is the opportunity presented by China's aging population. Aging is not only the increase of China's elderly population, but also the change of China's population structure. When China's post-60s and post-70s get older, they will show stronger consumption power and more diversified consumer demand than the post-40s and post-50s, and they will have greater acceptance of new technologies and new products.

The second opportunity is breakthroughs in biotechnology, which can not only bring advances in solving human diseases, but also surprise in transforming traditional industries. Zhang Suyang believes that life science and medical health belong to the specific scope of large health, from the perspective of consumption scale, in addition to real estate, food and automobiles, its market size has reached 7.5 trillion, very large.

Secondly, life science and medical health are not entirely in the consumer field, because most of their subjects are to B business, more decision-making links, longer value chain, is an industry whose marginal cost is not easy to decline rapidly.

In addition, life sciences and healthcare are relatively slow to deliver products and services, and the spillover capacity of new technologies is not comparable to other consumer goods.

In addition, health care is a "life and death" industry, which is subject to strong regulation and requires more time to polish products and services. From the perspective of investors, it will take longer to exit.