China: Big Pharma's Long March to End? - Pharmaceutical Executive


China: Big Pharma's Long March to End?

Pharmaceutical Executive

Innovation: Provincial Style Central Planning

Wang Hongguang (CNCBD)
The Chinese central government has made a fundamental commitment to transforming the country from a manufacturing economy to an innovation-driven economy. The state has supported basic research for many years and its strong support for science education has created a highly trained pool of researchers. Wang Hongguang, of the China Naitonal Center for Biotechnology Development (CNCBD), notes that annual R&D investment has reached USD 44 billion. Mr. Wang relates that "the number of essays published in international journals is six times larger, and eight new drug applications were granted clinical approval. Compared to the year 2000, the number of patent applications between 2001 and 2005, has increased 11 fold."

"There is a significant political push on the national level to accelerate the growth and importance of innovation," notes Mr. Grapow. "However, the execution is completed on a provincial level. Some regions such as the Shandong Province or Shanghai Municipality have made a huge commitment to pharmaceuticals and biotechnology and pharmaceutical innovation will certainly play a role in such regions." One such Shandong pharma pioneer is Luye Pharma. The firm's banker turned entrepreneur, CEO Liu Dianbo, decided to axe a profitable API business in favor of focusing on moving up the value chain with formulations. Mr. Liu has also decided to take the road less traveled in building his business. "Luye is a small company that cannot afford a lot of new drugs," says Mr. Liu. "So we decided to focus on differentiating our drug delivery systems and concentrating on the most difficult applications with the aim of using these platforms to make a new global standard." Beijing has also produced a number of innovative firms, which are coordinated through the Beijing Pharma & Biotech Center. The center has helped a number of firms overcome early stage hurdles through its affiliate, the Alliance of Biobox Outsourcing (ABO). Ting Lei, Director of the center, described a member company who had "encountered obstacles in operation since the establishment of the company. We provided consulting services and convinced him to transform the core technology of his company, transitioning to a service based business model. The company then grew 10 times in two years." Despite the emergence of other innovative hubs, Shanghai is the epicenter for China's innovative industry, with a wide array of institutes, biotechs and service firms all engaging in cutting edge R&D. Most Big Pharma players have R&D facilities in Shanghai including Roche, Novartis, Eli Lilly, AstraZeneca, Pfizer, and GSK, while other firms such as Merck have established collaborations with local firms. These multinational firms followed the talent and infrastructure in coming to Shanghai, and that makes the local players the true success stories. WuXi PharmaTech pioneered the outsourcing trend, opening its doors in 2001 and its success has spawned a huge service industry whose epicenter is Shanghai's Zhangjiang Science Park.

Lilly R&D partnership with Hutchison Medipharma
One of the most unique firms in the Zhangjiang park is Shanghai Biochip (SBC). The company was initiated from 2000 and officially founded in 2001, when the mapping of the human genome had captured the worlds attention. Chairman Hua Yuda describes the context of the founding of the company, saying "the US and various European countries invested a great deal in developing the biochip industry. China had limited resources at the time and thus we decided to build up capacities in this area through this organization." This state backed approach to development has enjoyed significant success in lower tech industries. However there has been a more collaborative, public-private approach in R&D oriented sectors, particularly pharmaceuticals. Shanghai Biochip is designed to develop technologies that change the way research is conducted. Mr. Hua says, "We are providing research services designed to measure and test human disease and health conditions." China's vast potential pool of patients provides an excellent population for these diagnostics. The company has also been utilizing the country's large population to build out a sample collection quality standard and tissue bank in addition to genomics, pharmacogenomics and biomarker analysis platforms. Shanghai Biochip already provides these services to ten leading global firms. According to CEO of ShanghaiBio, the CRO of Shanghai Biochip, Dr. Jason Gang Jin, the company already has a number of validated biomarker analysis methods for personalized medicine research in clinical trials, in addition to genomics services for discovery researches. The company's highlight thus far, has been a biomarker analysis platform that allows physicians to target chemical and radiotherapy treatment regimes. Companies such as Shanghai Biochip are utilized as a site of translational research, whereby work done in universities and institutes be channeled into the market directly, without hoping for the market to develop on its own. Additionally, for core emerging technologies such as genomics, these technology platforms are a part of the push to catalyze expertise and jumpstart innovation. Reflecting a commonly held view, Mr. Jin is highly bullish on Shanghai's future as a hub for innovation citing Shanghai's highly trained scientists, dramatic MNC investment, ambitious local entrepreneurs and extensive outsourcing services. Mr. Jin says, "I have a bold vision that within five to ten years, Shanghai will become the epicenter of global pharmaceutical R&D."

Service Companies: Buffet or Gourmet?

Xian Ping Lu (Chipscreen Bio)
The service sector boom, occurring primarily in Shanghai, has the potential to reshape the way pharmaceutical research is conducted. Firms have been experimenting with different risk sharing and outsourcing models and a single approach has yet to dominate the market. Chen Chunlin, Co-Chairman of Medicilon/MPI Preclinical Research – Shanghai sees "a trend among companies in the region starting with chemistry based services, adding preclinical services and then expanding with biology services." Medicilion was indeed one of the first firms to take this approach and it is now a major player in the space. The company entered a joint venture with US based MPI in order to broaden its service offerings and provide a more fully integrated approach to drug discovery outsourcing. Mr. Chen believes that the current wave of startups is just the tip of the iceberg. "I foresee an increased number of viable start-up companies as the bio-eco system and workforce matures in China. Many of my colleagues in the service sector, and in pharma positions, are frustrated entrepreneurs who eventually want to start their own companies to launch novel biologics and pharmaceuticals." Many firms including Wuxi Pharmatech, ChemPartner, and Sundia Meditech have achieved rapid growth and repeat customers with this business model. However, some of these newer firms have a different outlook on the best strategy to thrive in this crowded sector. Mr. Ji, from PharmaLegacy, sees a future in highly specialized services. Mr. Ji's philosophy is that "everybody can set up a good banquet, with every type of dish available. But there's still a market for a great coffee shop, and we want to brew the best coffee in town." Thus far, the market is hungry enough to sustain both models, but when supply finally comes to keep pace with demand for outsourced drug discovery services, there may be a sharp consolidation in the cards.


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