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Pharma companies in China are increasingly looking further afield, especially when it comes to biotech. Major changes to China’s domestic market policy1 and changing practices in manufacturing, accountability, quality management and regulation, etc.,2 are now leading Chinese pharmaceutical firms to look at opportunities in Europe and the US, especially as the Chinese Government offers substantial support to businesses that invest in external markets.
The local market is also burgeoning. China is now the world’s second-largest pharma market after the US, with a projected value of $300.9 billion by 2025, and a compound annual rate (CAGR) of just over 12%.3 As the domestic market moves from traditional generics to more innovative therapies, it will be crucial for firms to capitalize on the global opportunities for these more targeted offerings.
Chinese firms looking to expand overseas face some practical considerations. Should they set up proprietary operations in their target markets, partner with on-the-ground sales representatives, or acquire local companies? How can local compliance in new markets be accelerated, in particular given the EU’s stringent and diverse provisions? If they set up a base in Europe, which country should be their first port of call?
Interest in the market in China is also tangible. In 2020, China’s pharma regulator, the National Medical Products Administration (NMPA), approved 48 new drugs, 20 of which were produced domestically. This suggests there is high demand for new drugs in China, plus a surge in new drug development.
China acceded to the International Council for Harmonization (ICH) in 2017, adopted a marketing authorization system very like that in Europe and has increased pharmacovigilance (PV) activity, and it is also reducing time to market for overseas drugs. For overseas pharma companies, that expedited ROI makes the market in China increasingly attractive.
There are challenges and opportunities on both sides and pharma firms need models that help them maximize their new market potential but that also reduce their risk exposure.
The most common approach is to engage the services of a global or local CRO/outsourced service provider to get an understanding of local market dynamics and bridge the gaps in regulatory knowledge. Here, the US has an advantage, partly due to having English as its dominant language, plus a favorable environment for biotech innovation and a single regulator in the shape of the FDA.
Since Brexit, Europe has presented more of a challenge for Chinese companies. The UK no longer offers a natural bridgehead to the EU and Germany has thus become the favored EU destination for Chinese companies, due to its relatively transparent regulatory environment. Spain is also becoming popular, because of its cost-effective and flexible approach.
The EMA harmonizes drug requirements across the EU, but each market in Europe still sets its own requirements, so the situation is complex. This is quite apart from the diverse cultural make-up of the 27 member states and the different languages spoken across the region.
Companies setting foot in Europe for the first time need to find the most efficient way to manage requirements and registrations across the different countries and get it right the first time within budget, which is where substantive local support from a CRO can prove crucial. The EU’s standards on quality and safety are the highest in the world, so a company that can develop systems and processes that meet European standards is well placed to achieve compliance in other markets.
China currently accounts for around 40 per cent of active pharmaceutical ingredients (APIs) produced globally, and external markets such as Europe offer companies from China additional market potential for affordable generics and APIs. The plan here might be to adapt an existing product for sale in the EU, perhaps even relocating manufacturing operations, or forming a local sales partnership with a European brand.
Conversely, given China’s now more familiar authorization process, European pharma companies can now look to the country as an additional market for established products — especially for drugs that are considered high value in the local market.
Collaborative models are proving increasingly popular, with Pfizer4 being just one multinational that has already established a joint venture in China to co-develop new products. Meanwhile, well-funded Chinese pharma companies are gaining a foothold in Europe by acquiring entire pharma SMEs, or European manufacturing facilities.5 Some Chinese pharma companies are also investing in European biotechs to stay ahead of the competition at home.6
Intercontinental activity is increasing but identifying the right kind of independent help isn’t always easy. Global CROs may charge hefty fees, for instance, but few large service organizations have specialist capabilities that are as deep in China as in other territories or have a true appreciation of the subtleties that make a relationship work seamlessly. Paying steeply for unsuitably generic help is something that pharma companies need to avoid. Having both a global perspective and deep, specific knowledge of both Chinese pharma and external markets — especially Europe — will be essential to extracting maximum value from emerging opportunities on both sides.
Lastly, it’s important to understand that speed isn’t always the goal here: patience is also a virtue. Care taken with relationship-building and consideration of every opportunity will ensure that pharma companies gain the best possible benefits from their new ventures.
Sy Chyi Yeoh is Director of Business Development at regulatory and pharmacovigilance service provider ELC Group, part of global life science consultancy PLG (Product Life Group).
1. “4+7” Drug procurement reform in China, China National Health Development Research Center, March/July 2019: https://www.cgdev.org/sites/default/files/CGD-procurement-background-china-case.pdf
2. Major Changes in the Newly Revised Drug Administration Law, China Law Insight, August 2019: https://www.chinalawinsight.com/2019/08/articles/healthcare/major-changes-in-the-newly-revised-drug-administration-law/
3. Latest patent reforms to further bolster innovative pharma research in China, GlobalData, June 2021: https://www.globaldata.com/latest-patent-reforms-bolster-innovative-pharma-research-china-says-globaldata/
4. Pfizer and LianBio Announce Strategic Collaboration to Expand Development of Novel Therapeutics in Greater China, Business Wire, November 2020: https://www.businesswire.com/news/home/20201119005290/en/Pfizer-and-LianBio-Announce-Strategic-Collaboration-to-Expand-Development-of-Novel-Therapeutics-in-Greater-China
5. Chinese pharma firm to acquire Swiss production facility (Bristol Myers Squibb selling Swiss medicine production facilities to Chinese company WuXi STA), February 2021: https://www.swissinfo.ch/eng/chinese-pharma-firm-to-acquire-swiss-production-facility/46338654
6. Vivoryon Therapeutics and Simcere Announce Strategic Regional Licensing Partnership to Develop and Commercialize N3pE Amyloid-targeting Medicines to Treat Alzheimer’s Disease in Greater China, Vivoryon Therapeutics, June 2021: https://www.vivoryon.com/vivoryon-therapeutics-and-simcere-announce-strategic-regional-licensing-partnership-to-develop-and-commercialize-n3pe-amyloid-targeting-medicines-to-treat-alzheimers-disease-in-greater-china/