China’s pharmaceutical industry has continued to develop rapidly for the past several decades. How globally competitive is China’s pharmaceutical industry?
China’s pharmaceutical industry is developing rapidly in recent years, but China is still working on unwrapping the second tier to compete with the big pharmaceutical giants in the US and Europe in terms of innovative drug production. However, 80 percent of API (Active Pharmaceutical Ingredients) products supply comes from China, making China’s industry for APIs very competitive. APIs are the raw materials for the drugs, but they have to be formulated to become the finished products for people to consume. Even the US and European pharmaceutical companies import their APIs from China, but China’s innovative medicines are not as competitive as their APIs yet. The production of APIs causes a lot of pollution, and as a result, developed countries such as US and European countries don’t like to make their own APIs. As a result, most of them are imported from China or India.
Tianfu-Biotown in Chengdu is a large joint venture involving not only Chinese finance and Chinese pharmaceutical industry, but also academic research. Is Tianfu-BioTown a unique arrangement? In general, how involved are academic universities in drug research?
The Chengdu Tianfu International Biotown is funded by the local government in order to provide space and infrastructure, attract talented people from all over the world, and set up their companies there. The local government subsidizes those startups with rental apartments, and some initial funds for them to operate better in the beginning. There are also some academic professors from universities who set up their companies there to conduct applied biomedical research and make leading hit compounds to get their drugs to market. Some will license their rights out. These compounds need to go through a process before they can be made into drugs for clinical use. It takes a lot of screening to discover active compounds that are less toxic, which become hit compounds. Eventually, after some preclinical work (pharmacokinetics, toxicity, pharmacology) and after clinical trials and then government approval, the drug can go to the market.
A lot of basic research starts in universities. Then they license their patent or initial hit product to big pharma companies or other startup bio-companies. In China right now, more and more scientists are involved in reaching an initial targeted product.
In order to encourage research and development, governments might subsidize, give tax reductions, or provide grants to companies. What does government involvement look like in China with respect to the financing of pharmaceutical research? Does there seem to be a trend in the kids of projects the Chinese government is more likely to fund?
For the startup companies, the Chinese local and national governments will provide some incentive funds to help them set up their companies, but most of the money needs to be raised with private funds in order for the company to take their products to market or reach IPO (Initial Public Offering). When a company is starting out from the beginning, it is very difficult to raise funds from the private sector because people have little knowledge about the company and their initial projects. Once the company receives some government funding for its projects and it does well by smoothly moving into a next milestone in development, it will be a lot easier to get private funding. It needs to be clear that the company has potential.
The Chinese national government has set up 5-year key projects for which they give $1 billion (USD) to fund research on major diseases, including clinical trials and pre-clinical studies. The local governments will also provide more funding for the project at different milestones. They will consistently provide funding to new, innovative companies. In fact, China provides the second-largest amount of funding to pharmaceutical research. It is second only to the US.
It is well known that the US Food and Drug Administration (FDA) has some of the strictest rules and regulations for new drug approval. Is this the case in China as well? How do the National Medical Product Administration (NMPA) regulations compare with FDA regulations?
NMPA follows very similar rules and guidelines as the US FDA. As you say, the FDA has very strict rules for approval of medicines going to the market. However, it is a little bit easier for drugs to be approved for the market in China, as compared with the US. For the IND (Investigational New Drug) or pre-clinical application stage, the NMPA regulations are very similar to the FDA regulations, but it used to be even stricter. For example, for pharmacology, pharmaceutical companies have to go through large animal trials, small animal trials, ethics studies, reproduction toxicity. Companies don’t have to do that under the US FDA regulations. Actually right now, the NMPA is trying to follow FDA guidelines, so the policies are almost the same. However, the reason why it might be easier for some drugs to be approved for the Chinese market is because China wants their products to be able to compete with products from the US and European countries. If a competitor’s product exists, China can make the price going down dramatically from similar product in the US or Europe and even replace them.
In the past decade, there has been a common trend of Chinese emigrants working in the pharmaceutical industry in the US returning to China. Can you speak to the reasons behind this trend and your own experience/reasoning behind establishing your company in China instead of the US?
In the past, China used to be very poor and was unable to fund these companies. Now that China is gaining wealth and becoming more developed, the Chinese government is putting in a lot of funding into attracting people from abroad for them to set up their own companies in China. A lot of people working for big pharmaceutical companies in the US and European countries want to set up their own companies and make their own good products for the market. People who set up their companies in China ten or twenty years ago have already reached IPOs. Their executives are getting rich. They have made a good product and they give emigrants a good example to follow. They see they can come back to China to seek successful lives. For example, I used to work for a pharmaceutical company in the US, but have come to China to set up my own company. Right now, it is a lot easier to raise funds from local governments and the private sector than before if you have big pharma experience, a good story to tell, and a nice project idea. Additionally, the recently established Chinese NASDAQ, known as Sci-Tech innovation board (STAR Market), makes it possible for companies to raise money from the stock market too.
Currently in the US, it is difficult to start a new company because it is harder to raise funding. However, in China it is easier for scientists from abroad to gain funds because investors believe that those who have work experience abroad can make cool products that may reach the market.