NIE 2023 | Summit Dialogue: Marching Towards Success · Innovation and Cooperation in Medical Devices in China

Chen Zhenrong:The newly revised 'Regulations on the Supervision and Administration of Medical Devices' in 2021 were officially introduced, marking a new phase in the reform of medical device review and approval in China. With the strong promotion of the Central Committee of the Communist Party of China and the State Council, the medical device market in China has developed rapidly. Against this backdrop, what opportunities and challenges will the medical device field in China face at this stage?

Despite the impact of the epidemic, the Chinese medical device market has also been affected, but its development trend has always been upward. There are several major strategic directions that will not change in the future for the Chinese medical device market: there is no doubt that the national strategic direction of domestic substitution and independent innovation of high-end medical equipment in China will remain unchanged; there is no doubt that the rapid development direction of the Chinese medical device industry, especially the national industry, over the next 5 to 10 years will not change; there is no doubt that the determination and confidence of the Chinese people to use Chinese products will not change.

However, at the enterprise level, there are still some challenges. Firstly, there is a need for change in mindset. Domestic substitution requires domestic pharmaceutical companies to produce products of higher quality and innovation. It also requires medical institutions, including doctors, to have the concept that 'Chinese people can use Chinese products.' Secondly, policies need to be relaxed; the development of medical devices cannot do without policy support. Overall, China's medical device industry will embrace unprecedented development opportunities in the next five years.

We are very fortunate to be in an era of significant development in the medical industry, with the big health sector having been included as a top national strategy. At many national strategic-level meetings, it has been proposed to address the localization of medical devices and solve the 'bottleneck' technologies and core competencies in high-end medical devices. The state is increasing investment in policies, funds, talent, etc., greatly promoting innovation in China's medical device system and thus accelerating the development of the medical device industry. Although there are still many difficulties in replacing some high-end medical devices with domestic ones, it is believed that as long as domestic medical devices perform well, provide good service, and iterate quickly, they are expected to further increase market share.

Currently, many devices in the medical device field have achieved domestic substitution, but there is still room for substitution in many disciplines and products. In addition to the domestic medical device market, many Chinese medical devices are gradually entering overseas markets, providing more cost-effective and competitive products globally. Therefore, we need to not only see the current market potential in China but also consider foreign markets, as many countries around the world require innovative products from China. At the same time, many products have already gone global. It is foreseeable that going global in the future will be a very important opportunity for Chinese medical device companies.

In our early collaborations, most were related to drugs, includingLicense InIn addition to License Out products, with the promulgation of new policies in China, the number of customers in the medical device industry is also increasing. It is very promising for Chinese medical device companies to go global. A domestic listed medical device company we previously collaborated with went to Europe to acquire its downstream enterprises, thus forming a complete industrial chain and achieving localization substitution.

Chen Zhenrong:In high-tech enterprises, especially in the medical device field, innovative technologies and products are the foundation for standing firm. In recent years, China has also seen a surge in innovative medical devices. In the medical device industry, how can enterprises promote their own innovation?

In the field of medicine, especially life sciences, there is an endless stream of technological advancements, new materials, and new products in various specialties. To keep up with industry and the times, enterprises must not fall behind; once they do, they may plummet. Secondly, whether domestically or internationally, new technological breakthroughs can lead to new business model breakthroughs; otherwise, they will perish in the fierce competition. For Chinese medical enterprises, especially national and private enterprises, innovation is the only way out for development.

However, innovation is not just about technological innovation. The medical device industry and products are different from other industrial products; their innovation must be an innovation across the entire industrial chain. A medical device product or technology needs to start with design concepts that meet the needs of clinicians and patients. Technological breakthroughs, including capacity, output, cost control, product, business model, etc., all require a complete innovation chain. Therefore, medical device companies need an overall layout concept in their overall development process.

Now there is a very popular saying that 'no innovation, no future'. This is quite applicable to the medical device industry, especially in the field of high-end medical equipment. Medical device innovation is all-encompassing.

Firstly, in the field of technological innovation, as an entrepreneur, one needs to explore the principles of theoretical mechanisms, bear the costs of research and development in hard-core technology areas, and withstand setbacks before the product matures. Only with theoretical progress and core technologies resolved can there be an internal driving force for transformation; only by solving the underlying scientific and technological progress and development logic can there be rapid and continuous iterations to meet market demands; at the same time, long-term considerations are required, patience is needed, and one must endure loneliness and setbacks. Currently, many medical device companies mainly focus on imitation, but this is not a long-term strategy; they need to explore and actively promote innovation.

Secondly, innovative scientific and technological achievements of startups need to be driven by talent, and there should be corresponding training mechanisms for production. Thirdly, it is necessary to attach importance to the clinical force. For example, the Da Vinci robot is not just a product that embodies the strength of thousands of engineers and scientists, but also has more than 1,000 world-class surgeons working together on its advancement. This has significant implications for domestic medical research institutions, as clinical needs and business models should be considered at the inception of product or project development.

