In mid-November, Bali, Indonesia, has entered the rainy season, hot and humid, and the 55th World Lung Health Congress was held here. The conference is the world's largest exchange in the TB sector, held annually, but for many Chinese companies, this year's conference is significant.

At the opening ceremony on November 12, global TB activists, including Indonesian TB expert Erlina Burhan, shouted "reduce the cost of testing to US$5", and many Chinese business people in the audience recorded the scene with cameras.

Indonesia's demand for low-priced products has led many Chinese companies to see opportunities. "Tuberculosis is a disease that afflicts the poor, and it needs affordable testing products." Lou Jianrong, the founder of Guangzhou Red Biotechnology Co., Ltd., told the Economic Observer that during his trip to Indonesia, he witnessed the current situation of Indonesia's tuberculosis testing market. According to his understanding, at present, Indonesia mainly uses equipment and detection reagents from the American company Cepheid and the European company Qiagen (Qiagen), among which the Saipei reagent used to diagnose patients with pre-existing tuberculosis has a price of 8-10 US dollars, and the Kaigen reagent used to diagnose latent infection has a single test price of 60-80 US dollars.

As the country with the highest burden of TB in the world after India, Indonesia has 820,000 new cases of TB in 2023, a large number of patients are still under-detected, and 130,000 people die from the disease. After the new crown epidemic is under control, tuberculosis has once again become the world's number one infectious disease killer, and in Indonesia, a country famous for its volcanoes, tuberculosis is like a "crater" in the field of public health, which requires key prevention and vigilance, attracting infectious disease-related enterprises to visit.

In the eyes of many Chinese business people, Indonesia is in a historic period where it is concentrating on ending the tuberculosis epidemic. On October 20, Indonesia's new President Prabowo was officially inaugurated and proposed eight "optimal quick-impact projects", including a 50% reduction in tuberculosis patients within five years.

For Chinese enterprises going overseas, in the current complex international environment, the relationship between the destination country and China is an important factor to measure their business layout. A number of Chinese business people mentioned to the Economic Observer that Prabowo's first foreign visit after being elected president was in Beijing, which was seen as an important signal.

In the new crown epidemic, Chinese in vitro diagnostic companies that have developed in a blowout based on the massive demand for nucleic acid testing and antigen testing are facing centralized procurement pressure at home, and going overseas is an ideal choice to release production capacity and continue performance growth.

Organize a group to Indonesia

Taking the opportunity to participate in the World Lung Health Congress, Yang Xiang went to Indonesia for the first time. He has a notebook in his hand, on which are the contact information left by people who have come to the booth for consultation in the past few days, including health workers and agents in Indonesia, India, South Africa, Vietnam, Bangladesh, Uganda and other countries.

Yang Xiang is the chief scientist of Guangzhou Rader Biotech, and this time he went to Indonesia with the founder Lou Jianrong, on the one hand, to timely feedback the cutting-edge technology in the field of global tuberculosis to the domestic R&D team, and on the other hand, to introduce the product characteristics of Rader Biotech to Indonesian distributors and other visitors. Previously, the business of Rader Biotech was mainly in China, and the overseas sales system had not yet been established, so Yang Xiang temporarily took on the work of the marketing department.

In Indonesia, the registration and marketing of foreign medical products must go through local agents, and there can only be one agent for a product. Therefore, if you want to open up the market in Indonesia, it is very important to choose a strong agent. Redder Biotech is in the stage of negotiation with a number of agents and has not yet finalized the final partner.

On the afternoon of November 13, Yang Xiang accompanied Lou Jianrong to meet with the commercial person in charge of one of the agency companies, in the greeting stage between the two sides, the person in charge of the Chinese identity to close the distance, after half an hour of communication, the two sides agreed that a week later, the chairman of the agency company went to Guangzhou to inspect the field of Red Biology, and on market expansion, whether to cooperate in Indonesia local production and other key issues to carry out further negotiations.

This time, the group that went to Indonesia with Redd Biotech also included Wantai Biotech (603392. SH), Cayudi, Ustar, Jiufeng Medical and Zhishan Biotech. Except for Jiufeng Medical, which is a company engaged in AI image detection, several other companies are in vitro diagnostic companies.

Different from ordinary going to sea, this time it was a tuberculosis doctor - Li Liang, vice president of Beijing Chest Hospital. Li Liang is an authoritative expert in the field of tuberculosis in China, and he used the identity of the chairman of the Beijing Tuberculosis Diagnosis and Treatment Technology Innovation Alliance at this conference.

