Indeed, China is the world's top active pharmaceutical ingredients (API) supplier with sales of $4.4 billion in 2005, followed by Italy and India. But, when the Shangai-based three leading local contract research organisations (CROs) - Sundia Meditech, United Pharmatech and HD BioSciences - joined hands together and set up the first contract research service alliance (CROSA) in China in 2007, no one would have given a slight thought that the pharmaceutical industry in this dragon land was all set to find its place in the good books of foreign and multinational pharma players across the globe as a favourite locale for outsourcing drug development services.
There is no doubt that the recent outsourcing wave has a great deal benefited the Chinese CROs. In the past five years, the Chinese CRO industry has become a booming market as more and more drug companies are choosing the region to find service providers capable of offering research and development (R&D) services for all the stages of drug development.
To add to the success story of Chinese CROs, some of them have attracted huge investments from abroad. For instance, China's second largest CRO ShangPharma attracted $30 million from US private investment firm TPG in the past year.
With TPG as its cornerstone investor, ShangPharma is expected to turn itself into a fully integrated CRO, offering new biological services, including assay development and compound screening, drug metabolism and pharmacokinetic studies. The firm would also establish a manufacturing facility that is compliant with US Food and Drug (FDA) regulations. In fact, the CROs are taking advantage of China's high position on the list of top outsourcing destinations for drug development.
"Significantly reduced costs, shorter duration of the studies and the possibility of simultaneous approval in multiple markets are just some of the major benefits of doing trials in China, which have contributed to the country's appeal and several drug makers are outsourcing more and more clinical and preclinical work to China-based CROs," said an industry expert to Pharmabiz.
JV wagon
China has recently been dubbed as the favourite destination for outsourcing stages of the drug development and there is a growing amount of preclinical and clinical studies that are being conducted in the country. As a result, many foreign players have turned to the path of joint ventures (JV) to enter China to exploit the growing business opportunities.
For instance, the Canada-based PharmEng has signed a JV agreement with Chinese firm Beijing BRD Lixin PharmaTech to provide consulting and pharma development services in China. Also, US-based MPI Research and China's Shanghai Medicilon have formed a JV in preclinical services, as they position themselves to cash in on what is a budding market sector in China.
Besides, the US-based CRO Charles River Laboratories has announced that it will establish a presence in China by signing a JV deal with Shanghai BioExplorer, a Chinese preclinical services provider. The companies would form a new subsidiary, Charles River Laboratories Preclinical Services - China, and build a 50,000 square foot facility in Shanghai to offer early-stage drug development services.
In yet another instance, US services provider Frontier Biosciences has bought a majority stake in a China-based preclinical contract research organisation National Chengdu Centre for Safety Evaluation of Drugs (NCCSED) - a contract research lab specialised in drug safety evaluation.
Regulatory reforms
In an effort to capture business from other developing countries such as India, the Chinese government has recently announced plans to consolidate their outsourcing industry. As a first step, in order to combat the fragmentation seen within China's outsourcing industry, Assistant Minister of Commerce Fu Ziying has outlined plans to develop 10 outsourcing base cities, starting with Shanghai, Dalian, Xi'an, Shenzhen and Chengdu. This move is expected to encourage pharma multinationals to shift offshore outsourcing services to China and promote up to 1,000 native outsourcing enterprises.
Also, as part of its concerted attempt to shed the image of producer of unsafe and counterfeit drugs, China has announced an initial $1.7 billion investment to bolster its currently questionable ability to effectively monitor the quality of the food and drugs manufactured within its borders.
"The allocated funding, provided by both the central and local governments, will be spent on improving safety monitoring infrastructure over the next three to five years," said, State Food and Drug Administration (SFDA) spokesperson Yan Jiangying.
He also said that new laws are being drafted to tighten controls on the import and export of drugs and medical devices in China and facilitate the recall of hazardous products. Of late, China has been continually taking steps toward drug safety reforms as it vies to improve its tarnished reputation in this area.
As part of a drive towards greater innovation, the Chinese government also looks set to introduce new laws giving its domestic scientists freedom to tackle complex scientific problems without fear of failure. It is learnt that legislators are discussing a draft amendment to the Law on Science and Technology Process that would allow researchers to report failures, and the experience gained from them, without fearing it will impact future funding applications.
