By now, I hope you have a sense for how incredible the opportunity is in Chinese biotech stocks. We’ve been talking about it here in MoneyWire for the last two weeks.
The government is pushing the sector — targeting 116X growth. The Chinese people need better treatments, especially for cancer. And the country’s new and improved version of the FDA opens the door for drugs developed by biotech companies to quickly expand internationally.
This is an investment theme that will grow over many years. We’re still at the very early stages, which is right where we want to be. But on Thursday night, we got fresh evidence that the train is starting to leave the station.
The FDA approved the first ever Chinese-developed cancer treatment. And BeiGene (NASDAQ:BGNE) — the Chinese biotech company that U.S. biotech giant Amgen (NASDAQ:AMGN) recently purchased a 20% stake in — was the recipient of that favorable decision.
The approved drug is zanubrutinib, a treatment for a rare form of blood cancer called mantel cell lymphoma. It will be marketed under the name Brukinsa.
This monumental move by the FDA marks a turning point for the Chinese biotech sector. Up until now, the “drug trade” has been one-sided with China licensing pharmaceuticals from the United States. But that is quickly changing.
Chinese biotechs are starting to license their own drugs to U.S.-based companies to sell outside of China. And as more deals between U.S. and Chinese drug companies take place, China’s biotech industry will only become more coveted by investors.
BeiGene is up big over the last month thanks to the recent developments, but this bump is only a small sliver of the huge potential I see ahead in the coming years.
Even beyond the country’s strong support of its biotech companies, there are several additional reasons why I believe investing in the sector will be one of the best wealth-building opportunities of the next 20 years. Let me highlight some of them for you.
Catalyst #1: Demographics
The U.S. has 331 million people. China’s population is more than four times bigger at nearly 1.4 billion. Unfortunately, that also means greater numbers of people who are sick.
That is why the government is funding massive research into cancer treatments. In 2015, 4.3 million cases of cancer were diagnosed in China — more than any other country.
Plus, China’s population is aging. According to Time, 330 million Chinese will be over 65 by 2050. The country is expected to hit peak population in 2029 before entering a big decline.
Given the growing need for drugs over the next decade, simple economic theory points to a big boom in Chinese biotech. Demand is increasing and the supply is just not there.
Catalyst #2: Technology
The evolution of artificial intelligence (AI) in healthcare will lead to medical breakthroughs. By gaining more access to gene sequencing data, AI computers will be able to create drugs based on recognized patterns. China is pretty far along with AI technology. So as healthcare incorporates AI, China could be the best positioned country in the world.
Catalyst #3: Local Governments
Local cities and territories in China would love to attract biotech firms. Think about the wealth that Silicon Valley created for surrounding areas.
There are already cities throwing out big incentives to Chinese biotech firms to set up shop. Beijing and Shanghai have both said they will spend up to $1.5 billion to help early stage biotechs. Some are creating campuses where multiple companies can open offices, creating a collaborative workspace. Shenzen has stated it will match any private funding money on a 1-to-1 basis.
Catalyst #4: Diversifying the Economy
Beijing has highlighted the pharma and biotech industries as two that it wants to lead growth in the future. By depending less on the export-driven manufacturing industry, it will create a bigger economic boom domestically.
Catalyst #5: Talent
In the past, China did not have enough educated scientists to match the knowledge of other countries. That has quickly changed as more America-educated Chinese make their way back home to work.
The government also introduced incentives for U.S.-educated Chinese to return home. China is dangling carrots to attract the world’s top scientists through its China’s Thousand Talents program, and my guess is that it’s working.
Catalyst #6: Gene Editing
Gene editing is another one of my favorite long-term investing themes within the future of medicine. Scientists are working toward curing diseases the same way you or I would make an edit while typing at our computers.
By the end of 2018, there were already at least nine gene editing studies taking place in China targeting various forms of cancer. That’s more than the U.S., where there are four gene editing studies in the FDA pipeline.
Catalyst #7: Just the Beginning
I’ve seen estimates that up to 100 Chinese biotech companies are preparing to go public in the near future. I realize that seems insanely high, but think about this: Most of China’s biotech companies weren’t public before this push from the government. They existed, yes. But they couldn’t list on a major Chinese stock exchange unless they had revenue. And that requirement eliminated nearly all of them.
Now is our opportunity to get in at a very early stage. That’s truly when the big money is made.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.
