Life Science Blossoms

color = "#DF1F26"; Life Science Blossoms China is conducting a huge experiment with biotechnology. Can the returning “sea turtles” use the massive domestic market and competitive cost base to make it a life sciences world power? Even the world power? By Zhu Shen The past 30 years have witnessed an economic miracle in China. Global market demand, vast arbitrage opportunities in labor and manufacturing and shrewd government polic

Zhu Shen
Nov 30, 2009

Life Science Blossoms

China is conducting a huge experiment with biotechnology. Can the returning “sea turtles” use the massive domestic market and competitive cost base to make it a life sciences world power? Even the world power?

The past 30 years have witnessed an economic miracle in China. Global market demand, vast arbitrage opportunities in labor and manufacturing and shrewd government policy have combined to propel unprecedented growth and wealth creation. But the country is also facing great challenges in managing and balancing economic growth and a population of 1.3 billion.

Two of the greatest challenges are to provide healthcare to the entire population, most of which is rural and currently enjoys little or no coverage, and to increase the quality and efficiency of agricultural output in a sustainable, environmentally friendly manner. Biotechnology will play a critical role in developing solutions to both sets of problems.

Consequently, biotech and the...

The past 30 years have witnessed an economic miracle in China. Global market demand, vast arbitrage opportunities in labor and manufacturing and shrewd government policy have combined to propel unprecedented growth and wealth creation. But the country is also facing great challenges in managing and balancing economic growth and a population of 1.3 billion.

Two of the greatest challenges are to provide healthcare to the entire population, most of which is rural and currently enjoys little or no coverage, and to increase the quality and efficiency of agricultural output in a sustainable, environmentally friendly manner. Biotechnology will play a critical role in developing solutions to both sets of problems.

Consequently, biotech and the life sciences are one of the pillar industries that the Chinese government views as fueling sustainable growth. In his opening remarks at the 4th National Congress of Science and Technology on January 9, 2006, Chinese President Hu Jintao emphasized the critical role that life science and technology will play. “Biotechnology is the priority of high-tech industries by which China will try to catch up with the developed countries, and China will strengthen the application of biotechnology to agriculture, industry, population and health,” said President Hu.

The life sciences now account for about 20% of the total investment in science and technology, an investment that jumped from 50.9 billion RMB (US$7.5 billion) (0.64% GDP) in 1997 to 184 billion RMB in 2004 (1.35% of GDP), and is expected to grow to 455 billion RMB in 2010 (2% of GDP). In the private sector, the R&D effort has also grown dramatically (see table p. 70). How wisely this government and non-government investment is spent will determine whether biotech blossoms or withers in China, and will impact the life sciences community around the world.

The current global economic recession, which started in 2008, is a wildcard in the game. It has dramatically slowed the rate of growth in China but, paradoxically, biotechnology and the life sciences may come out a winner. That is because the government is the primary life science investor in China and the life sciences will benefit from the US$586 billion Chinese economic stimulus package to promote domestic consumption and build better infrastructure. With dedicated funds supporting research at universities and institutes, such as the National High Technology Research and Development Program (the 863 program) that started in 1986, and the National Key Basic Research Development Program (the 973 program) that was initiated in 1998, basic research is also insulated from economic woes. Other major supporters of science include the Ministry of Science & Technology (MOST), the National Natural Science Foundation of China (NSFC), the Chinese Academy of Science (CAS), and local governments and enterprises.

According to the Minister of Science and Technology Chen Zhu, China had about 200 government-funded biotechnology laboratories and over 30,000 R&D staff in 2007. This is in addition to the more than 500 biotech companies that employ 50,000 staff.1 In comparison, the state of California boasts about 5,000 companies and research organizations and 200,000 employees, representing nearly half of the world’s biotechnology industry, so China is already a major player in the sector.

