Foreword

The Yangtze River Delta is a hub of the biomedicine industry, contributing nearly 30% of the country's total output, 30% of pharmaceuticals sales, and being home to one-third of all biomedicine industrial parks. An influential industrial cluster has taken shape in the Yangtze River Delta, with Shanghai and Suzhou as two nuclei. Since its inception, the Lin-gang Special Area has prioritized future-oriented industries such as biomedicine and integrated circuits, in a bid to develop a world-class, open and modern industrial system by 2025 and to create dominant modern manufacturing clusters of biomedicine, artificial intelligence and civil aviation. In Suzhou, biomedicine is the "No. 1 industry", with its scale exceeding the 200 billion yuan mark in 2021 after maintaining more than 20% growth for years in a row. It is home to top enterprises such as Innovent, CSTONE Pharmaceuticals and Alphamab Oncology.

The biomedicine industry is capital-/technology-intensive and characterized by heavy investment, long payback period and high cost. As a result, the scientific research teams and enterprises in this industry have a thirst for funding, which is even stronger at the early stage. In 2021, Shanghai's biomedicine industry reported 154 investment and financing deals, with a total amount of 35.8 billion yuan. In addition to the demand for active social financing, supportive policies and hefty subsidies provided by the government are also essential to the development of the biomedicine industry.“Plant phoenix trees well, and phoenixes will fly here and dwell”. The Yangtze River Delta, by offering systematic planning and high-profile subsidies for the biomedicine industry, is an unrivaled magnet.

A Comparison of Policies in Lin-gang and Suzhou

Both the Lin-gang Special Area of Shanghai and Suzhou, two major cities in the Yangtze River Delta, prioritize and encourage the biomedicine industry by introducing a raft of policies.Generally speaking, their policies have virtually the same directions and contents, mainly covering new drug R&D, medical devices, generic drug consistency evaluation, industrialization projects and certification.Their policies are compared in terms of the following aspects:

In terms of support for new drug R&D,Lin-gang covers Class 1-4 chemical drugs, Class 1-5 biological products, Class 1-6 traditional Chinese medicines and natural medicines; while Suzhou does not specify any drug categories, but mainly supports Class-I new drugsaccording to the disclosed supported scope.

In terms of supportive policies for medical devices,their supported scope overlaps, both intended for Class-II and Class-III medical devices, but the policies introduced by Lin-gang are more appealing than those by Suzhou.

In terms of support for generic drugs,obviously Suzhou’s policy is only applicable to a drug that is the first one among generic drugs of the same kind in the country to pass consistency evaluation and provides stronger support, while Lin-gang’s policy is more inclusive of generic drugs, but offers less support.

The policy of Lin-gang is aimed at supporting major projects, providing the highest financial support among all clauses, but with a smaller supported scope, while Suzhou encourages further industrialization of drugs made in the city, with a threshold for project investment, but with a wider supported scope.

The agencies enumerated in the policies of these two places are basically the same with slight differences, involving AAALAC, WHO, FERCAP/SIDCER, AAHRPP certification, GLP (3 items and 5 items), GCP, CNAS, etc.. Except for the GCP certification, the method and amount of financial support for each certification in both places are basically the same.To be more specific, Lin-gang offers a reward of up to 5 million yuan to a medical institution that has secured the GCP certification, plus an extra 500,000 yuan reward for an additional discipline; whereas Suzhou offers no reward for early GCP certification but only supports GCP-certified new disciplines at medical institutions. Except for the subsidies for project investments in which the medical institutions have passed the GCP certification, the method and amount of financial support for professional qualifications in other cases are exactly the same.

In terms of public service platform development,the policies of Lin-gang and Suzhou have an almost consistent coverage, including various types of biopharmaceutical service platforms, R&D service platforms, professional incubators, laboratory animal services, testing and inspection, drug screening, clinical medical research, pharmaceutical industrial waste disposal and other public platforms.

In terms of service platform development,Lin-gang classifies public service platforms into three categories and offers financial support of up to 50 million yuan for tech platforms like CRO, CMO, CDMO, of up to 30 million yuan for public platforms including inspection and testing, laboratory animal services, drug screening, pharmacology and toxicology, pharmaceutical industrial waste disposal, and of up to 30 million yuan for clinical medicine research centers, while Suzhou offers financial support of up to 20 million yuan for all service platforms.

In terms of platform operation subsidies,the supported scope of policies in both places is basically the same, but Lin-gang offers greater support than Suzhou. While the contents of support have things in common, both places have some customized clauses. For example, Lin-gang offers financial support of up to 300 million yuan for breakthroughs in R&D of critical core technologies and products, and of up to 10 million yuan for drugs that are launched in foreign markets following international joint clinical research. Suzhou offers a subsidy of up to 10 million yuan for technological revamp or model innovation, and a subsidy of up to 60 million yuan for headquarters of pharmaceutical companies.

