2017.11.29 Costone Capital Views:
The new phase of China’s economic development means that China’s technological innovation, especially that in healthcare sector need to parallel that in the most advanced countries in the world. It also entails the national policy support for the medical industry and R&D of medical firms. Against this backdrop, more factors need to be taken into account when evaluating core capabilities of good healthcare enterprises.
The new phase of China’s economic development means that China’s technological innovation, especially that in healthcare sector need to parallel that in the most advanced countries in the world. It also entails the national policy support for the medical industry and R&D of medical firms. Against this backdrop, more factors need to be taken into account when evaluating core capabilities of good healthcare enterprises.
1. The ability to innovate: China is shifting its focus from coping foreign countries to R&D of innovative medicine and pharmaceutical machinery, which makes the ability to innovate a key measurement for evaluation of a company. What we should focus on is the company’s capability to synergize advanced technology from overseas and accumulate a talented pool for its own R&D.
2. Cost-effective medical products and services. An integration of manufacturing and marketing can achieve economies of scale which help bring down the costs. Moreover, companies that can provide customers with medical services of higher quality at a lower price are more appealing to investors.
3. Entrepreneurship. This is an important factor that should be considered whenever and wherever you invest. When it comes to healthcare sector, it’s also vital to freshen up the entrepreneurship of those state-owned medical companies.
4. Working capital management. A key component is efficient supply and working capital management. Often, despite the development of innovative products, entrepreneurial failure is due to the lack of a sufficient cash flow to finance operations.
5. Ability to integrate global resources. International cooperation of R&D on new drugs and overseas M&A have become a trend, which comes down to the well-integrated use of global resources.
0n November 25 and 26, 2017, New Fortune hosted 2018 China Venture Investment Conference Annual Summit and the 15th New Fortune Best Analysts Forum. CoStone Capital’s managing partner Tao Tao was invited to attend the forum and delivered a speech entitled How to Value China’s Healthcare Companies. Above are the excerpts from the speech.
The year 2019 marks the fortieth anniversary of China’s Reform &Opening-Up, once again, we meet at the turning point of history. What’s the next step for the game, is there any clear guidance? The answer is affirmative.
Our country is enjoying a good momentum of development, which does not come from the Washington Consensus nor the Beijing Consensus. China’s experience has proved that both the visible hand and the invisible hand are crucial: the visible hand, stands for the government-led reform, and would yield benefits for reform and opening up; the invisible hand, stands for the Marginal Power represented by the private sector, and would improve economic efficiency and tax collection, create jobs and employment opportunities.
Provided that we want to protect and expand the benefits form reform, three simple but mandatory agreements are to be made and followed: No.1 Private ownership must be recognized, protected and treated equally with public ownership constitutionally, both ownerships are scared and inviolable;No.2 Make further clarification of the principal position of market economy, “deepen economic system reform by centering on the decisive role of the market in allocating resources”, as President Xi addressed in the third Plenary Session of the 18th CPC Central Committee;No.3 Implement the guiding principles of “comprehensively promoting law-based governance” of the fourth plenum. The rule of law is essential for economic growth, irreplaceable to protect private ownership, and necessary to encourage innovation and entrepreneurship.
Above are three rules for us to avoid falling into the Middle-income Trap. Assuming that we are breaking systematic barriers to private enterprises’ participation in market economy, and boosting innovation and entrepreneurship of our society, then we are heading towards a promoting direction. We are marching in the path of light, regardless of the ups and downs of Sino-US relationship, the drop in GDP growth rate, or the monetary policy.
These principals also apply on knowing how better to run a business: don’t be hedged by rules and regulations at the beginning, pay more attention to your survival, and you’ll learn more when you start your second business.
For many years, Huawei has been the only Chinese company on the list of the Top 50 R&D Spenders. Regardless of the economy and its income, what Huawei has been doing is investing in its future, dedicated to R&D, continuously and resolutely. This provisional work underscores Huawei’s accomplishments, making Huawei anindustry leader.
So, there are standard answers on how to run a company,which could be summarized as concentration and professional dedication, continuous investment on innovation and trying harder in R&D. Entrepreneurship is also important, every single company needs entrepreneurs to push aside all obstacles and difficulties, to implement strategies and ideas. We, as investors, are destined to look for such outstanding entrepreneurs and their companies, invest in them and partner with them.
At this key point of history, a country, a company, or asingle individual, will all need to find the right path. Four decades after the Reform and Opening-up, it’s time to learn from our experience and stop “wadding across
