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Summary of the COVID-19 Pharma Industry Survey Results

Core Content

This document presents the findings of a survey conducted from February 13 to 17, 2020, targeting 104 participants from the pharma and healthcare sector in China, including operators and investors. The survey explores the sector's response to the COVID-19 crisis, challenges faced, short-term mitigation strategies, and expectations regarding the 14th Five-Year Plan.

Main Viewpoints and Key Insights

1. Immediate Response to the Crisis

• Flexible work arrangements (e.g., working from home) were the top priority to ensure employee safety and business continuity.
• Government-mandated tracking systems were implemented by most companies, with 23% using third-party services such as logistics and IT vendors.
• Adjusting 2020 targets was a least concern, though it may vary based on the crisis's progression.

2. Challenges During the Crisis

• Market and sales activities were most affected due to restrictions on HCP (Healthcare Professionals) engagements, medical events, and hospital access.
• Adjusting to new market demands was the second most critical challenge.
• Supply chain disruptions, logistical issues, and raw material shortages were also significant concerns.

3. Crisis Impact on Business

• Supply chain and logistics were identified as the top three areas most impacted.
• Cash flow and financing concerns were highlighted by >50% of respondents.
• Limited use of online access models was a concern for many, but expected to evolve.

4. Short-Term Mitigation Strategies

• Strengthening relationships with local governments and hospitals was the highest short-term priority.
• Adopting new technologies for engaging HCPs, patients, and customers through online channels was a major focus.
• Larger companies (revenues >5 billion RMB) were more open to integrating new technologies and digitalization, while SOEs focused on online models and foreign companies embraced all aspects of digital transformation.

5. Expectations for the 14th Five-Year Plan

• Healthcare services, hospitals, prevention, and public education are expected to be emphasized.
• R&D focused on China-specific diseases will likely receive more government support.
• SOEs and private companies are anticipated to benefit more from these initiatives compared to foreign enterprises.

6. Impact on Local vs. Foreign Drug Companies

• WOFEs (Wholly Owned Foreign Enterprises) are confident in their ability to respond quickly due to current regulatory support for accelerated drug approvals.
• SOEs are also optimistic, leveraging their deep understanding of the local market.

7. Revenue Outlook for 2020

• A balanced view was observed: ~20% of respondents believe sales will catch up to meet targets, while ~20% expect a revenue drop of up to 20%.
• Many remain uncertain about the full-year outlook, depending on the crisis progression.

Key Observations

• New ways of working are becoming more prevalent, driven by health and safety concerns and the need for business continuity.
• Digital transformation is accelerating, particularly in marketing and sales and online business models.
• Partnerships and alliances are expected to play a key role in shaping the future of the healthcare industry.
• Government support is likely to focus on prevention, education, and R&D, especially for domestic players.

Conclusion

The survey highlights a shift towards digitalization, flexible operations, and strategic partnerships in the Chinese pharma and healthcare sector. While SOEs and private companies are more concerned with cash flow and productivity, foreign companies are more focused on marketing and sales recovery. The 14th Five-Year Plan is expected to drive healthcare innovation and public health initiatives, with local players likely to benefit more from these changes.

Appendix Highlights

• Company segmentation based on revenue and ownership structure (SOEs, Private, JVs, WOFEs).
• Employee count distribution (less than 5,000; 5,000–10,000; more than 10,000).
• Key contacts for Deloitte’s China Life Sciences & Health Care team, including Industry Leader, Consulting Leaders, and Directors.

About Deloitte

Deloitte has a long-standing presence in China, with a history dating back to 1917. It offers a wide range of services, including audit, consulting, financial advisory, risk advisory, and tax services, to both local and multinational clients. The firm plays a significant role in shaping China’s accounting and taxation standards.