Johnson & Johnson's recent deal to build a startup incubation center in Shanghai is the latest initiative undertaken by a multinational pharma company looking to cement its foothold in China.
Policies encouraging innovation and a faster approval process this year have spurred foreign drugmakers to seek opportunities to bolster their presence in the country.
"China, and Shanghai specifically, have become a global hotspot for healthcare innovation," the New Jersey-based company's China Group Chairman Vladimir Makatsaria said in a news release.
In an email to S&P Global Market Intelligence, the company said co-locating the new center, called JLABS, with its existing facilities in Shanghai was an important consideration. The company's Asia Pacific Innovation Center and Janssen's Discovery Center are also in Shanghai, its regional hub.
The company has also been shifting more of its operations to China.
In November, J&J subsidiary Ethicon Inc. opened a new manufacturing facility in Suzhou, less than a year after closing its facilities in Scotland.
In addition to growing government support, pharmaceutical manufacturers are also leveraging private capital looking to invest in the healthcare sector.
For example, AstraZeneca PLC is partnering with a Chinese private equity fund to establish a joint venture called Dizal Pharmaceutical.
The joint venture will develop and commercialize three potential medicines from AstraZeneca's pipeline and holds the global rights for two and China rights for the third, company spokesman Matthew Kent said in an emailed response.
The joint venture's novel clinical programs will focus on diseases with a high unmet need in China, particularly cancer.
"As China strengthens its healthcare system, AstraZeneca continues to look for opportunities to support [the country's] objectives, specifically in terms of advancing domestic [research and development] capability and addressing unmet local medical needs," he added.
According to Kent, Dizal's products will be able to seek fast-track approvals as domestic drugs since the joint venture will be considered a local company.
As for its current pipeline, AstraZeneca has been aligning its product offerings in China to meet the needs of the population.
In September, the Cambridge-based drugmaker said it will seek China's regulatory approval in 2018 for Bevespi Aerosphere — its chronic obstructive pulmonary disease drug — after it demonstrated significant benefits for patients in a phase 3 trial.
About 87 million people suffer from the lung disease, the third-highest cause of death in the country after heart disease and cancer.
AstraZeneca also sees China as an important growth driver for its lung cancer drug Tagrisso, which was approved by the national regulator in March. The drug is effective in patients who develop resistance to first-line therapy, which research suggests is more common in patients from East Asia.
Since the start of China's national healthcare reform in 2009, the country has drawn the attention of multinational drugmakers.
In 2010, Sanofi — known as Sanofi-Aventis at the time — agreed to form a joint venture company with Minsheng Pharmaceutical Co. Ltd. to enter into China's consumer healthcare market.
In 2012, Pfizer Inc. teamed up with Zhejiang Hisun Pharmaceutical Co. Ltd. to form a joint venture focused on producing high quality generic drugs, a partnership that broke up when Pfizer sold its stake in the business in November.
In November 2017, the world's biggest generics drug manufacturer, Teva Pharmaceutical Industries Ltd., was reportedly in talks with Guangzhou Pharmaceutical Holdings Ltd. to set up a joint venture to make generic medicines. Similarly in September, Amgen Inc. partnered with Jiangsu-based Simcere Pharmaceutical Group to co-develop biosimilars.
Shanghai also serves as the regional hub for Koninklijke Philips NV, a company who has gradually transformed itself into a healthcare technology business.
The company is gradually selling off its stake in Philips Lighting — which it spun off in 2016 — to focus on its healthcare technology business.
China is already a key market for the company, contributing double-digit growth in its third quarter earnings.
"There are many markets around the world that we consider extremely important and the China market is one of them," said Kimberly O'Loughlin, a Shanghai-based general manager at Philips.