Life Science market update

Market size, share and growth China

March 2011

Prepared for: Trade Respondents and Key Opinion Panel

As the worlds most populous country and fastest growing major economy, China offers many opportunities for overseas investors. The Chinese healthcare industry has considerable potential, with developed economy and strong growth in the medical device market. Yet, the market remains one of the most difficult to penetrate, due to its numerous regulations and limitations.
2009 Population (mil) % growth 1,334.7 0.5 2010 1,341 0.5 2011 1,348 0.5 2012 1,355.2 0.5 2013 1,362.5 0.5 2014 1,371.4 0.7

Macro-environment scan

Number Aged 65+ (mil)

Aged 65+ (%) GDP (USD bil) Per capita (USD) Real growth (%) Health Expenditure (USD bil) Per capita (USD) As % of GDP Private (%) Hospital Beds (000) Private (%) Rate / 000
Source: Medistat 2010

108.1
8.1 4,607 3,450 6.5 216.5 162 4.7 49.3 3,470.1 n/a 2.6

111.3
8.3 5,200.6 3,880 7.3 244.4 182 4.7 49.3 3,486.6 n/a 2.6

113.2
8.4 5,892.8 4,370 8.0 277.0 205 4.7 49.3 3,504.8 n/a 2.6

116.5
8.6 6,674.8 4,930 8.3 313.7 231 4.7 49.3 3,523.5 n/a 2.6

121.3
8.9 7,601.3 5,580 8.6 357.3 262 4.7 49.3 3,542.6 n/a 2.6

n/a
n/a 8,736.6 6,370 7.5 410.6 299 4.7 49.3 3,565.7 n/a 2.6
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Life Science Research overview

Life science is viewed by the China government as one of the key research priority. Chinese president, Hu JinTao, in the Fourth National Congress of Science and Technology on 9 January 2006 emphasize that life science and biotechnology will be used to develop application for agriculture, industries, population and health. China is concentrating its effort especially on genomics, proteomics, biomedicine, neuroscience, agricultural science such as super-hybrid rice research, stem cell and cloning technology, gene therapy and drug vaccine development. As China aging population grows, the potential burden on the healthcare system caused by an increase of chronic diseases such as cardiovascular diseases, diabetes and degenerative conditions have prompted the Chinese government to increase investment in regenerative medicine therapy especially in stem cell research. The increased focus on stem cell research have seen scientific publications on stem cells research in China increase 30 folds from 37 publications in 2000 to 1116 publications in 2008. The number of scientific publications on life science by Chinese researchers in the top 5 journals (Cell, Science, Nature, The Lancet and The New England Journal of Medicine) has doubled from 2008 to 2009, indicating the strength of Chinese research.
Interviews (Suppliers, distributors and lab users),and national statics bureau of China, Clearstate Analysis

2009 Spending on Life Science R&D RMB 8.9 bil CHF 1.4 bil

Life Science funding channels

The main dedicated funding programs for life science come from the 863 and 973 programs, National Key Technologies program and the NNSFC. These funding of application based research in biotechnology, together with the support from the Chinese government, will generate more products and encourage competition in the market.
National Key Technologies Program

863 Program

973 Program

NNSFC

High Technology and research program where life sciences and biotechnology were identified as key areas to be funded. In 2009, RMB 516.8 million were given to life sciences.

National key basic research program where agriculture, population/ health and environment/ resources are some areas of priority. In 2008, RMB 430.4 million were given to life sciences.

One of its main beneficiaries is the agriculture and biotechnology. In 2008, RMB 1.5 billion was given to life science.

This organization is responsible for the funding of basic and applied health sciences including research on diseases. In 2008, 1.4 billion was given to life science research.

Source: CAS, MOST, NNSFC ERA watch research Philosophical transaction or the royal society, interviews , China Statistical year book 2008, Clearstate analysis

Market size and share

Life Science expenditure in China hit RMB 4.8 billion in 2009, with the largest expenditure on genomic research. Around 50% of genomic research spending is on reagents and the rest are on instruments.
Product segments 2009 market size (RMB, mil) 381.5 150 2009 market size (USD, mil) 57.9 22.8 Competitors share ranking

#1
LifeTech (40-50%) Qiagen/ Tiangen (20-30%) Qiagen (40-50%) LifeTech (70-80%) Affymetrix (40-50%) LifeTech (25-30%)

#2
BioRad (10-20%) Takara (20-30%)

#3
Roche (10-20%) Toyoba (10-20%)

#4
Eppendorf (0-10%) LifeTech (10-20%)

QPCR Instrument QPCR Reagent

Nuclei Acid Purification Instrument Gene Sequencing Instruments Microarray Instruments Core Biochemical

34.8

5.28

Roche (10-20%) Roche (0-10%) Agilent (20-30%) Takara (15-20%)

Biomerieux (0-10%) Illumina (0-10%) Illumina (20-30%) Qiagen (10-15%)

LifeTech (0-10%) -

179.4

27.2

99 999.03

15 151.6

Roche (0-10%) Sigma Aldrich (5-10%)

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Note: Values are end-user values; 1 USD : 6.57974 RMB Sources: Clearstate trade interviews (suppliers and distributors), surveys and analysis

Market Growth
Based on key market growth drivers and barriers, Clearstate estimates the life science Moderate to high growth expenditure in China to experience a CAGR of 15.6% by 2014.
Low to flat growth Negative growth

Growth Drivers Molecular diagnostics application, disease out break, microbial contamination. Cheaper reagent costs, application in clinical diagnostics National research focus, increased outsourcing, currently in hype phase. Increased wages, disease outbreak, new genomic technology. Complement NGS, current research already account for technology use.

Growth Barriers Maturing of technology, budget allocation.

Growth potential

QPCR

Sanger Sequencing NextGen Sequencing Nuclei Acid Purification Microarray

Replacement by newer technology, immature research landscape Replacement by newer technology. Low labour cost.

Lack of skilled personnel, some replacement by NGS.

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Technology life cycle

China interest to dominate in science and technology, will see it embracing both emerging new technology such as NGS and core and essential technology such asSegment growth potential PCR.
Highest growth moderate to high growth low to flat growth Growth expectations

Introduction

Initial excitement

Reality check

Sustainable growth
Essential technology in nuclei acid (NA)based research, and common in labs doing genomic research.
QPCR

Maturity
Maturing technology, but still useful in many core research, but move to clinical application may take years.
SS MA

NGS

CB

Emerging new technology, with strong national focus on this technology

NAP

Substantial focus on genomic research in China to drive growth Cheap manual labour cost prevents higher growth in automation.

Less research focus with this technology with the advent of NGS

NGS NextGenSeq NAP NAP automation

CB Core Biochemical

SS

Sanger Seq

MA Microarray QPCR Quantitative PCR

Product lifespan 7

Market Drivers & Barriers

Based on key market growth drivers and barriers, Clearstate estimates the life science expenditure in China to experience a CAGR of 15.6% by 2014.

Drivers
National focus on life science research. Singled out as one of the most important industry to develop. Disease and microbial contamination outbreak like H1N1 may increase the need for instruments and reagents. Adoption of latest technology by research facilities.

Barriers
Divergence of research funding to other sectors.

Increased scientist pool from returning overseas researchers.

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