"Hidden Dragon" No More
The early phase of the Chinese CRO scene was flooded with chemistry-based companies because of the nation's large chemist
talent pool—and the clarity and ease of assessing the quality of the deliverables by their Western customers. As we have seen,
opportunities are now emerging for new CROs that provide preclinical, animal model, and clinical trial services. But the hurdles
are higher due to the complexity and difficulty in quality control. Big Pharma and large biotech companies in the West have
been more cautious in using these services, but outsourcing will likely increase with experience. "Quality is always the key,
and we have had great success outsourcing chemistry in China," says Roche's Babiss. "However, many areas of drug discovery
that span the value chain are being developed in China, with a primary emphasis on quality, and we are continually testing
the capabilities to see if we can then establish longer term relationships."
One company that has established its presence in systems biology and analytical services for preclinical and clinical is ShanghaiBio,
originally the contract research division of Shanghai Biochip, at the Shanghai Zhangjiang Hi-Tech Park. ShanghaiBio expects
to double its revenue in 2008—from $3 million in 2007, according to Jason Gang Jin, executive vice president for global technology
and business. The company develops cell, tissue, and protein arrays internally for Western pharmas and biotechs. "With the
recent, drastic restructuring at many Big Pharma companies in the US, we expect the prospect for growing and expanding our
preclinical and biology services to be excellent."
ShanghaiBio was funded initially with $45 million, most of which came from the Chinese government, its venture funds, and
local universities and research institutes. The company has attracted a number of potential US-based investors, including
major private equity funds, and Big Pharmas are already using its services. Jin's goal is to have a ShanghaiBio IPO in the
next two years.
Another China-based CRO company that garnered significant government support is Fountain Medical Development, one of the few
Chinese CROs focusing on clinical trial services for biotechs and pharmas outside China. Armed with an MD degree from the
top-ranked Peking Union Medical College, and with hands-on experience in launching Quintiles Transnational's greater China
business, Fountain's CEO Dan Zhang says, "With our co-founders' extensive knowledge of designing and managing clinical trials
within multinational pharmaceutical companies, Fountain is uniquely positioned to serve our clients' clinical research needs
in China. Our Phase I and central lab facility in Tianjin is the only one in China to provide one-stop, integrated service
for our global clients."
As the SFDA allows more clinical trials in the country, the test run of a special-approval, or fast-track, channel for first-in-class
compounds is a likely innovation. Fountain's collaboration through Tianjin Binhai Biomedical Industrial Park provides a potential
platform for the new approval mechanism. "Several US-based VCs approached us to get in the seed round, but we eventually had
to turn most of them away because we only needed a small amount of funding at the beginning," says Zhang. "One important factor
to keep in mind is the unique political environment of China. Building a healthy relationship with the government when a project
is first initiated becomes essential. The effort spent in collaboration with the right partner at the beginning will translate
into significant value." With a better understanding of China's political system, a drugmaker can take advantage of policies
encouraging pharma R&D and gain government support.
As for China's infamous reputation for corruption among its countless local and regional officials, Dan Zhang insists that
most such officials in the life sciences were removed following the criminal prosecution, resulting in the execution or jailing,
of numerous high-ranking drug safety officials in recent years. A new generation of regulators is putting a system in place
to prevent the recurrence of corruption. With revised SFDA regulations on drug review and approval—and increased accountability
and transparency—the overall development time in China is set to shorten.