How to create synergy between Lin-gang and Zhangjiang

Shanghai municipal government points out in the implementation opinions on accelerating the transformation and development of the North and South thatit is necessary to create a collaborative innovation mechanism featuring "R&D in Zhangjiang-Conversion and Execution in the North and South", drive integration of industry and medicine, integration of industry and research, and by leveraging key industrial platforms build a full-fledged life and health industrial chain with core competitive strengths.

The 14^thFive-Year Plan for the development of biopharmaceuticals in Shanghai has made it clear that Shanghai will target "high-end, intelligent, international" development of the biomedicine industry, further implement the "R&Din Zhangjiang + Made in Shanghai" initiative, and quicken the pace of building a globally influential biopharmaceutical innovation hub and a world-class biopharmaceutical industrial cluster.

In light of the government’s plan, "R&D in Zhangjiang, Made in Lin-gang" is a development path for the biomedicine industry Shanghai is trying out.Zhangjiang was the first biopharmaceutical base launched in China. Since Roche Pharmaceuticals became the first multi-national corporation to settle in Zhangjiang in 1994, Zhangjiang has grabbed significant attention and support from both the central and Shanghai authorities, and has attracted a large number of multinational pharmaceutical companies. However, over these years, there is a saying about Zhangjiang Pharma Valley that "Blossoming inside the wall but the scent of flowers is smelt outside the wall”. In other words, many start-ups incubated in Zhangjiang have not been able to take root in Zhangjiang, but have gone to Suzhou, Nanjing and other cities instead to seek further development. Apparently, Shanghai could have done better in the direct conversion of deliverables of biopharmaceutical R&D. An analysis of the whole chain of the biomedicine industry from R&D to manufacturing may shed light on the reasons behind.Upstream research institutes and institutions need long-term and stable funding. With stable support, researchers of the fundamentals can focus on their work and work out really significant innovations. Some midstream activities may be financed by some industrial funds or social capital as angel investors and must not rely entirely on public finance. When drugs or devices have passed the tough early stage of research and development, and move to the downstream commercialization and production stage, the government needs to come up with supportive policies and provide concrete convenience for the industrialization of biopharmaceuticals and devices. Multipronged measures should be taken to connect the upstream and downstream, and then a research team or start-up can be incubated and nurtured successfully.

Zhangjiang Pharma Valley offers a sound R&D environment to pharmaceutical R&D institutions and teams, but many companies chose to do production elsewhere because of a shortage of social capital, absence of industrial synergy and other problems. Now, backed by Lin-gang, government policies that propose more scientific and well-thought-out planning in top-level design, and increasing engagement of industrial capital, Zhangjiang-based biopharmaceutical companies will enjoy greater growth potential in the future.

Status Quo and Outlook of the Biomedicine Industry

In September 2020, President Xi Jinpingchaireda symposium of scientists and delivered an important speech, proposing "four orientations" guiding sci-tech innovation and development, namely, oriented toward the world’s frontier of science and technology, oriented toward the main economic battlefield, oriented toward the major needs of the country, and oriented toward people's life and health.As one of the key frontier industries in line with four orientations, the importance of the biomedicine industry is unanimously recognized by governments at all levels, major institutions and platforms, and it is also among key industries governments at all levels underscored in their 14th Five-Year Plans and aspire to develop. However, capital is meant to pursue profits. So those innovation results expected to have a significant impact on the society are very probably not the favorites of social capital. In this circumstance, government-led industrial funds and direct government incentives are of special importance to the development and implementation of the biomedicine industry. The policies introduced by Lin-gang exactly reflect what the government expects from industrial development,never aiming at near-term profits, but aiming to attract and retain top-flight research teams.

As competition in the biomedicine industry intensifies and new drugs keep coming into the market, relevant companies will see their R&Dspending on the rise, and the return on investment yielded by new drugs is likely to be less than expected, or has the potential to drop or even become negative. Given this characteristic, research of the fundamentals will be more crucial to the innovation and development capacity of biopharmaceutical companies.Only those innovations of real significance will attract an unending supply of financial and technical resources and deliver more durable growth.

In this sense, biomedicine is a promising industry and a red-sea industry. Though its development is currently under the protection of all sorts of policies and financial support from the government, both the government and enterprises should think over how to build up enterprises' viability so that they are able to "walk on their own" after getting through the challenging start-up stage.

References:

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