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Volume 35, Issue 4
The contract-research industry in China is growing in leaps and bounds, and Big Pharma is leading the way.
China's contract-research industry has come a long way. In fact, it reached a milestone when Shanghai-based WuXi PharmaTech listed its initial public offering (IPO) on the New York Stock Exchange in September 2007. In the same year, Hutchinson Medipharma established an agreement with Eli Lilly to work on novel compounds in oncology and inflammation.
(PHOTO: TOM BONAVENTURE, GETTY IMAGES)
Looking back, China's contract research industry consisted mainly of chemistry-based companies, largely as a result of a limited talent pool and accessibility of quality deliverables in the early 1990s. As the regulatory and business environment improved in the mid-1990s, however, foreign CROs found their way to Beijing and Shanghai, driven largely by demographic changes, economic trends, and the untapped potential of the Chinese market. MDS Pharma Services was the country's first foreign-based contract research organization (CRO) followed by Quintiles Transnational, Covance, and Kendle.
Today, the CRO industry in China has developed tremendously. According to Jan-Willem Eleveld, vice-president for management consulting (Asia–Pacific and Japan) at IMS Health, the CRO industry has evolved from preclinical offerings to clinical studies. Established players such as Wuxi PharmaTech are also opening new business in the clinical-trial arena, and there has been a rise in the number of firms that have established current good laboratory practice (cGLP) facilities to carry out studies in China.
Adds Eleveld, "CROs are facing a new reality that Big Pharma [is] moving away from a pure out-sourcing model and establishing fully integrated R&D centers in China. Unlike past R&D outfits designed for local clinical trials for local approval, new R&D investments are for the purpose of global pipeline. As a result, they build more in-house capabilities in all aspects of R&D and use CROs (preclinical) to manage capacity overshoot. On the other hand, clinical CROs have great future because more and more new drugs will be developed in China as part of a global R&D hub."
Recently, there have been a number of active new establishments and acquisition activities, resulting in the doubling of foreign CROs in the country last year alone. Several foreign companies have expanded their services into central laboratories and drug-supply management. In a move to remain competitive in the changing business environment, many local companies have embraced the mergers and acquisitions (M&A) approach by opening their services to international drug developers. Some are also actively gaining accreditation from organizations, such as the American Association for the Accreditation of Laboratory Animal Care, to gain a better market position in the eyes of international clients.
In April 2010, New Jersey-based PhytoMedical Technologies signed a Letter of Intent (LOI) with Shanghai Medicilon, a premier Chinese preclinical contract research company to advance PhytoMedical's anticancer compound by conducting investigational new drug studies under cGLPs on its lead drug (D11B).
The Chinese government plays a paramount role in developing the contract research industry in the country. Its Contract Research Organization Union China (CROU) developed the first industry standard, Clinical Trial Services of Contract Research Organizations, for the sector. Johnny Huang, senior consultant on healthcare practice for Frost & Sullivan China adds, "The Chinese government is adopting a market policy to improve its regulatory environment and CRO industry development. Its initiatives for drug discovery in past years included strengthening of intellectual propoerty rights and focusing on shrinking evaluation time for drugs. The government has also focused on its infrastructures by creating technology parks, such as Shanghai Zhangjiang Hi-Tech Park, establishing a large talent pool in the field of pharmaceuticals, and formulating numerous government bodies that help develop drug discovery in China."
Perhaps the challenge for the government going forward will be to harmonize local CRO culture and international drug-research standards, he says. Some leading pharmaceutical companies have taken initiatives to help local CROs improve their practices in this area. For example, Pfizer is working with leading academic institutions to educate scientists in state-of-the-art practices for drug R&D.
Overall, to achieve success in the Chinese market, CROs need to adopt a cost-effective approach for their business. Huang says, "Flexibility and scalability of operations allow companies to be more nimble and respond to change faster. In the long term, CROs in China have to create their advantages in local talent pool, unique service, and strong partnership with local clinical experts. These are the key ingredients to success, especially in multicentered clinical trials in China."
—Jane Wan, a freelance writer based in Singapore