One notable feature of the industry in China, and a sign of strong government support, is the network of 20 biotech industrial parks spread across Beijing, Shanghai, Tianjin, Suzhou, Taizhou, Guangzhou, Shenzhen, and other metropolitan cities. Fifteen billion RMB (US$1.8 billion) has been invested in these parks, many of which tout for business in “road shows” across the US and Europe. Their primary targets are potential “sea turtles” —Chinese-born scientists who have found success overseas and who can be persuaded to migrate back to their homeland—but they increasingly appeal to foreign nationals too. Talented individuals can expect to be pitched various incentive packages to establish life science entities in the science parks. For instance, the Suzhou Industrial Park (SIP) launched a “Pioneering Talent Grant” in 2007 in which a 1 million RMB award was given as start-up funding, followed by up to 5 million RMB additional investment by the China-Singapore Suzhou Industrial Park Ventures Co., Ltd, free lab space, and housing subsidies for key talents.2

With the country trying to balance the rising demand for food against the perceived risk of growing and eating GM crops, agricultural biotechnology has been a controversial topic in China.

Among the industrial parks, Shanghai, Beijing, Tianjin, and Suzhou are the largest and/or the most aggressive in expanding. The Shanghai Zhangjiang Hi-tech Park has attracted seven of the top ten multinational pharmaceutical corporations, and Bayer Schering has this year begun to build R&D centers in Beijing.

In addition to investment in science parks, the government funds life sciences through quasi-venture capital companies such as Shanghai Venture Capital and Shanghai Zhangjiang Group. These invest in start-up and later-stage companies with operations in China. They go through a due diligence process to evaluate investment opportunities, relying on the opinions of experts in specific fields, although the level of sophistication and domain expertise may not yet be on par with those of leading VC funds in the U.S.

With the country trying to balance the rising demand for food against the perceived risk of growing and eating genetically modified crops, agricultural biotechnology has been a controversial topic in China. Opponents of GM food have vigorously campaigned that the long-term health implications are yet to be determined and that China should be wary of adopting GM food, especially rice, a staple food for more than a billion people in China. Last July, however, the State Council approved a major research and development project for genetically altered foods, including meats and produce. The council has invested about 20 billion RMB on transgenic breeding since then, according to China Daily.3 “China has worked on research of transgenic rice and is strongly considering (its commercialization),” said Niu Dun, vice minister of agriculture, in August 2009.

*According to an annual GDP growth rate of 9% over 2004-2010. Philos Trans R Soc Lond B Biol Sci. 2007 June 29; 362(1482): 947?957. Published online 2007 March 1. doi: 10.1098/rstb.2007.2025. © 2007 The Royal Society

China currently produces around 500 million tons of rice, but needs to grow 630 million tons to feed the 1.6 billion-sized population expected by 2020. Science is seen as the best way to meet that demand. In February 2009, Monsanto, the global top producer of genetically modified seeds, announced the establishment of a genomic research center in China.

Though cautious in accepting GM crops for human food consumption, China has been a firm adopter of growing GM crops as animal feed, given its vast demand and reliance on imports, and for the textile industry. “The Chinese government has announced investments in biotechnology research in the country’s universities and institutes, “so they aren’t against genetically modified crops,” said Monsanto executive vice president, Gerald Steiner. He added that Monsanto will look to the government to seek the best way to proceed.

China’s commitment to agricultural biotechnology has given it a leadership position in developing hybrid rice varieties, and newer transgenic varieties of crops such as corn and soybean that are superior in terms of yield, quality, disease- or insect-resistance, and environmental tolerance. These are some of the fruits of the current research era, which started in the mid 1970s at institutes and facilities affiliated with the CAS, China’s only multidisciplinary research institution for natural science and high-tech development. By 2007, CAS’s life science portfolio covered 6000 researchers spread across 24 institutes, 13 research centers, 26 key laboratories and 12 botanic gardens.

Researchers funded by central government generally target major social needs, striking a strategic balance between scientific frontier research and pragmatic national interests in certain key areas such as genomics, bioinformatics, major disease gene identification and biomedicine development. The roster of achievements of the past three decades include: the sequencing of 1% of the human genome, as part of the international Human Genome Project; sequencing of the rice genome; analytical work on 61 SARS viral sequences that lead to better understanding of the origin of the human SARS epidemic; gene cloning and functional research in acute promyelocytic leukemia; identification of genes responsible for hereditary high-frequency hearing impairment and familial atrial fibrillation; and pinpointing the loci of susceptibility to type II diabetes, essential hypertension, and nasopharyngeal carcinoma.

