Research
Quarterly Trends Report

Healthcare trends, oncological developments and the saturated American cannabis market

  • Public Equity
  • Healthcare
  • Global

Third Bridge Forum conducted over 180 interviews throughout the first quarter of 2019. Our Interviews covered pharmaceuticals, biotechnology, the lifesciences, and healthcare equipment and services, providing key insights from senior specialists operating in China, North America and Europe.

Originator drug manufacturers in China 

The pilot scheme for tendering with minimum procurement quantities in China, aimed at reducing the price of drugs within the country, has already had a major impact on the valuation of pharmaceutical companies. A former Deputy General Manager at Yangtze River Pharmaceutical Group, Beijing Haiyan Pharmaceutical said that “after the first batch of winning bids was announced on 7th December” by the government, “the combined valuation of 300 listed pharmaceutical companies decreased by about RMB 30bn in only two days.” According to the former Deputy General Manager, the impact was much more dramatic than was anticipated, with participating foreign companies – or “originator drug manufacturers” – such as AstraZeneca, Pfizer, Sanofi SA, Merck & Co and Bristol-Myers Squibb (BMS) “facing great challenges” compared to domestic companies. The specialist continued by explaining that “generic drugs produced by domestic companies can now basically replace imported originator drugs which have become cheaper than before.” The former Deputy General Manager also discussed the impact of the pilot scheme on hospitals and doctors, stating that while “they used to receive considerable commissions from drug distributors,” now that the distribution models have changed, “there is little room for them to profit off… drug sales.” 

Immunotherapy techniques 

Large international players such as BMS’s newly acquired Celgene, Abbvie and GlaxoSmithKline (GSK) are all developing immunotherapy techniques within the field of oncology. A former Head, US Oncology at Abbvie suggested that while “the introduction of immunotherapy into oncology has changed the field,” the market is quickly becoming saturated and a major challenge for pharmaceutical companies going forward will be differentiation and finding “new therapeutic modalities,” which are sorely “needed in oncology.” The former Head explained that his “optimism has again been in neoadjuvant” as it is used on patients who are in the early stages of the disease. He continued by stating that he thinks “there is a need for basic treatment of getting cancer at the base rather than just concentrating on immunotherapy.” 

Legalisation of cannabis 

Canada and the cannabis-legalised states in the US are two extremely different markets, according to the former CFO at Aurora Cannabis Inc., who said that “it’s almost like a different industry between the two countries.” While Canada is highly regulated, the relatively unregulated and “fragmented” nature of the US, in which each segment of the value chain is separate, means that in the US, companies “actually could make money.” The former CFO continued by saying, however, that because companies in the US market are limited by state, there’s “less mobility,” which could reduce the adaptability of US companies. The former CFO also explained that investors will likely have to wait to see high profits in the Canada-based market because the industry is still “at the stage where… companies are trying to maintain market share,” but that a key strategy Canadian companies will need to adopt in order to succeed is to “penetrate the international market and develop their brand at the same time.” She continued by stating that while this is true of Canadian companies, the “trouble with the US companies is they can’t export. They can’t even export among themselves, between states” so they’re unable to expand internationally unless that legislation is changed, which might only be the case if a “Democrat gets back into Washington.” The former CFO added that “a lot of US companies are going through the Canadian Stock Exchange and listing there, to have funds. To expand… beyond a mom-and-pop… operation.” 

The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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