"This time, six representative enterprises were selected to participate in the conference to showcase China's advanced technology and promote Chinese enterprises to open up overseas markets more widely. I walked around the exhibition and found that some of China's tuberculosis screening technologies have been at the forefront of the world, and they are no longer imitating and following. Li Liang told the Economic Observer that during this trip, he will contact and communicate with the relevant persons in charge of the Indonesian Ministry of Health and medical institutions to introduce China's latest technology and experience in tuberculosis prevention and control.

More widespread and cheaper

The world's cutting-edge technologies mentioned by Li Liang include the tongue swab technology used by Ustar, the AI tuberculosis imaging screening technology used by Jiufeng Medical, and the portable latent infection screening device developed by Rader Biotech. A common feature of these technologies is that they are grassroots-oriented and easy to use.

Li Liang explained that the symptoms of tuberculosis patients are not specific, similar to cough and fever when catching a cold, and if doctors at the grassroots level cannot identify tuberculosis, they may be missed, so it is necessary to use simple equipment suitable for use in primary medical institutions while improving the level of doctors. At the same time, these devices and technologies can be used for proactive screening, changing the original pattern of symptomatic care to screen for asymptomatic TB patients who have developed the disease (and are infectious).

Taking tongue swab technology as an example, its operation method is similar to the method of using nasopharyngeal swabs for new crown detection, "Compared with sputum detection, tongue swab technology has no problem in specificity, and the sensitivity will be a little worse, but the convenience and population coverage it brings can make up for the shortcomings." Because the subjects of sputum testing generally have more symptoms, and even if they are treated for symptoms, about 50% of them do not have sputum, and it is difficult for children and the elderly to cough up sputum. Chen Chong, general manager of Guangzhou Pushi Lihua Technology Co., Ltd., said that in the past, patients without sputum needed to use nebulization to induce phlegm, bronchoalveolar lavage fluid, etc., which were invasive, complex and costly for patients without sputum in the past.

In addition to the inability to test easily extracted specimens such as saliva, another limitation of mainstream testing equipment such as Saipei's GeneXpert is that it can only be installed in large medical institutions due to cost and technology limitations.

"The quality of a product, in addition to the sensitivity and specificity of the product itself, is also related to how to use and where to use. Yang Xiang said.

In the second half of 2023, Chen Chong visited 10 clinics in Indonesia. He found that clinics are the first step for many TB patients, but these clinics do not have the financial and staffing capacity to use large instruments, and they often need to send samples to large medical facilities or third-party laboratories for testing, and it takes days to receive the results, which can lead to patient attrition.

In addition to being grassroots-oriented and user-friendly, Chinese enterprises also emphasize economy. Pushi Lihua said that the price of its equipment and reagents can be much lower than other similar products in the market, the price of equipment can be lower than 1/100 of the price of similar equipment, and the price of reagents can be 1/10 of similar products.

Yang Xiang is also full of confidence in the price advantage of Rader Bio's products. Before joining Rader Biotech, Yang Xiang had been engaged in the development of reagent raw materials abroad for a long time, and he revealed that Rader Biotech not only independently developed and produced tuberculosis detection equipment and reagents, but also conquered the key technology of core raw materials for reagents.

"We can reduce the cost of products developed for economically weak countries to the extreme, because we can produce reagent raw materials, so we can 'knock down' the cost." Yang Xiang said.

Indonesian localization is unavoidable

Localized production is a term that all Chinese entrepreneurs who come to Indonesia will talk about, and it involves their business choices.

"We are discussing whether to promote local production in Indonesia." The head of Southeast Asia sales of a Chinese listed company said that compared with Mindray Medical (300760. SZ), Shengxiang Biology (688289. SH), New Industries (300832. SZ), Fapon Biotech, etc., her company has been slow to localize in Indonesia. At present, in Indonesia, the company has no permanent staff, mainly relying on agents, as a docking agent sales, she only goes to Indonesia once or twice a year, which may lead to the inability to respond to changes in the market in a timely manner.

In addition, due to Indonesia's unique single agent system, foreign-funded manufacturers do not have much right to speak. The above-mentioned sales person in charge said that foreign-funded manufacturers can generally only set annual sales targets for agents, and agents will decide whether to complete the targets at their own discretion, and manufacturers cannot enforce them. After all, changing distributors is costly and requires a repetition of the product registration process.

In her view, localized production has become the only way for Chinese companies to gain a foothold in the Indonesian market. She mentioned some details, such as: in the official project bidding in Indonesia, both letters and interviews are in Indonesian, and English is not accepted; At exhibitions in Indonesia, the Chinese counterparts she met in the past two years basically put up signs of localized production.

According to Shen Yang, the head of Indonesia, another well-known listed company in vitro diagnostics in China, Indonesia is taking advantage of the attraction of the vast market to attract investment, and further require foreign-funded enterprises to carry out local production and research and development.

