The US pharmaceutical giant Johnson & Johnson became the first foreign-funded open platform to be accredited by the Shanghai municipal government in February. This is in line with its plans to build an innovation ecosystem in the country. 

In November last year, Shanghai’s municipal government set out regulations to encourage foreign R&D centres to take root in the city. 

Policy support measures – ranging from customs clearance facilitation for R&D and tax cuts to talent acquisition and participation in government projects– came into effect on December 1, 2020, and will run until November 30, 2025.

The open platform, spanning multiple locations, supports the development of an innovation ecosystem. It provides local and international start-ups with facilities, equipment and professional guidance to bring about more disruptive healthcare solutions. The focus on China echoes a decision in 2019 from the company’s executive committee to position the Chinese market as a “global innovation hub”. 

Growing market

Will Song, chairman of Johnson & Johnson China, tells fDi that “innovation is in our DNA” and “in China, the power of innovation is especially real”. 

As the world’s most populous country, with an ageing population and a rising middle class with an appetite for healthcare products, “China is a market with huge unmet healthcare needs,” he says. 

Johnson & Johnson was one of the first international healthcare companies to enter China in 1985 and is the largest international player in this market.

Referring to the government’s latest R&D push, Mr Song says: “We are encouraged by China’s determination to foster innovation and we are very confident that, in such an environment, we can make a real difference to transform people’s lives with innovation.”

In its 14th five-year strategic plan, the government announced that it will increase R&D spending by 7% annually until 2025. 

Johnson & Johnson already has a network of roughly 700 science professionals in R&D facilities across Beijing, Shanghai, Guangzhou, Suzhou and other Chinese cities. Outside the US, China is its only market to have end-to-end R&D capability across medical devices, pharmaceuticals and consumer health.  

Digital future

The company is looking to advance digital surgery in China. It has teamed up with Beijing-based start-up Changmugu to develop the first AI solution for joint surgery pre-operative planning. This has enabled surgeons to make the planning for procedures 30-times faster and increased operation accuracy by 20%, according to Mr Song.

Xian Janssen, a pharmaceutical subsidiary of Johnson & Johnson, has also signed a memorandum of co-operation with the first affiliated hospital of Xi’an Jiaotong University to deliver a new e-hospital model or virtual health services for patients.

Innovation for all

Other foreign businesses might not be so bullish on China’s R&D boost, says Kyle Freeman, partner at law firm Dezan Shira & Associates in Beijing. 

Mr Freeman says while some foreign companies might look to “seize on some of the information” provided by the government and targets in the five-year plan, others — particularly technology businesses — may be reluctant to pursue such a strategy as this might also have a knock-on effect on operations in other overseas markets, such as the US or Europe.

Johnson & Johnson declined to comment on whether the life sciences sector would be spared the threat of US–China decoupling. 

“The biggest challenge remains how we meet the current and future needs of patients and consumers, and address the increasing unmet needs in a better and faster way,” Mr Song maintains. 

“Innovation cannot be done by one company. It requires joint efforts and collaborative work from public and private sectors,” he says, including government authorities, industry partners, research institutions, entrepreneurs and local companies.

This article first appeared in the April/May print edition of fDi Intelligence.