Innovation means that we cannot simply follow foreign products to learn and progress. Instead, we need to start from the product principle and clinical needs, then integrate these requirements into product research and development. Only by promoting product updates and iterations can we possibly catch up with or even surpass global research progress.

As legal service providers, it is necessary to build a protective barrier for innovative models. For instance, policy compliance in the pharmaceutical industry a few years ago, including talent introduction and intellectual property rights, posed challenges to legal and knowledge departments. The model innovation of medical device companies will inevitably drive the innovation of external service institutions. Legal service providers need to provide a legal compliance framework for companies' model and technological innovations, so as to better protect innovation and ensure that it stays on the path of legality and compliance.

Chen Zhenrong:At present, China's medical device innovation is moving from closed innovation to an open innovation direction. How should we view the cooperation and win-win outcomes brought about by innovation?

This is a key point in the development of medical devices in China. Before sharing, let's look at a simple example: Germany is a traditional automotive powerhouse, and it is very difficult for China to surpass Germany in the traditional automotive field. However, in the new energy vehicle sector, global automakers are at the same starting point. Through the joint efforts of enterprises and government support, China's new energy vehicles have achieved overtaking on a curve and are now among the top in the world.

The same is true for the medical device industry. China started relatively late in the traditional optical endoscope market, but it is at the same R&D level globally in the field of disposable electronic endoscopes. Especially for the overall solutions of disposable electronic endoscopes, we have achieved a global overtaking and obtained the world's first certification.

As we move towards overseas markets, we have a clear product layout trilogy. The first step is to achieve international revenue from our products, realize global patent coverage, including the EU, Asia-Pacific region, etc., and establish academic connections by disseminating Chinese academic concepts globally. We aim to occupy theoretical high ground in academia and simultaneously reach cooperation sales agreements with some high-quality distributors. The second step is international R&D, establishing laboratories and R&D branches with developed countries. The third step isIndustrial internationalizationThen, it is hoped to expand production capacity, production technology, and production scale internationally.

A first-class company is definitely an international one, with an international perspective and layout; secondly, internationalization requires top-level design, including having a sufficient market for its products and after-sales costs; at the same time, different strategies are needed for different markets. For example, in highly developed markets like Europe, America, and Japan, as well as in Southeast Asia and the Belt and Road markets, if you want to go global, you need to consider national strategies.

Currently, in developed markets such as Europe and America, Chinese enterprises still focus on the low-end consumables market. However, there are still many challenges facing their efforts to export high-end large-scale equipment overseas. But the most fundamental test for this issue is whether the products can withstand strict testing and gain the trust of enterprises. This process may be long, but there have already been many successful attempts that have proven its feasibility.

Whether it is pharmaceuticals or medical devices, we assist relevant enterprises in going global. One very important understanding is that if a product truly has global innovation value, it can cooperate with some top experts and institutions. For these top institutions and experts, their goal is to serve patients with the best products. From this perspective, they do not particularly care about the country of production of the product. Therefore, if the product is the best in its field and what these top institutions need, there is a high probability of cooperation. It is believed that with the innovation and iteration of Chinese enterprise products, they will have global leadership and leading innovation capabilities, and global healthcare systems will also have a higher recognition of Chinese products. Therefore, innovative medical device products need to first gain the recognition of top global experts to better enter mainstream markets in Europe and America.

At the same time, for some innovative products, including those from the FDA, there is also a certain degree of tolerance. Therefore, entrepreneurs can be more bold. Whether it's institutions, partners, or regulatory authorities, they will give considerable tolerance to innovative products. Moreover, top medical institutions are willing to support the innovation of good products.

Chen Zhenrong:What are the key points that Chinese medical device companies should pay attention to when collaborating with overseas investment institutions or multinational corporations?

In recent years, with the enhancement of China's medical device innovation capabilities, China has gained more confidence when cooperating with cross-border enterprises. Especially some outstanding private entrepreneurs or domestic companies have made solid efforts and advanced forward with determination, thus having the opportunity to stand on the world stage.

Regarding cross-border cooperation, there are several technical issues worthy of attention. The first is the review system; when considering 'bringing in and going out' technologies, it is necessary to consider the investment review systems of each country, which vary among different nations. The second issue is intellectual property rights. Additionally, when communicating with partners, it is important to consider that many companies in Europe and America are also startups, requiring a more meticulous review of their qualifications and not blindly trusting them. Finally, it is also necessary to consider the proportion and pace of upfront payments and milestone payments, as there are differences in drug-related concerns among different countries and regions.

Chen Zhenrong:The road is long and arduous, but with perseverance, we will reach our destination. China's medical device industry is undergoing a historic transformation. From imitation to innovation, and gradually venturing abroad, China's medical device industry is on the path to improvement and strength. It is believed that outstanding Chinese medical device products will shine with their own brilliance in the global competition of the future.

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