Biopharmaceutical partnering in China
China has become an attractive place for foreign investment in research and development, including the biopharmaceutical sector. A report by the US National Science Foundation in 2004 indicated that between 1994 and 2001 American multinational companies quadrupled their research and development investment in China, rising from US$2.6 billion to US$10.5 billion. In 2006 PriceWaterhouseCooper estimated that over 600 foreign biopharmaceutical companies had active joint ventures in China.
One of China's appeals is its market size. According to IMS Health statistics China's domestic pharmaceutical market grew by more than 20% a year between 2003 and 2006, and diseases which are currently plaguing western populations are expected to increase dramatically. In 2005 the World Health Organisation estimated that China had 28 million diabetic sufferers and that the number of sufferers was growing by a million per year. According to the the International Diabetes Federation China will have 59.3 million diabetics by 2025.
China's popularity has increased since it joined the World Trade Organisation in 2001 and tightened its patent laws in 2002 to define new drugs as those that had never been marketed or sold previously in China. The Chinese government's strengthening of manufacturing regulations in July 2004 to ensure harmonisation with international standards of good manufacturing practice has also enticed foreign multinationals, such as GlaxoSmithKline and Pfizer, to set up manufacturing plants in China.
In 2003 the Chinese food and drugs administration introduced compulsory Good Clinical Practice training which increased multinationals' appetite to conduct clinical trials in China. China's stable and literate population, the majority of whom are not on any other medications, and its low costs of labour, makes the country an attractive place for conducting cheap clinical trials. A number of multinational pharmaceutical companies, such as Pfizer and AstraZeneca, have set up special clinical trials centres in China. The number of clinical trials, however, being conducted in China by outside companies remains small. Silico Research's analysis shows that only 0.47% (12 trials) of all clinical trials sponsored by industry currently recruiting for phases 1 and 2 listed on the clinicaltrials.gov database are located in China and none appear for phase 3.
Multinational pharmaceutical companies have begun to sign alliances with local Chinese companies in a variety of areas. This includes the recent licensing agreements by GlaxoSmithKline with China's Simcere Pharmaceutical Group of Nanjing in September 2006 to manufacture and sell a cheaper version of its bird flu drug Relenza for use in China, Indonesia, Thailand, Vietnam and other less developed countries; and Roche's sub-license to Shanghai Pharmaceutical Group in June 2006 for the production of the bird flu drug Tamiflu for pandemic use in China.
In January 2007 Organon, the human healthcare business of Akzo Nobel, signed a research and development agreement with HUYA Bioscience International, a biopharmaceutical company focused on developing Chinese biopharmaceutical products, to search for new, proprietary biopharmaceuticals compounds. No financial details of the transaction were disclosed, but Organon acquired an equity interest in HUYA. The deal follows other collaborations Organon entered into with Shanghai Genomics and HD Biosciences in 2005. The collaboration with HD Biosciences involves HD Biosciences development of functional assays for a number of identified G-protein coupled receptors and ion channels.
In March 2007 Charles River Labs, an American medical research and services company, set up a joint venture with Shanghai BioExplorer, to provide early-stage drug development services. The initiative involves Charles River building a 50,000 square foot facility in Shanghai, which will open in mid-2008 and offer pre-clinical services. In April 2007 the Florida-based company ReceptoPharm, a division of Nutra Pharma Corporation, signed an agreement with Nanogene Biotechnology (Zhong Xin Dong Tai Co Ltd) to develop its drug RPI-MN, aimed at HIV/AIDS and other viral disorders, for the Chinese market. Nanogene will supply the drug's raw material for ReceptoPharm to run preclinical and clinical trials at Soochow University. The collaboration could bring major benefits for ReceptoPharm because the Chinese antiviral market is estimated to be around US$280 billion, approximately 10 times greater than the American antiviral market.
In August 2006 AstraZeneca signed a deal with Wuxi PharmaTech Inc, a leading chemistry-based research and development service company based in Shanghai, whereby AstraZeneca agreed to pay US$14 million for Wuxi Pharma Tech to carry out a two-year project to work on compound collection synthesis. Wuxi PharmaTech is providing its research chemistry facility to build a desired compound library.
