Unleash the Dragon - Pharmaceutical Executive

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Unleash the Dragon
With an army of scientists and a sea of consumers, China is poised to become pharma's most valuable market and partner


Pharmaceutical Executive


At least five multinational pharma companies have launched R&D operations in China or are considering such an initiative. In October, Roche announced the opening of Roche R&D (China) at the Shanghai Zhangjiang Hi-Tech Park, the company's first R&D facility in Asia and its fifth worldwide, and Eli Lilly established a research operation in the same park this year. AstraZeneca started its East Asia Clinical Trial Center in Shanghai in April 2003. Novo Nordisk China relocated its R&D center to the Beijing Zhongguancun Life Science Park and doubled its size this August. Russell Greig, president of international pharmaceuticals for GSK, said his company would consider establishing a R&D center in the country, if the government puts the correct regulatory regime in place, and Pfizer is close to making a decision about its China R&D center, according to Allan Gabor, Pfizer China's general manager.

China has about 20,000 biologists with a master's degree or higher. They are paid one-fifth to one-third what similarly qualified biologists make in the United States. This vast, competitively priced talent pool is also being explored not just by Big Pharma, but also by biotech companies, such as Basilea Pharmaceutica, a Swiss-based, Roche spin-off that develops small-molecule anti-infectives. In May 2002, Basilea set up JIPharma, an impressive R&D center in Haimen, Jiangsu province, near Shanghai. With a staff of nearly 100 people, mostly chemists, recruited from leading Chinese faculties, JIPharma works to full international standards on Basilea R&D projects.

Anthony Man, Basilea's CEO, cautions that the war for talent could be highly competitive, particularly in big cities. This will drive labor cost up in a short time, eroding to an extent the cost advantages in highly knowledge-dependent technology sectors. "The cost savings will ultimately really come for businesses dealing with volume, whether this is clinical trials or manufacturing," he says. "That's simple supply and demand."

Man's advice: "Pay enough attention to risk and infrastructure and don't build a house of cards. The burning desire for a 'quick win, fast money' as seen in the Chinese real-estate market may undermine the original goal of sustained growth."

Entrepreneurs Come Home The companies founded by "overseas returnee" entrepreneurs play a key role in China's life science world. Most of the Chinese students who came to the United States in the 1980s and 1990s to pursue graduate degrees in biology or chemistry established their scientific careers at pharmaceutical and biotech companies or academic research institutes. A small but growing number have found a second passion in the business side of healthcare. Many returned to school for an MBA or JD degree, while others found opportunities in business and management.

Back in China, armed with Western education and corporate experience, the returnees are bridging the gap of understanding between Western and Eastern business cultures. Their companies have brought new ideas and modern business paradigms to China's economy—and they often represent the best investment/collaborative opportunities for US and European companies.

One of the earliest returnees is Kevin Chen. Born in Shanghai, Chen graduated from East China Normal University in Shanghai and received his master's from Shanghai Biochemistry Institute before coming to the United States in 1985. After receiving his PhD from the University of Minnesota and doing postdoctoral training at Caltech, Chen held positions at MIT and DuPont and was hired in 1997 to establish a research center in Beijing for Novo Nordisk.

Today, Chen is president of a pair of Chinese companies. South Gene Technology (SGT) is the commercial arm of Shanghai's National Human Genome Center (NHGC), a major center for Chinese genomic research. "SGT is equipped with high-end high-throughput genotyping equipment and has the capability to churn out high-quality data at very competitive cost," Chen says. "We have the ability to access disease-associated genes discovered by NHGC and patient samples from our wide network with hospitals and universities." In addition, Chen heads Shanghai IgCon Therapeutics, a joint venture between SGT and California-based Genetastix that pursues therapeutical human antibodies.


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