【Live Review】Opportunities and Practices for Medical Devices Going Global | Fortune & Sight Healthcare Insights Live Sharing Session

With the comprehensive relaxation of epidemic control globally, the global medical device industry landscape is undergoing reshaping. In the Chinese market, the 'involution' between centralized procurement and domestic medical devices has made going global a breakthrough strategy for many domestic medical device companies to start their second growth curve. Due to the varying regulatory requirements for medical device applications and listings in different markets, the actual demand for different medical devices also varies from country to country. The information gap between product registration applications and actual needs has made the journey for many domestic device companies going global fraught with obstacles. Against this backdrop, understanding the regulatory situation of each country and the regulatory authorities' management concepts for different products is an important step in product globalization and also the first step into that country's market. Therefore, the demand for cross-border service CROs that cater to multiple countries, multiple categories, one-stop services, and rich overseas clinical resources is becoming increasingly strong.

At 16:00 on February 17th, the first episode of 'Fortune & Sight Medical Insight Live Sharing Session' joined hands with Huiyi Medicine to host a program themed 'Opportunities and Practices for Medical Devices Going Global'. The session was moderated by Guo Jing, Senior Consulting Director for Healthcare Industry in Greater China at Frost & Sullivan, and featured Chen Jun, Secretary-General of the IVD Sub-Committee of the China Medical Device Industry Association, Deng Xiaoyu, Founder of Suzhou Huiyi Medical Research Co., Ltd., and Jia Shiwei, Head of Overseas Business Department at Xinwei Medical, to conduct an in-depth discussion on the export of medical devices.

What is the market prospect for foreign markets in the medical device sector? Which specific tracks may have greater development potential?

What choices will medical devices companies make when going global? What specific factors need to be considered?

Medical devices themselves are a sector with a particularly diverse range of categories and numerous sub-sectors. The experiences among different sub-sectors vary, and the development stages of products for each indication also differ. However, some sub-sectors are currently well-developed and mature, such as cardiovascular interventional devices and the IVD industry. Therefore, for some sub-sectors that are just starting out overseas or are still in the introduction phase, it is possible to actively learn from the better operational schemes of mature sub-sectors and apply them to their own sector. For example, Mindray has done a good job in localization by establishing R&D centers in various locations and forming subsidiaries for global sales, which is instructive for the entire medical industry.

In the practical process, what are the difficulties in overseas clinical trials? What are the key factors that require special attention?

At present, I think the biggest challenge in overseas clinical trials is that the logic of how Chinese enterprises implement clinical trials overseas is not quite the same.

The medical environment overseas is based on evidence-based medicine. Clinical trials are actually providing clinicians with evidence for the use of products. The use of new products, equipment, and devices completely depends on the data from product clinical trials or evidence-based medicine. Only with good evidence-based medicine data can products be applied to patients.

For a long time, people have thought that clinical trials are just a tool to obtain an entry ticket or a stepping stone into the medical industry. However, in fact, they should be seen as a long-term pass within the overseas healthcare system. Chinese companies are currently accustomed to using the lowest cost and shortest time to complete clinical trials in order to obtain the 'entry ticket' from the FDA or NMPA.

The decisive factors in the domestic market lie in the market, sales channels, agents, and government support. However, in overseas markets, the success of products largely depends on real clinical data, which is used to determine whether they can match existing therapies, compete with similar products, expand new indications, or even develop innovative solutions. For example, some products may be approved for smaller indications, but through clinical trials, their indications can be continuously expanded to benefit more patients.

It is not difficult to find that many powerful international medical device companies design clinical trial protocols far exceeding regulatory requirements, which also helps them set a higher threshold for competitors in the future. For Chinese companies, I think everyone can also change their approach; a reasonable clinical trial design can greatly safeguard the entire overseas expansion.

In addition, overseas clinical trials heavily rely on talent reserves, which are currently a major weakness for Chinese medical enterprises. Talents going global are very scarce in China, and I believe this is also a major challenge that domestic enterprises need to face.

Finally, when companies go global, they need to consider the characteristics of different countries and markets. For example, the 'rules of the game' in the United States and Europe are completely different. Different countries and markets pose different challenges, so companies need to respect local 'rules of the game' to achieve the desired success and returns locally.

What are the difficulties and key points in clinical trials during the globalization process of IVD, including the process of going global?

For IVD companies, the first hurdle in going global is the issue of access. Although regulations vary across countries regarding the classification of risk levels for IVD, the overall application logic in China and globally is similar. Therefore, if an enterprise has experience with NMPA registration domestically, it is relatively easier to pass when applying overseas. If both domestic and overseas registration are carried out simultaneously, preparation can be more efficient, but if only domestic registration is desired and the company intends to go public overseas, it will be more difficult.

On the other hand, Chinese IVD companies indeed lack experience and talent in overseas clinical trials. Therefore, it is still necessary to seek experienced CRO companies for assistance, which can save a lot of energy and avoid many detours.

What considerations will be made in selecting outbound service providers?

