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»13/03/2008 [Independent reports]
CROs bring innovation into Chinese pharmaceutical industry

Most of the big pharmaceutical firms and their products are well known to most people. Less well-known are the contract research organisations, known as CROs, which are increasingly important in the drug development process. Pharmaceutical companies outsource research to CROs, who can help them develop drugs faster and cheaper

 

Shanghai-based Wuxi Pharmatech has taken a comfortable lead among Chinese CROs in the race to what is a large potential market. According to China Pharmaceutical and Biotechnology Monthly, worldwide spend on drug development will exceed 100 billion US dollars by 2010. And a hefty 40 percent of that will be reserved for outsourcing.

Chen Shuhui, Chief Scientific Officer of Wuxi Pharmatech said "We work closely with the large pharmas and biopharmas to provide service to co-invent drugs. So this business will continue to grow. Many more company are being formed everyday."

It's no surprise why Chinese CROs are so popular. Some analysts say the cost of outsourcing to a Chinese CRO can be one-fifth the price of performing those same services in-house.

CROs have been credited with being the main driver for the fast growth of the Chinese pharmaceutical industry. And WuXi, which IPO'd on the New York Stock Exchange in August 2007, has been at the vanguard of that movement. It credits a number of factors for its rise--importantly, government support.

Chen Shuhui said "But in China, China views CRO as the critical technical, the pool for training Chinese people to become professionals. Maybe from which they could eventually, these other companies can provide more and more support, provide more technology support for Chinese company, to provide know-how, expertise, there. So the link between the western pharmaceutical industry and Chinese-grown large pharma in the future, they will be the link between."

Western-educated and trained returnees work and lead at WuXi and many of the market leaders in China's CRO industry. And according to analysts, they have provided crucial global experience and credibility for the Chinese pharmaceutical industry.

A different CRO model is Crown Bioscience. The company is headquartered in the US, because western pharmaceutical clients are more familiar with the laws there. But the vast majority of the company's resources are in China.

William Pan, President of Crown Bioscience said "As we can see from WuXi Pharmatech, their IPO last August, it was very successful. And a few more companies in chemical synthesis service area, they are about to IPO. So we step in, just want to focus in bioanalytical, provide service for big pharmas and other companies in this industry. So we consider outsourcing in bioanalyticals, biologics will be big opportunities here in China."

This specialization is an important milestone in the development of the industry here. More than offering one-stop-shop service, Crown Bioscience is focused on offering research services that other Chinese pharmaceuticals may not have the expertise to do and that other overseas pharmaceuticals may not do as quickly or as cheaply.

William Pan said "Back to 5 to 7 years ago, they were asking, 'Should I outsource our project?' But nowadays, they just ask, 'Where should I outsource my projects? China or India or Russia?' So for China, this is really a big opportunity."

From Made-in-China to Innovated-in-China, that is the Chinese government's hope for the country. And it is the reality on the ground here in the pharmaceutical industry. Local Chinese pharmaceutical companies began with manufacturing, but they have moved on to offering more value-added services, like research and development.

Just as exciting as the development and specialization of CROs in China today, there are Chinese firms that are their own boss when it comes to novel drug development.

Hutchison Medipharma, fully supported by Hong Kong conglomerate Hutchison Whampoa, is hoping it will be at the forefront of global R&D one day.

Samantha Du, CEO of Hutchison Medipharma said "When I first set up pharmaceutical R&D in China, people thought that was really a dream that would never be realized. Because it was at the time, it was focused on generic part of the business, especially focused, even CRO was considered very hi-tech at the time. So setting up innovative R&D, especially pharmaceutical R&D, is considered way behind the curve. But I see changes. And I see more and more, even local companies, they're willing to put their profit back to R&D. More and more people recognize the importance of proprietary drug discovery and development, pay more attention to patent protection. And I think it's going in the right path, definitely the right path."

Arthur Mok, Partner of Hogan & Hartson said "Discovery. I see them moving away from the original activities in this space, which was mostly manufacturing, contract services, to becoming innovators. I think that's an evolution up the value chain for Chinese businesses."

From R&D by multi-national corporations to the R&D outsourced to local CROs to the R&D that local companies are undertaking for themselves. There is a growing sense of real innovation in China's pharmaceutical industry today, falling nicely in line with the government's push for innovation in the Eleventh Five-Year Plan.


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