Jim Miller
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I recently got a firsthand look at the evolving drug development services sector in China. I visited six CROs in Beijing and
Shanghai and gained other valuable insights while attending the Impact China II conference, which was sponsored by the Strategic Research Institute. I came away with the sense that what is going on in China is very impressive, but the Chinese CRO industry still has a long
way to go.
Chinese pharmaceutical services companies that target Western drug companies are concentrated in three main areas: pharmaceutical
chemicals, clinical research, and discovery services. The chemical segment has emerged as a principal source of raw materials
and non-GMP intermediates for the pharmaceutical industry globally. Even the leading Indian active pharmaceutical ingredient
(API) manufacturers are sourcing early-stage materials in China. Although manufacturing generic APIs for the local Chinese
market is well established, the production base is still small for APIs manufactured under US and European GMPs. Intellectual
property protection remains a major concern in China and is another factor holding back the development of contract chemical
manufacturing.
The clinical research sector is still in its early stages, dominated by the major global CROs such as Quintiles (Research Triangle Park, NC,
http://www.quintiles.com/) and PPD, Inc. (Wilmington, NC,
http://www.ppdi.com/) that have opened offices and laboratory services in Beijing and Shanghai. Only a few local CROs have opened, including Excel PharmaStudies in Beijing (
http://www.excel-china.com/). Frontage Laboratories (Malvern, PA,
http://www.frontagelab.com/), a US-based provider of development services, recently opened a bioanalytical and pharmaceutical chemistry laboratory in
Shanghai.
Investors target early development
Currently, the hottest sectors for Chinese CROs serving Western companies are early research and development (R&D) services,
especially discovery chemistry. The standard bearer for the sector is Wuxi PharmaTech (Shanghai, China,
http://www.pharmatechs.com/). Established only in 2001 to provide discovery and process chemistry, Wuxi PharmaTech has grown to more than 250 employees
and has ongoing relationships with Merck, Pfizer, and other major pharmaceutical companies. Wuxi recently opened a 250,000-ft2 chemical manufacturing facility, which operates to Western GMP standards.
The success of Wuxi PharmaTech has enticed entrepreneurially minded Chinese chemists and venture capitalists from the United
States and China into establishing new research organizations offering discovery-oriented custom-synthesis and drug metabolism
and pharmacokinetics (DMPK) studies, preclinical research, and bioanalytical testing. In fact, China's pharmaceutical services
sector feels a lot like Silicon Valley during the Internet start-up boom of the late 1990s. Pharmaceutical services companies
are receiving substantial valuations from investors even before they generate their first dollar of revenue, and founding
entrepreneurs can't help but talk about "when we do our initial public offering." Bridge Pharmaceuticals (Beijing, China,
http://www.bridgepharmaceuticals.com/), a newly opened preclinical CRO established with SRI International (Menlo Park, CA,
http://www.sri.com/), recently received $22 million in venture capital from US investors.
Luring back Chinese scientists
New services companies are built around veteran scientists from Big Pharma, and venture capitalists are aggressively recruiting
senior Chinese chemists and pharmacologists from major pharmaceutical companies to return to China to lead the start-up operations.
These Big Pharma veterans bring two critical sources of value: their scientific expertise and their network of relationships
with colleagues in Europe and the United States.