In order to encourage localization, the Indonesian government has stipulated that foreign medical products entering Indonesia need to obtain a registration license, which is divided into two types of licenses: one is an import license called AKL, which is sold in Indonesia through a local agent, and the other is a license called AKD, which is for foreign products that have achieved local production.

"In the procurement organized by the Indonesian government, once a product with an AKD license participates in the bidding, the similar products that only get AKL will be frozen and cannot participate in the bidding." Shen Yang said that his company began to cooperate with local companies in Indonesia to build factories two years ago and achieved local production.

With more and more peers entering the Indonesian market, the price war is quietly starting.

According to the person in charge of sales in Southeast Asia of the above-mentioned listed company, the Indonesian agent has sent a quotation from another Chinese manufacturer, asking if it can reduce the price, if not, the agent will cooperate with the new manufacturer. The person in charge said: "Indonesia's tuberculosis market seems to be very large, but it is actually very volatile, and it is unknown whether it will be able to make money in the future." ”

Shen Yang advocated that Chinese manufacturers should unite and should not hurt the image of Chinese brands by excessive bargaining.

End TB & Gold Indonesia

"Ending the TB epidemic is Indonesia's top priority, and Indonesia's next TB prevention and control actions are much like China's patriotic health campaign in the 80s and 90s." Shen Yang has been resident in Indonesia for 4 years and has been in contact with the Indonesian Ministry of Health and the medical community for a long time. From the Indonesian government's perspective, he observes that ending TB is relevant to the country's long-term vision for development, "Indonesia Gold 2045".

"Indonesia Gold 2045" means that Indonesia will become the world's fifth largest economy by 2045. This was proposed by the previous Indonesian President Joko Widodo, and Prabowo continued this goal. In order to achieve this goal, the Indonesian government has identified food and beverage, textiles, automobiles, electronics and other industries as key support industries, and the large and young workforce is a favorable factor for the development of these industries.

With a population of 281 million, Indonesia is the fourth most populous country in the world, with an average age of 29.7 years. The Indonesian government expects Indonesia's demographic dividend to peak by 2030.

However, in the working population, there are new cases of TB on a larger scale every year. Indonesia's Coordinating Minister for Human Development and Culture, Muhajir said at a conference in June that three-quarters of TB patients are in the productive age group, that many TB patients are unemployed, and that TB may be hurting economic activity.

Building healthy and high-quality human resources was Prabowo's commitment during his presidential campaign. After his election, three decrees related to tuberculosis were proposed:

First, in the 2025 budget, 8 trillion rupiah (about 3.65 billion yuan) will be transferred from other fiscal expenditures to control tuberculosis;

The second is to allocate 3.2 trillion rupiah (about 1.46 billion yuan) for a free medical check-up program for 52 million people, including screening for tuberculosis through X-rays;

The third is to allocate 1.8 trillion rupiah (about 820 million yuan) to enhance hospital infrastructure and medical equipment to promote the construction of D-level medical institutions into C-level medical institutions.

This investment of real money is a great business opportunity for companies engaged in tuberculosis business. Such opportunities are rare in other countries.

While ushering in new opportunities, Chinese companies are also concerned that there are already many participants in Indonesia's tuberculosis market.

Speaking at the 55th World Lung Health Congress, Indonesian CDC Director Yudhi Pramono said that in 2023-2024, Indonesia has begun epidemiological investigations of close contacts of tuberculosis and active screening of high-risk groups, including X-rays. He did not disclose the suppliers of the products used in the screenings, which, according to the Economic Observer, are mainly European, American and Indian companies.

Yudhi Pramono also introduced that in terms of tuberculosis diagnosis, Indonesia has 2,407 rapid molecular diagnostic devices distributed in large medical institutions in 507 cities in 38 provinces, of which 2,340 are GeneXpert of the American company Saipei.

Shen Yang, who is engaged in molecular diagnostics business, is very familiar with the above data. According to his understanding, in the past 8-10 years, Indonesia's equipment has been funded by the Global Fund to Fight AIDS, Tuberculosis and Malaria (The Global Fund) and the Global Foundation for Innovative Diagnostics (FIND), plus some government procurement, to achieve wide coverage, which can be used by large medical institutions on almost every island.

However, like the molecular diagnosis of other infectious diseases, the diagnosis of tuberculosis requires both equipment and reagents. "The current equipment is sufficient, but the Indonesian government cannot afford to pay for all the reagents without the support of the Global Fund, and it will be difficult to use these equipment." Shen Yang said that as Indonesia moves into the ranks of middle-income countries, the level of funding from the Global Fund will decline, and Indonesia needs more affordable testing products.

(Shen Yang is a pseudonym in the article).