2020 China Life Sciences and Health Care M&A Trends

"2020 China Life Sciences and Health Care M&A Trends" based on deal data, delves into uncertainties and challenges in M&A activities, especially M&A trends in subsectors such as drugs, biotech, medical service institutions and medical device manufacturers. Moreover, it also looks ahead into 2020 by capturing the current trends, observing live business cases and identifying hot areas.
 

Viewpoints / key findings

Overview of 2019 China life sciences and health care M&A

• China M&A deals in a nutshell: In face of significant headwinds, including slower GDP growth, tightening credit policies and US-China trade frictions, the deal count and value of M&As in the LSHC sector have declined about 24% compared to the previous year, driving the deal value to a  low point since 2014.
• Cross border deals have reduced: This was caused not only by increasingly complex international relationships, including tensions between the United States and China and the impact of Britain’s exit from the EU, but also by financing companies who retained more cash to avoid financial risks. There has been a cooling down of cross border trends in 2019 for both inbound and outbound deals. Deal numbers for both dropped about the same proportion, around 35%. Among, middle sized deals (USD 100M—500M)  shrank the most.
• M&A overview by segment: Despite the downward trend of both the overall deal value and volume, the M&A activities in biotech were still heated in 2019; With preferable policy environment and the influx of large capitals, the biopharma subsector maintains dynamic M&A activities, becoming a hot investment area in 2019; Mainly driven by mega deals, the medical service subsector also emerges similar trends; Medical devices deals hit by declining cross border investment, while domestic industry consolidation remained active.
   

2020 outlook for Chinese life sciences and health care M&A

• COVID-19 acts as a "catalyst" for the technology surge in health care: The crisis has prompted China's application of some next-generation technologies in certain health care offerings and in areas of public health management. For example, online medical consultation, 5G, AI and big data have become the technology focus in combating the virus propagation. Meanwhile, related financing activities are still alive. The development of science and technology will further lead the future of the healthcare industry.
• The value chain of China pharmaceutical market is at an inflection point:

­- Biopharma heading toward First-in-class

­- CXO is on the rise

­- Further consolidated & digitalized distributor sector

­- Growing demands for DTP in retail channel

• The clouds and silver lining in medical service institutions investment:  As 2020 is the mid-term target year for the "Healthy China 2030" initiative, investment in primary care might surge, with efforts in improving infrastructure, advancing digitalization, and enhancing collaboration between community care and upper class hospitals.
• Home-grown medical devices continue as theme for 2020: Home-grown devices are getting various support in terms of product research, market entry approval, and downstream procurement. Hospitals are also facing mounting pressures from total budget control measures under the payment reform, thus domestically-made products with lower pricing turns out to be a better option for medical institutions.

Although the negative impact on macro economy would emerge in the coming months, we believe, under such circumstances, companies trying out bold innovations would be more likely to attract new investments, thereby building a more solid future for the LSHC industry.