Transgenics and animal cloning developments have allowed Chinese scientists to produce medicinal proteins from transgenic animals and to develop large-scale commercial production of transgenic fish.

The Chinese pharmaceutical market has been dominated by generic drugs over the past few decades. This is changing.

The Chinese pharmaceutical market has been dominated by generic drugs over the past few decades. This is changing. Western pharmaceutical companies have made tremendous inroads into the huge domestic market with novel proprietary drugs supported by favorable demographic trends and a receptive population that has seen rapid growth in its disposable income. According to Pharma China,4 the pharmaceutical market for Western medicines and Traditional Chinese Medicine (TCM) reached US$70.7 billion in 2008.

A shift from imitation to innovation is taking place among domestic drug developers too, albeit slowly. Examples of novel drugs developed in China include Artemether, an anti-malaria drug developed from the qing hao plant by Chinese researchers in 1982; sodium dimercaptosuccinate, for treating heavy metal poisoning; Huperzine A, an alkaloid from TCM to treat memory loss; and arsenic trioxide, originally developed by a Chinese medical school from a TCM compound for treating a rare form of leukemia. It was acquired by PolaRx biopharmaceuticals, an early-stage US biotech company, in 1998, which obtained FDA approval 30 months after phase I initiation, then an industry record. In January 2000, Cell Therapeutics Inc. in Seattle acquired PolaRx and Trisenox, the brand name for the arsenic trioxide. Trisenox was later sold to Cephalon for $68 million in July 2005 with up to US$100 million additional payments pending certain milestones being met.

The pace of drug discovery has picked up in recent years: According to Greg Scott of ChinaBio, publication of novel molecule patents went from 34 in 2000 to 380 in 2006, with more than 1800 total from 2000 to 2008; of those, 68% patents were generated by universities and institutes.

Commentators that are enthusiastic about the future of therapeutics development in China draw encouragement from the rapid development of the Contract Research Organization (CRO) industry. Over the past five to seven years, Chinese CROs have built a solid foundation of knowledge, experience, and talent, many specializing in niche areas such as chemistry, preclinical, and clinical trial services. “I am highly optimistic about the future growth of the Chinese CRO sector,” says Alex Yue Wu, CEO of Crown Bioscience Inc. His cancer discovery biology CRO, which has operations in Beijing, Taicang, and Indianapolis, and is headquartered in Silicon Valley, provides integrated services from antigen expression to R&D candidate selection. “Currently 16 out of the top 20 big pharma companies are our clients. What attracted them are our demonstrated expertise, track record, laser focus in oncology, and a rapidly growing worldwide market. Our unique and proprietary Asian cancer models such as those for liver and gastric cancers are not available elsewhere. Big pharma wants to have access so that they can be better equipped to develop therapeutics in these areas.” Wu expects to close larger service deals in the coming months and said he was recently surprised and impressed by the growing demand for his services in the domestic pharma and biotech companies. “We have signed CRO service contracts with a number of well-funded Chinese pharma companies who have global ambitions and need us for their novel oncology development. This is definitely a sign of China moving from generics to innovation,” said Wu.

On Oct. 4, 2008, a worker uses envelopes to separate rice collected on a test field sewn with different rice varieties in the outskirts of Kunming, capital of southwestern China’s Yunnan province. Photo taken by Andy Wong and provided by The Associated Press.

Some newer entrants are getting into biology, and process development, others into contract manufacturing. With Western pharma companies facing escalating drug development costs, they are looking to the East for viable alternatives, and starting to leverage this skilled CRO pool in China. According to a May 2008 Citigroup report, the global CRO market is estimated to be $15 billion and growing 15 to 16% annually. China’s share is growing well above that rate.

Multinationals and smaller biotechs alike are seeing China as a location for clinical trials. Costs are low, but the real attractions are the speed of patient recruitment and unparalleled access to vast treatment-naïve patient pools for important disease indications.

This is due to the uneven national healthcare coverage based on geography, income, employment, and other factors. Whereas it may take two years or longer to recruit enough patients for a solid tumor phase II trial in the US, in China, it may take six months or less to run a similar trial. For drug developers, 1.5 years saved could change the fate of a promising drug candidate.