Firstly, it is still necessary to consider the development stage of the enterprise. For enterprises that have just started overseas, especially some startups, it is essential to balance the input-output ratio well. Such enterprises rely more on localized channel partners and agents. Other service providers at various stages are also centered around cooperation with local overseas agents, operating in a business-oriented manner. Enterprises need to listen to the suggestions of service providers to enhance their overall efficiency overseas.

In recent years, the China National Medical Products Administration has indeed made many efforts to comprehensively improve the R&D level of medical devices in China. As a result, many companies can now fully utilize local data during their overseas expansion, combining it with specific overseas needs to achieve product listing abroad. Therefore, this process requires a service provider who understands both the Chinese market and the overseas market, as well as the needs of enterprises.

The solutions and target markets of different service providers vary. The knowledge barriers in different segments of the healthcare industry are also high. Therefore, when choosing a service provider, enterprises should fully consider their own needs, product characteristics, and expected market features, as well as whether the knowledge structure or professional background of the service provider's team is suitable.

The learning cost and trial-and-error cost of going global are very high, so it is crucial for enterprises to find a team that has been deeply involved in this field for a long time and is professional. As for whether it is a Chinese or foreign-funded team, and whether they use simple or complex tools, this depends on the company's own preferences and the actual situation of the team.

When choosing an institution, IVD companies should first consider the institution's understanding and expertise of EU regulations, followed by whether it has traded on products with a high risk level related to the EU or products that are similar to the company's own product technology category.

As mentioned earlier, if the product has already been registered domestically and has gone through the complete domestic registration process, then choosing a partner becomes simpler. However, for products that are directly going public overseas, it is necessary to select an agent with rich experience in IVD technology platforms and related products. They can provide valuable opinions and suggestions based on past experience cases, drawing on the foundation of other industry enterprises, to help companies prepare their materials more comprehensively and professionally.

In the process of first-line products going global, besides clinical trials, what other matters are worth noting?

The overseas expansion of first-tier products is actually a systematic task, with each link being very important. Weaknesses in any link can lead to the 'barrel effect,' such as product quality, technological superiority, innovation, patents, etc., including the entire service system, brand building, market promotion strategies, and the maturity of overseas teams. Every key point is significant, and any oversight in any step can cause certain constraints.

For IVD companies, it is very important to make full preparations before going global. Current regulations have many requirements for product research and development, so the rigor and completeness of the product R&D process are crucial. If the product R&D data is not complete, difficulties will arise during the application process; if the product quality system does not meet standards, even if the company manages to go public by chance, it will still encounter many problems. Therefore, early construction of the quality system, including the collection of relevant domestic data and clinical trial data, as well as the writing of documents in the middle and later stages, should be fully prepared to help the company complete the application process faster.

As an outbound service provider for Chinese healthcare enterprises, we believe that companies still need to have confidence. China's healthcare industry is in a period of vigorous development, and it is normal to encounter some minor difficulties or failures. However, by maintaining confidence, choosing the right approach and solutions, and leveraging the production capacity, supply chain, and cost structure of Chinese enterprises, we believe that it is inevitable that Chinese companies will gain a certain market share in the global market.

What is the trend of Chinese healthcare companies going global in the next five years?

Given the current situation, domestic medical enterprises choosing to go global and promote business globalization have become one of the few options for companies under the healthcare reform and centralized procurement policies. In the coming years, the company will demonstrate its unique capabilities on the path of going global based on its own development stage and strengths, as well as different understandings and explorations of overseas markets.

I have summarized four differentiated ways to go global. The first is when the product is relatively good, has a complete set of certificates, and involves significant investment in overseas operations. The second is when there is a wide product portfolio, with products that are relatively low-risk in high-risk sectors, and a full set of CE and FDA-related certificates. The third is by leveraging the ODM or OEM processing capabilities of major European and American companies to circumvent some CE and FDA restrictions. If an enterprise has some advantages in its supply chain, following this path can quickly lead to a significant overseas presence. The fourth is when the enterprise's products are innovative or monopolistic, and involves substantial investment in overseas operations. Not every enterprise can have only one of these characteristics; some excellent companies may possess two or even three of them.

Overall, the outbound cycle for domestic healthcare companies is very long. Many companies need a long time to lay the foundation before achieving their first overseas breakthrough. I believe that companies that persist in long-termism and a global perspective, build systematic and international business systems, and thereby establish their own unique competitive barriers will surely succeed.

We can see that many Chinese IVD companies have grown significantly over the past three years due to the pandemic and have also accumulated capital during this period. After the pandemic, companies need to calm down and think about what products they can offer in overseas markets to meet the challenges of global competitors.

On the other hand, going global requires a certain period of time, so companies need to have comprehensive and clear strategic planning, analyze and position their products suitable for global competition, and then resolutely 'go global'.

From the perspective of the technology involved in IVD, Chinese enterprises are by no means lagging behind international giants. As long as enterprises do a good job in product positioning and market analysis, they should not engage in short-term investment behaviors similar to those during the COVID-19 pandemic, nor should they be overly aggressive. By adhering to long-termism, they will surely receive good market returns when going global in the future.