AstraZeneca's partnership with Wuxi Pharma Tech is part of a much wider investment the company has been making in China since 1993. It has Chinese headquarters in Shanghai and 20 branch offices in more than 20 cities across mainland China. In 2001 the company opened a world-class manufacturing site in Wuxi, Jiang Su Province, which today is manufacturing about 80% of the products AstraZeneca sells in China. The company now has more than 2900 employees involved in the manufacturing, sales, marketing and clinical research of new products in China and has been been collaborating with 139 hospitals and research institutes in China. In May 2006 AstraZeneca announced that it will invest $100,000 in China, including the establishment of a research and development centre, known as Innovation Center China, at Shanghai's Zhangjiang Hi-Tech Park. Expected to open in mid-2007, the aim of the centre is to provide leading edge biomarker research initially targeting cancer therapies specifically relevant for Chinese patients.
Since 1994 Roche has been investing in China. By 2004 Roche had invested $300 million on various projects and opened four companies in China based on its core pharmaceuticals and diagnostics businesses. Located in Hong Kong and Shanghai, the four companies employ some 1300 people. Roche has collaborations with the two Chinese National Human Genome Centers to conduct genetic epidemiology studies to identify genetic predispositions to diseases such as diabetes or Alzheimers. By 2003 Roche had sold 1.7 billion yuan (about US$ 200 million) worth of pharmaceutical and diagnostic products in China. Roche has also built two manufacturing plants in China, one of which is a high tech manufacturing facility in Shanghai producing major medicines in the Roche porfolio such as the cancer medicine Xeloda and the transplantation medicine CellCept.
GlaxoSmithKline has a strong presence in China, and has established five legal entities in the country, including four manufacturing facilities (three are joint ventures) with a total registered capital of over US$230 million.The company has offices in 29 major cities (including Hong Kong) with 2,800 employees nationwide.
Pfizer has invested US$500 million in China. In 2007 the company is to open a new research and development centre in Shanghai with an initial spending target of of US$25 million over the next few years. Pfizer has manufacturing plants in Dalian, Suzhou and Wuxi. The Dalian plant was the first in China to receive international GMP certification. By 2003 Pfizer had 40 innovative products on the Chinese market, and is planning to have introduced a further 15 new innovative products by the end of 2007.
Other companies active in China include Pierre Fabre which has several partnerships designed to find and study active ingredients or improve the formulation of traditional Chinese medicines and Curis Inc's collaboration in medicinal chemistry with Shanghai ChemPartner which is aimed at accelerating Curis' discovery and development pipeline of drug candidates; and Eli Lilly which since 2003 has been running a research laboratory in the Zhangjiang Hi-Tech Park jointly with Shanghai ChemExplorer, a chemical research company.
The large investment by multinationals in China is small by comparison with the investment they are making elsewhere. AstraZeneca's recent investment of $100 million in China is only 3 per cent of the $3.4bn AstraZeneca spent last year on research and development in 2005. Linguistic and cultural barriers as well as concerns about reliability of manufacturing and clinical standards will continue to inform western companies decisions to invest or partner with Chinese companies for the foreseeable future. Some steps are being taken to enforce patent rights. In June 2006 a Beijing court overturned a ruling made by China's patent review board in 2004 to support the challenge of a dozen of the leading generic-drug makers in China against Pfizer's patent on sildenafil citrate, Viagra's main chemical. The manufacture of counterfeit drugs is also being stamped on. According to PriceWaterhouseCoopers the Chinese government shut down 691 factories for manufacturing counterfeit drugs in 2004, and at least 1,300 non-compliant factories saw their operations shut down due to lack of conformity with good manufacturing practice. The announcement that Zheng Xiaoyu, the head of the Chinese State Food and Drug Administration from its foundation in 1998 to 2005, was sentenced to execution in June 2007 for having accepted bribes to approve untested drugs and undermining safety regulations for drugs will have done little to boost the outside world's confidence that China has the ability in the near future to regulate and enforce high manufacturing and clinical standards.
Alliances and partnerships by western companies with Chinese companies and institutions in the coming years are likely to be concentrated in areas that can be easily codified and regulated. Preclinical testing is one area that might grow in China due to the absence of animal rights activism in the country.
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