For example, an eight-year study cosponsored by the American Epidemiology Society and the Chinese CDC aims to identify environmental and dietary factors contributing to the development of cancers of the GI tract by following 100,000 Chinese GI cancer patients. The study is being undertaken by Bio-Research, a Beijing-based clinical trial CRO. “It is inconceivable to conduct such studies in the US, not just because of higher costs but because of the greater mobility of the U.S. population. It would be virtually impossible to follow 100,000 of them through such a long period of time,” remarked Tao Min, president of Bio-Research, himself a “sea turtle.”

Chinese physicians at the top hospitals in metropolitan cities are increasingly knowledgeable about cutting-edge therapeutics development, and are being courted by Western companies and CROs as experts and consultants for their clinical trial design, execution, and market intelligence. A major part of a successful drug launch in China depends on the influence of these experts. “We work differently with investigators in China,” said Min. “These doctors are thought leaders in their own field and extremely busy people. We need to be particularly service oriented to make their work less cumbersome.”

As the Chinese State Food and Drug Administration (SFDA) moves toward international harmonization of clinical trial standards and shortening the review time for Investigational New Drug (IND) submission, and as the quality of clinical trial services in China continues to improve, the opportunity exists for the clinical trial CRO sector to continue to grow and develop. It is difficult to project how fast the SFDA reform will happen, given the prioritization of Chinese healthcare reform and the mandate for universal health coverage. Many industry watchers believe the Chinese government needs to put the right resources and funding in place, including training and hiring enough experienced reviewers to meet the growing demand of domestic and international therapeutics developers.

There are ample reasons to believe that the Chinese “sea turtles” will continue to bring about the blossoming of life sciences in China.

Most of the Chinese CROs are founded by the “sea turtles” (overseas returnees). They have come back in droves —an estimated one quarter of the 700,000 students who left China between 1978 and 2003 have returned, according to China’s Ministry of Education. They bring not only their advanced knowledge and valuable operational experience, but also Western pharma/biotech contacts, understanding of customer service, and business savvy. Other sea turtles head up the multinational teams in the Chinese headquarters of international companies. Still others joined top Chinese academic institutes and universities.

The Chinese government is actively recruiting talent from overseas countries as part of its strategy to develop China’s life science industry. Changyou Chen, a former senior scientist at a San Diego biotech company, was among the returnees to be recruited back to China in 2005 to lead antibody drug discovery and development at the government-funded Guangzhou Institute of Biomedicine and Health (GIBH). “In China, I have better career opportunities and do what I love to do because I am respected for what I have learned in the US and what I can bring to China,” Chen said. “Also, China is willing to provide you with a lot of initial resources, such as grant money, starting funding, lab space and equipment, so you can hire people and pick your projects.” In 2009, Chen co-founded Lifeon Bioscience, an antibody therapeutics company in Hefei, Anhui province. Chen attended Anhui University as an undergraduate and a college classmate is his investor and co-founder.

In his address at the 4th National Conference of Science and Technology, President Hu Jintao said, “China will admit more talented people from overseas and attract overseas Chinese graduates back to start business in China.” To this end, the government has launched several programs with robust funding and desirable incentives, to entice overseas talents to return to China. These include the “Hundred-Talent Project” of CAS. In fact, over a thousand “talents” were awarded from 1994 to 2004 with total funding of more than US$240 million. Other incentives are the “National Outstanding Young Scholar Project” and the “Cheung Kong Scholar Project.” These initiatives, combined with the onslaught of US pharma/biotech layoffs, and the opportunities at private life science enterprises in China, have been central to the “sea turtle” phenomenon, offering career advancement and more responsibility.

This “reverse migration,” or “reverse brain drain,” fits well with the Chinese philosophy of symbiosis of crisis and opportunity. Talents can now flow to wherever there are opportunities, regardless of geography. There are ample reasons to believe that the Chinese “sea turtles” will continue to bring about the blossoming of life sciences in China, which in turn will create new opportunities for the betterment of global health and wellness.

1. Zhu Chen, “Life sciences and biotechnology in China,”Phil. Trans. R. Soc. B 29 June 2007 vol. 362 no. 1482 947-957