Ge Li, another returnee, founded and runs WuXi PharmaTech, a Shanghai-based company specializing in contract chemistry research and product development services. Li grew up in Beijing, received his bachelor's degree in 1989 from Peking University and his PhD from Columbia University. He was one of Pharmacopeia's founding scientists and gained valuable experience in small-molecule drug discovery and running a successful biotech company. Many of WuXi's senior managers share similar backgrounds. For example, Shuhui Chen, the company's recently hired CSO, formerly served as senior research scientist and research adviser for Lilly's discovery chemistry division. WuXi PharmaTech has more than 60 pharma and biotech clients in the United States, Europe, and Japan, including 14 of the top 20 pharma companies and eight of the top 10 biopharmaceutical companies.

"The pharmaceutical industry is facing the challenge of escalating costs and low R&D efficiency," says Liu Ye, who cofounded Beijing Honghui Meditech, another contract chemistry research service company, with a few fellow returnees from Sweden after more than a decade of education and experience at companies such as Pharmacia and Karo Bio. "Companies that can develop effective therapeutics at more competitive cost will gain an important advantage," says Ye.

Many returnee-founded companies are involved in medicinal and synthetic chemistry, but clinical research is another key area for returnees. Because of the large patient base and relatively concentrated specialty hospitals in cities, patients (including treatment-naive patients) can be recruited for a variety of disease indications faster than possible in the United States or Europe. On average, companies can save from two to five months by conducting a Phase I trial in China. The time saving could be more significant for Phase II and III trials, says Tao Min, a returnee who founded Bio-Research, a Beijing-based contract research organization (CRO), in 2000.

Though the cost of conducting clinical trials has increased in China, it is still only 40-60 percent of the cost for most indications in the US. In China, only hospitals designated by the Chinese State Food and Drug Administration (SFDA) are authorized to conduct trials. As a result, principal investigators at such hospitals often have extensive experience with Western companies.

One of the key differences in conducting clinical trials in China and the United States is that in the United States, the sponsoring company takes responsibility for the management and results of trials. In China, the responsible party is the clinical investigator. "We work differently with investigators in China," says Min. "These doctors are thought leaders in their own field and are extremely busy people. We need to be particularly service oriented and make the PI's work less cumbersome."

Min's advice to Western biotech/ pharmaceutical companies interested in conducting clinical trials in China is to have the right attitude and refrain from cutting corners. The Chinese SFDA modeled many of its regulatory standards and procedures after those of the US FDA; therefore, Western companies need not be overly nervous about the process in China. Having the right attitude means following SFDA instructions and processes instead of trying to bypass steps by using connections.

Licensing and Partnering Opportunities In the past few years, a small number of US companies have successfully out-licensed clinical-stage or earlier compounds to Chinese biotech companies. Peregrine Pharmaceuticals, based in Tustin, California, is an excellent example. Peregrine licensed an Iodine-131 radio-labeled Tumor Necrosis Therapy (TNT) monoclonal antibody that was indicated for a type of brain cancer to Medipharm Biotech, an antibody therapeutics company based in Shanghai. Collaborating with Peregrine and its subsidiary Avid BioServices, a CMO, Medipharm received Chinese regulatory approval for an advanced lung cancer indication in August 2003, becoming the recipient of the first radio-labeled antibody approval in China.

The Chinese approval came before Peregrine initiated US Phase III studies for the drug. As a result, Peregrine can access robust efficacy and safety data from its Chinese partner, potentially lowering the risk of US development. Peregrine and Avid, meanwhile, are working with Medipharm to establish a cGMP facility to produce antibody therapeutics commercially in China.