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If you are planning to invest in Chinese biotechs, you need to understand the risks and opportunities involved in such investments. In this article, we will explore the potential of these stocks, their growth prospects, and the risks involved. We will also look at how the market has changed in recent years.
Investing in chinese biotech stocks
Investing in Chinese biotech stocks is one way to take advantage of the Chinese market’s rising demand. In 2018, China spent $137 billion on healthcare, and that figure is expected to reach $170 billion by 2023. But China has a lot of risk to be aware of, including regulatory risk and political risk. That’s why some investors have shied away from these stocks.
However, the upside is great. It’s possible to double or triple your investment in Chinese biotech. And if you’re lucky, you could get 50 times your original investment. That would be similar to the gains biotech companies in the U.S. had during the mid-1990s. Consider the case of Amgen, which traded for five dollars in the mid-1990s and is now trading at $175. That means a $35X return for your initial investment of $5,000.
There’s a good chance that China will steer its economy towards innovation and biotech. Its health care spending has increased at 20% per year since 2002, and biotech companies are poised to benefit from that growth. The Global X China Biotech Innovation ETF is one way to gain exposure to the Chinese biotech sector. This fund seeks to invest in companies directly involved in the country’s biotechnology industry. The fund invests in pharmaceutical companies, biotech firms, diagnostics companies, wholesalers and distributors, and services providers.
Risks involved with investing in chinese biotech stocks
There are several risks involved with investing in Chinese biotech stocks. The market for biotech companies in China has been on a downswing in recent months, due in large part to the ongoing trade war and waning investor sentiment. In addition to the political risk, there is a heightened regulatory risk.
China has a massive population – nearly 1.4 billion people – and they have an epidemic of cancer. Because of this, the government has funded massive cancer research in the country, and that population is aging. And the country has loosened privacy laws. In addition, many local cities are trying to attract biotech companies to their regions. Similar to Silicon Valley, local Chinese cities are offering incentives to biotech firms to set up shop.
The upside potential for investing in chinese biotech stocks is huge – up to 50x of the original investment – and this is similar to the tenfold upside seen in U.S. biotech stocks in the mid-1990s. Amgen, for example, was trading at $5 per share in the mid-1990s and is now worth $175. This means that a $5,000 investment in Amgen has turned into $175,000 in less than eight years.
Potential of chinese biotech stocks
Chinese biotech stocks offer investors access to the promising companies in this emerging sector. The Chinese government is focusing on high-tech fields like biotechnology and is requesting that biotech companies submit their drug products for approval. The country has also introduced new rules allowing biotech companies to raise capital on public stock exchanges.
One Chinese biotech stock that is making waves in the market is Legend Therapeutics. It has a strong pipeline of CAR-T drugs. Its pipeline includes an anti-CD20 monoclonal antibody for leukemia and a candidate targeting CD33. The company is also developing an off-the-shelf CD20 therapy.
The Chinese biotech industry is experiencing a major boom. The government is encouraging more investment in the sector by enacting regulatory reforms and increasing R&D spending. Incentives such as tax breaks are helping to drive investment in this sector. A recent example of this is China’s successful development of homegrown COVID-19 vaccines. Three Chinese companies, Sinopharm, Sinovac, and Qiaohexing, developed these vaccines. Vaccines for the deadly disease will be vital to the country’s eradication efforts.
Growth prospects of chinese biotechs
A new Morningstar report on the growth prospects of Chinese biotech stocks highlights two companies that could benefit from government investment. The Chinese leadership has a long list of objectives for its development master plan, including creating truly innovative drug developers, protecting proprietary research data and making public health resources affordable. In this report, Morningstar examines two diversified names that could benefit from the new government investment in biotech. The article also looks at the Center for Drug Evaluation, the government’s agency for approving clinical trials.
One of the biggest hurdles facing Chinese biotech companies is competition. With so many competitors competing for limited resources, prices can rise quickly. But as China’s investment in artificial intelligence (AI) expands, new opportunities will emerge. China’s investment in AI will allow the country to experiment with new ways to improve drug delivery and new drug discovery. That will open up a new pool of global and local partners.
While China’s biotech industry is still young, some companies are already demonstrating impressive results. For example, BeiGene’s Brukinsa recently beat rival Imbruvica in a head-to-head Phase III trial.
