Backed by a government intent on promoting innovation and fuelled by the "brain gain" of talented scientists and entrepreneurs returning from abroad, China's health biotech industry only needs a more favourable investment climate to emerge as a global force in the production of therapies and medicines - both new and low-cost generics - experts say in a new study.
Long considered a skillful product replicator, China today boasts of daring medical science innovation and stunning breakthroughs – including the world's first commercialized gene therapy product and the sole cholera vaccine tablet. However, Chinese firms face an uphill battle in attracting high-risk venture capital needed to sustain innovative, research-driven projects, says the study published by Nature Biotechnology.
Conducted through face to face interviews with management of 22 Chinese firms, the work is the first study of China's most innovative health biotechnology companies available in the public domain.
It says that despite substantial Chinese government funding to promote an innovative industry and entrepreneurs who will commercialize new health biotech products, the intense interest of potential international investors is typically muted by an uncertain financial system, rigid restrictions on the export of capital that limit the options for exiting investments and continuing doubts about the Chinese government's approach to quality control and intellectual property rights.
"The Chinese biotechnology industry is like a baby dragon, which will grow quickly and soon become hard to ignore. It's no longer the case that the industrialized world has hegemony over biotechnology innovation,” says co-author Peter A. Singer, MD, of the McLaughlin-Rotman Centre for Global Health (University Health Network and University of Toronto).
“However, for all its blossoming as an industrial and economic superpower, China still has one foot in the closed society of the past. For the sake of both national and global health, we hope China will embrace the financial and regulatory reforms needed to attract the venture capital required for sustained innovation in the health biotech sector,” he adds.
The report builds on a similar study of India's private health biotech sector published in April 2007, opening a window on the product development capabilities and strategies used in rapidly growing economies to survive and grow amid developing country challenges. It also recommends policies that could help their biotech firms succeed.
Lead author Sarah Frew, a research associate of the McLaughlin Rotman Centre for Global Health, says the budding of biotech industries in China and India holds major implications for the global industry and for improving both health and prosperity in the developing world.
The biotech revolutions in the two countries differ significantly, she says: India's firms are largely focussed on process innovations to improve affordability and accessibility of medicine among local and global populations; Chinese firms are striving to create novel products in such areas as gene therapy and regenerative medicine.
“Addressing the health needs of 1.3 billion people in China is global health,” says Dr. Frew. “The challenges faced by the private sector, research institutes and universities, and health care providers will be very difficult to meet unless the country's leaders are prepared to look at new approaches.”
Drs. Singer and Frew, with co-authors Abdallah S. Daar, MD, Stephen Sammut, Alysha Shore, Joshua Ramjist, Sara Al-Bader and Rahim Rezaie, say they found a home-grown Chinese private health biotech sector motivated both financially and morally to develop innovative health products to address local and global health needs.
“The responsibility now lies with both the Chinese government and the international health community to support these companies in their ventures and ensure that these products reach their intended markets,” says Dr. Frew.
The return of the ‘sea turtles'
The report notes a strong focus on encouraging the return of Chinese scientists and entrepreneurs who left the country to study or train abroad – the so-called ‘sea turtles' who return with scientific talent and international credibility.
“While the ‘sea turtle' phenomenon is beneficial, the country's industry might be better served if Chinese residents in the West built transnational companies with a footprint in both China and the West,” says co-author Stephen M. Sammut of Burrill & Company, San Francisco.
“While this practice is already common, regulations and taxation policies to encourage this approach would address many of the concerns of private and public capital, assure prospective alliance partners, and add depth to the pool of experienced managers. Such an approach would also promote China as a co-development partner rather than a purely low-cost venue to international companies to contract services.”
Population a major driving force
China's 1.3 billion inhabitants (20% of the world's population) create a significant demand for low-cost products with the result that biogenerics accounted for more than 90% of the $3 billion biopharmaceutical market last year. For some companies, generic products represent a low-risk entry point into the industry.
The same is true for diagnostics. Chinese companies like Beijing Wantai Biological Pharmacy Enterprise and Shanghai Huaguan Biochip Co., Ltd. play an important role in keeping local consumer prices down. Wantai has developed and marketed a large range of blood screening tests for diseases such as HIV, hepatitis B and C, sexually transmitted diseases and rotavirus. Huaguan earns most of its revenue exporting its range of fertility tests and formulations for HIV, tuberculosis, hepatitis C and STDs to other Asian, African and South American countries.
The Chinese government, however, remains intent on pushing applied research, driving Chinese firms to develop new therapies in pioneering fields such as gene therapy and stem cells.
The first commercialized gene therapy product approved anywhere in the world was Gendicine, an injection used in the treatment of head and neck cancers developed by Shenzhen SiBiono GeneTech Co., Ltd. More than 5,000 patients have been treated with Gendicine, about 400 of them from overseas. The drug is currently undergoing further clinical trials in China for several new indications, including liver, abdominal and pancreatic cancer.
Several Chinese companies are working in the field of human and animal stem cells. One of them, Beike Biotechnologies, has organized a network of satellite hospitals, clinicians and research laboratories to commercialize its stem cells therapies, which involve harvesting stem cells from the umbilical cord or amniotic membrane, in vitro expansion, and administration to patients either intravenously or by injecting directly into the spinal cord.
Beike has treated more than 1,000 patients, including 60 foreigners, for a variety of conditions including Alzheimer's disease, autism, brain trauma, cerebral palsy, diabetic diabetic foot arteriosclerosis and spinal cord injury.
Because therapies using cells derived from the umbilical cord are considered a clinical technology in China, the State Food and Drug Administration does not require clinical trials before these treatments are approved. This absence of clinical data makes it difficult to evaluate the efficacy of these therapies.
New therapies developed for local and global health problems
The study found that the government's focus on innovation is also driving development of new therapies to address significant local health needs, including lung fibrosis, liver cirrhosis and various problems associated with an aging population caused in part by the country's one-child policy.
Lung fibrosis, caused by radiation treatment, is a major cause of death for the more than 275,000 Chinese who die from lung cancer every year. Inflammation and fibrosis of the liver is a side effect from hepatitis B virus infection, which afflicts over 100 million Chinese.
Shanghai Genomics Inc. has focused its efforts in this area, developing novel non-steroid anti-inflammatory therapeutics to replace currently available treatments which achieve poor results and have many side effects. The company's first product on the market, GuBang, is a material for bone void filling that can aid bone growth and serve the growing needs of Asia's aging citizens.