Eastern promise - the Chinese pharmas’ market

Healthcare in China is one of the biggest challenges the country faces as it continues to develop, but also one of the biggest opportunities for domestic and foreign firms alike. Spending on healthcare in China has risen from just 1% of GDP in 2002 to 5.15% today - and this is only likely to rise further. With China's population aging and consumer demand for better quality medical care increasing, there are significant sums of investment being placed in this sector. A report by McKinsey & Company suggests that healthcare spending in China will top $1 trillion by 2020 as incomes rise and the costs of chronic conditions grow.

Progress on home turf

While the need to meet such challenges is growing, China has previously struggled with the innovation necessary to meet these demands. New types of drugs, new medical equipment and developing the infrastructure for quality care have often required a reliance on foreign firms and experts for development in the sector. However, in recent years, China has begun to champion medical innovation. This is now at the forefront of government policy on healthcare and other sectors.

Forums such as the upcoming 2014 'Summer Davos' brainstorming session in Tianjin are designed to further discuss and determine ways to inspire innovation for the betterment of China's economy going forward.

Pedro Lichtinger, the former CEO and president of Optimer Pharmaceuticals and former president of Pfizer's global primary care business unit, says: "The Chinese Government has made biotechnology and pharmaceutical research and development a priority for the country, and is making significant financial resources available as well as providing multiple incentives. In parallel, major pharmaceutical companies have made research investments that have brought technology and processes to the country. As a result, research quality, intensity and breadth have made significant progress."

Although Lichtinger tells World Pharmaceutical Frontiers that the material results of this push for innovation will take a number of years to come to fruition, the signs are there that China is championing domestic innovation and international cooperation in innovation in order to develop its healthcare market and meet demand.

Cluster theory

Delivering on this demand requires a change in the way that the industry has traditionally worked in China, moving from rigid, state-owned companies to greater public-private collaboration and developing clusters where innovation can thrive. One such cluster is visible in the Tianjin Economic-Technological Development Area (TEDA), which has been ranked China's top development park by the Ministry of Commerce consecutively since 1998.

In order to address the 'high-risk, huge-input, long-cycle' features of the pharmaceutical industry, TEDA is nurturing a phase-based cluster mixture at its pharma park. This involves allocating various sub-areas within the region to different pharmaceutical firms at stages such as R&D, development and commercialisation.

According to Li Hongliang, deputy general manager of TEDA Science and Technology Development Group, "What is important for pharma companies to survive and thrive not only consists of top-level 'hardware facilities', but more importantly a holistic approach to support programmes." He further elaborates that the TEDA administrator provides 'all-cycle' support to the pharma tenants, with services ranging from legal, licensing, finance, talent support, marketing and business development, and environmental policy compliance.

The results of such clustering and commitment to innovation can be seen through the successes of TEDA and its tenants. TEDA reported on 27 December 2013 that it had effectively developed five pharmaceutical accelerators. By the end of December 2013, TEDA was home to more than 350 pharmaceutical tenants with a combined industrial output exceeding 17 billion yuan.

And in 2013 alone, more than ten new-drug discovery projects were selected as nationally significant R&D projects and another ten ventures obtained clinical trial approvals.

This growth is creating a truly interconnected hub of research for pharmaceutical firms, allowing companies to collaborate and enjoy crossover benefits in innovative environments such as public lab spaces. Yu Xuefeng, chairman of Tianjin CanSino Biotechnology Inc., says, "We have established a public lab of 3,000m² in size, containing a current-good-medical-practice workshop with annual capacity reaching 40 million dosage." Such developments allow domestic and international tenants access to a range of facilities, thereby fostering continued growth.

Little wonder that TEDA's biopharmaceutical ecological circle is extremely well developed, with multifaceted capacity in medicine manufacturing, drug discovery, clinical trials, medical-equipment production and the pharma-related service chain. Tenants include not only large pharmaceutical manufacturers such as Novo Nordisk and Novozymes, but also medical device producers such as Siemens, contract research organisations (CROs) such as AsymChem and WuXi AppTec and even traditional chinese medicine manufacturers engaged in innovation.

Research rewards

The ecosystem-building approach by China's top industrial zones such as TEDA has helped create the optimum environment for collaboration and crossover - an area where CROs particularly thrive.

The latest 'landmark' event is that, in May 2013, Israeli company Teva licensed Tianjin SinoBiotech's US patent of a recombinant fusion protein drug.

"The production cost of our drug could be one tenth that of existing products on the market, and its effects last much longer," says Professor Yu Zailin, chairman of SinoBiotech, which is located in TEDA. "That's why Teva wanted a licence to develop and commercialise the technology in the US."

Under the terms of the agreement, the licensee will be provided a licence to develop and commercialise potential drug products for the treatment of neutropenia for the US market. SinoBiotech will continue to develop and commercialise its own proprietary novel recombinant fusion protein drug for treatment of human neutropenia which is currently in clinical phase I/II studies with tumour and cancer patients in China.

Yu Zailin is very pleased about the cooperation with a world-class pharmaceutical operator like Teva. He believes that this deal highlights the broad potential of Chinese R&D capabilities and research quality.

The huge investment in research is seeing CROs thrive in China. There are now more than 500 domestic CRO entities in China, which account for around 7-10% of global CRO output - and with most of these being small and medium-sized enterprises, there is still huge room for growth.

Mix and match

Creating this growth in an increasingly interconnected world requires a focus on cross-discipline convergence - taking the best and most innovative aspects of different industries to create new insights and efficiencies.

In 2012, the Tianhe-BGI Bioinformatics and Computing Joint Laboratory was launched in the Binhai New Area, Tianjin. This cross-disciplinary joint venture uses the Tianhe-1A, the world's second fastest supercomputer, to research biological sciences, doing human genomics association studies in three hours that used to take over 300 days. It also enables researchers to explore more breakthroughs in convergence of supercomputing and biological sciences, and boost development of OMICS-related industries.

The initial project of this joint laboratory was optimising the pipeline of bioinformatics analysis, followed by more endeavours to develop much stronger bioinformatics tools and algorithms for quickly handling various biological questions that need massive calculation and analysis based on high-performance computing.

Another initiative in December 2012 saw the Tianjin International Joint Academy of Biomedicine establish an internationally-benchmarked 'pharmaceutical economy and policy research centre', which is run with elite partners including the University of Southampton, and the UK-based National Institute for Health and Clinical Excellence (NICE). The initiative's mission is to carry out professional research, analysis and evaluations in converged arenas between medical services, economics and policy sciences.

"It is imperative for us to bring in more world-class masters, forming a melting pot for global experts with diverse backgrounds, ethnicity and disciplines," says Dr Wang Lin, deputy dean of the Tianjin International Joint Academy of Biomedicine. "This will push us to a new height in terms of the services that can be offered."

Wang, himself a returnee and a member of China's 'Thousand Talents' programme, used to be a senior executive at DuPont. He stresses that the academy will strive to recruit a total number of 200 'top talent' (mainly composed of scientist-turned entrepreneurs) into the zone within the next five years. In 2013 alone, tenant companies being incubated by the academy had collectively achieved revenue of 69 million yuan.

More broadly, TEDA expects its biomedical industry output to reach 30 billion yuan in 2015, with an average annual growth of 25%. There are expected to be more than 20 firms with annual output value of 500 million yuan or above, more than 30 R&D institutions and more than 150 new and high-tech biopharma companies. And with R&D expected to account for over 10% of the region's total revenue, further collaborations and innovations are surely on the way.