China: A New Biopharma Model Emerging

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Professor Richard Barker, founder of New Medicine Partners reflects on China’s very different approach to the biopharma industry.

 

Napoleon once said: “China is a sleeping giant. Let her sleep, for when she wakes she will shake the world.” Well, in biotech, she is now wide awake

I’ve recently returned from a four-day biotech conference in China. Well, actually Hong Kong and Shenzhen. Some of what I heard and saw gives a glimpse of a very different model of the biopharma enterprise than we are familiar with in the West.

The most obvious difference is the very determined and proactive stance that the national and provincial governments are taking.

Along with artificial intelligence, smart cities and healthy ageing, biotech is a high, generously funded priority and has been designated a ‘National Key Programme’ supported by President Xi and many local leaders anxious to build 21st-century knowledge economies. All realise that a modern biotech sector is not built overnight, but they do not intend to let it take its sweet time either.

China already has at least 1800 biotech companies which, with other life sciences companies, have raised over USD 45 billion in funds over the last three years. One source suggested at least 1350 clinical trials were underway in 2016 alone.

 

However, the Chinese know that the fast-growing biotech sector is also an immature one: one senior official pointed to the lack of primary innovation as opposed to the in-licensing of Western products and the many ‘me-too’ projects in areas like CAR-T –Remarkably, there are more CAR-T trials now underway in China than in the US.

 

They are beginning to have strong science in some of their universities – often led by returning academic ‘sea turtles’ (the name given to Chinese-born professors who have built their careers in the US or Europe). But, just as in parts of the West there are cultural and practical gaps in translation into promising products.

However, despite these similarities, the industry that is emerging in China will inevitably follow a very different trajectory than that established in the US, Europe and Japan. Firstly, the price/volume tradeoff is clearly dramatically different in a country with 1.38 billion people, only a tiny fraction of whom can afford premium drug or diagnostic prices. One company that presented at the conference was promising liquid biopsy tests at USD 50, in contrast to the hundreds of dollars expected for such services in the US market.

There is a particular need for translational infrastructure that embodies industry best practice

Secondly, there is an appetite to leapfrog into the latest precision medicine products – cell and gene therapies are prominent. Fewer companies are interested in innovating in chemical or even biological drugs. And there is a strong interest in regenerative approaches to neurodegeneration — understandable when one learns that nearly 40 percent of Hong Kong citizens will be over 65 by 2050.

Regulation is evolving extremely rapidly. There is a now a determination not to allow delays or barriers to hold back the industry and there is talk of online real-time approvals of clinical trials. But, we need to bear in mind that, with a rash of leading-edge projects in technically difficult areas like CAR-T, there is also the risk of a backlash if something serious goes wrong. The Chinese government has demonstrated the ability to slam on the brakes if the car veers off the road.

There is also a shortage of some key skills, and China is still reaching out to the West to fill them. Clinical development is one. Biotech entrepreneurship is another. There are opportunities for individuals and companies, both in creating and translating biotech advances. There is a particular need for translational infrastructure that embodies industry best practice but also accelerates innovations to market, using the latest tools of precision medicine – something on which I’m actively working.

There is, of course, a well-established fear in the West that China will not respect IP, but I see the basis for that diminishing, as China recognises its own IP will be increasingly valuable on the world stage. Despite this, there is a sense that speed to market, rather than reliance on IP, will be the most important source of competitive advantage.

A second Western fear is that of corrupt business practices, a problem that hit GSK and other companies hard in recent years. China knows that some of these are deeply culturally embedded – so we heard from a very spirited talk from an anti-corruption official keen to point to the long prison sentences recently meted out to people who offered or took bribes.

What does all this add up to? A country and an industry in a hurry, seeking to climb rapidly into the sunny uplands of true innovation but hampered by some skill shortages in getting there. The industry that emerges, will have a very different and competitive cost structure and the ability to offer lower pricing in return for the huge volume of demand.

It will absorb early on the tools of artificial intelligence, to be less reliant on human labour and perhaps also able to mine large health databases — less constrained by the walls around them that we see in parts of the West. Because of foreign exchange controls and foreign market and cultural unfamiliarity, it will go global slowly, but go global it will. We have already seen Chinese acquisitions of Western biotech companies.

Is this an opportunity or a threat to the Western industry? Despite inevitable challenges of such a different culture, I’d argue it would be a mistake for US, European or Japanese companies to bypass the Chinese market. They will need effective local partners, and managers they can trust, and be prepared to rethink conventional marketing and pricing practices. But, the economic powerhouse that is modern China cannot be ignored. Sooner or later the global biotech industry will feel the power. Napoleon once said: “China is a sleeping giant. Let her sleep, for when she wakes she will shake the world.” Well, in biotech, she is now wide awake.


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