Besides, the watchdog has implemented a new system that requires drug manufacturers to recall unsafe drugs voluntarily as soon as they become aware of a problem, in order to minimise their exposure to the supply chain. In doing so, they can avoid or receive lesser regulatory repercussions, but if they fail to do so, they risk facing severe penalties such as large fines (up to three times the drug's market value) or in the most severe cases, removal of their manufacturing licence.
Under the new recall system, pharmaceuticals that are classed as being harmful or potentially fatal must be recalled within 24 hours of the discovery of a safety issue, while drugs that may cause temporary or reversible health problems must be recalled within two days. Apart, medicines that need to be recalled for non-safety related issues must be removed from circulation within three days. The government is also planning to enforce good manufacturing practices (GMP) norms strictly.
"Recent legal reforms, which raised manufacturing standards and reduced bureaucracy, have made the region highly attractive to its western counterparts, who are always looking to cut costs without sacrificing quality of work," pointed out a reliable source.
Building Chinese presence
International pharma players are in a race to build and expand their presence in the Chinese pharma market, which is expected to become the joint fifth largest pharma market alongside the UK with an estimated value of $24 billion, thanks to the booming CRO market and ongoing government and regulatory body efforts to improve the business environment, conduct and standards within this burgeoning pharma industry.
For instance, the pharma heavyweight GlaxoSmithKline (GSK) has recently set up a drug research centre in China, while Novartis set up Institute for BioMedical Research at Shanghai's Zhanjiang Park. While AstraZeneca announced its first clinical pharmacology investment in the country, Novo Nordisk revealed plans to expand its presence in China beyond its R&D centre by collaborating with the Chinese Academy of Science to establish a new diabetes research foundation.
The US-based contract manufacturer SAFC is expected to make its foray into the Chinese market by building a new manufacturing facility in Shanghai, while Sanofi-Aventis would build a new influenza vaccine manufacturing facility in China. Already, an agreement was signed between Chinese authorities and Sanofi-Aventis to set up Sanofi-Pasteur vaccine facility in Shenzhen.
"China is joining a number of countries focussing on prevention of diseases and recognising the value of vaccines. The time is right for Sanofi Pasteur to further invest in China and prepare to provide this fast growing market with the most modern vaccines to be produced in a state of the industry facility," said, Gerard Le Fur, chief executive, Sanofi-Aventis.
Annual pharma events
Of course, the Chinese pharma industry has undergone a sea change in 2007. It has turned into a fertile ground for CROs, retaining its reputation as the world's top API supplier and bettered the regulations to shed the image of producer of unsafe and counterfeit drugs and take the foreign players into confidence. Hence, it's the right time to bring the pharma and its allied players across the globe together in China to apprise them of the strides the country has made in the pharma front in the past year. And the Chinese authorities and pharma players feel that API China and Interphex, which are held simultaneously at the same venue, are the apt platforms to carry out this task.
This year, API China and Interphex would be held at the Dalian World Expo Centre from May 12 to 14, 2008. Organised under the aegis of Reed Sinopharm Exhibitions Co. Ltd., a member company of Reed Exhibitions and Sinopharm Group, the events would help one to meet all major Chinese domestic pharmaceutical ingredients manufacturers, importers and exporters and learn the latest Chinese pharmaceutical industry and market developments by attending the conference and seminars that are integral part of the events. Also, it is a golden opportunity to source the whole spectrum of bulk pharmaceuticals, pharma chemicals and allied industrial products.
API China, also known as China International Pharmaceutical Ingredients Fair, is the country's leading exhibition for the pharmaceutical manufacturing sector. The event is being supported by Ministry of Commerce of the People's Republic of China, People's Government of Nanjing Municipality, China Pharmaceutical Industry Association, China Pharmaceutical Packaging Association and China National Pharmaceutical Industry Corporation.
"High-level conferences are one of highlights for the exhibition. Our goal is to provide our customers with an unmatched value added service that is focused on current industry issues and challenges. Our conferences cover the key topics surrounding the latest trends and issues of the global pharmaceutical industry through a series of discussion and interesting conference sessions. Professionals and high level corporate delegates gather to discuss and share case studies on the pharmaceutical industry chain, laws and regulations of drug administration, export and import information, outsourcing and contract research organisation," said the organisers.
Given that China is becoming an ever more important sourcing centre for pharma ingredients in recent years with local pharmaceutical companies playing active role in globalisation process, API China and Interphex conferences are expected to help companies to draw their ideas and inspirations for future growth.