China is currently the second largest pharmaceutical market in the world. Big data and artificial intelligence (AI) will have significant technological impact across all the aspects of China’s pharmaceutical industry, says GlobalData, a leading data and analytics company.

China is heavily investing in AI to help facilitate the growth of its innovative pharmaceutical sector. Recently, GE Healthcare launched Edison AI platform in Shanghai and announced partnerships with five software development companies: Shukun Technology, Yizhun Medical AI, YITU Technology, 12Sigma Technologies and Biomind to help expand AI platforms.

According to GlobalData, a key area of current focus is machine learning algorithms, which help reduce R&D cycle times and costs. This ultimately allows companies to have a strong and sustainable drug pipeline while also increasing trial completion rates.

The government has recently issued a strategic plan ‘Made in China 2025’, under which the country looks to heavily invest on R&D to boost innovation.

GlobalData’s report, ‘CountryFocus: Healthcare, Regulatory and Reimbursement Landscape – China’, reveals that the pharmaceutical market for western medicine in China is expected to grow at a compound annual growth rate (CAGR) of 12% by 2022.

Priya Nair, Business Fundamentals Associate Analyst at GlobalData, comments: “‘Made in China 2025’ will help China detach from the stigma of being a staple in generic drug production and will help it focus more on the research and production of innovative drug entities.”

“China is looking to promote R&D, which is stemmed from AI. However, rise in chronic diseases from environmental pollution means that China is still heavily focused on the production of low cost generic drugs for the larger demography.”

According to GlobalData’s Pharmaceutical Intelligence Center Disruptor Deals database, 34% of Chinese AI deals involved companies headquartered in the US.

Nair adds: “With a simultaneous expanding technological market, it seems logical for China to increase AI investment. Pharmaceutical companies which have previously focused on their Western client bases are now focusing on China.”

In the current political climate, it is difficult to predict future deals between China and the US, with the current trade war between the two economic superpowers. The Committee on Foreign Investment in the United States’ (CFIUS) recently ordered patient social network PatientsLikeMe, whose majority owner is iCarbonX, a Chinese digital health company to find a new buyer, because of concerns about data sensitivity.

Similarly, Momenta Pharmaceuticals deal with Chinese investors failed in 2018 over concerns about CFIUS.

Nair explains: “The implication of this is that President Trump’s administration may limit the amount of Chinese investors investing in US pharmaceutical technologies with concerns over China’s access to sensitive user data and the use of US technologies for the Chinese market. This could affect future AI deals in the pharmaceutical space.”

Despite the current tensions between China and Hong Kong, six Chinese biotech companies, including Shanghai Henlius, SinoMab Bioscience and Alphamab Oncology, have applied to list on the Hong Kong stock exchange (HKEX) after raising US$4bn for Chinese pharmaceutical companies.

The growth of Hong Kong and Shanghai stock exchanges will continue to drive growth and deal making in the domestic pharmaceutical and AI markets.

Nair continues: “China’s current financial climate is expanding, with the emergence of ‘The STAR (Sci Tech innovAtion boaRd) Market’, China’s very own Nasdaq-style tech board, which represents a new funding platform. With companies trying to increase IPO valuation, investment in AI can help expand pharmaceutical development efficiency.”

However, for the Chinese pharmaceutical sector to be sucessful, obstacles such as different language barriers, changes in government regulations and sale of counterfeit drugs through online need to be addressed.

Nair concludes: “China needs to focus on quality control and the monitoring and manufacturing process of pharmaceuticals if they want to achieve the ‘Made in China 2025’ goal.”