ChinaBio Consulting has been operating in China for 11 years now, yet when you arrived in the country as an angel investor, you did not intend to build a company. How has your mandate changed and what is the key focus for ChinaBio today?

Initially, when we arrived in China as angel investors, our intention was not to establish a company. However, as word spread about our expertise and knowledge of the Chinese market, we started receiving requests for more information. Back then, it was challenging to find industry information in China, a problem that still exists today. As a result, ChinaBio began providing consulting and advisory services to meet the demand for industry data. While we are still involved in angel investment activities, our main focus now is on consulting. We work with a wide range of companies in the pharmaceutical, biotech, medical device, and diagnostic sectors, as well as large multinationals and even one-person operations.

China has long been known as a generics market, but recently there has been a buzz of innovation capturing the attention of the global marketplace. What are the key elements generating that stir?

There are several key elements driving the buzz of innovation in China. One significant factor is the influx of returnees who have received education and gained experience in the West. In the past four years alone, over 400,000 returnees have come back to China annually, with a substantial portion working in the life science space. This has led to a shift in management leadership within companies, with a significant increase in returnees driving business operations. Additionally, the Chinese government has been injecting substantial amounts of capital into the industry, with life science investment increasing from about US$10 billion in 2007 to US$100 billion per year. Grants and funding programs, such as the Thousand Talents program, have played an important role in supporting innovation. Furthermore, private funding from venture capitalists and private equity funds has significantly contributed to driving innovation, with VC and PE funds raising over US$40 billion last year for investment in China’s life sciences, putting China on par with the U.S. in terms of VC funds.

Specifically in the biotechnology space, why has China emerged as a leader in large molecule innovations?

China’s emergence as a leader in large molecule innovations in the biotechnology space can be attributed to several factors. The issuance of biosimilar guidelines in 2015 by the Chinese government sparked a rush to develop biosimilars in the country. However, companies quickly realized that the approval process for biosimilars in China was different from the West. Instead of just proving bioequivalency, companies essentially had to go through a new drug approval process. This led many biosimilar companies to shift their focus to novel drug development. For example, companies like Innovent in Suzhou started in-licensing and developing novel candidates, leading to significant deals and collaborations. This shift in focus and the development of novel drugs have contributed to China’s leadership in large molecule innovations.

From a policy perspective, what key efforts have you observed as the most impactful on behalf of the government to assist the industry in competing with other global pharmaceutical jurisdictions?

The Chinese government has made significant efforts to elevate policies and procedures to be on par with the U.S. and Europe, aiming to assist the industry in competing globally. For instance, the introduction of tacit Investigational New Drug (IND) approval, which now occurs in 60 days compared to the previous explicit approval process that took up to two years, has significantly improved the speed of clinical trials in China. This change has encouraged international companies to conduct trials simultaneously in China and other countries, reducing the time lag for drug approvals in China. The alignment of approval times with international standards has benefited the Chinese population by providing access to advanced drugs more quickly, allowed multinational players to bring products to market faster, enabled CROs to run clinical trials to international standards in China, and facilitated local domestic companies in getting their drugs approved more quickly for Western markets.

What have you observed as some of the most impactful measures put in place by the government to encourage industry consolidation?

One of the impactful measures implemented by the government to encourage industry consolidation was the requirement for companies submitting drugs for approval to conduct a self-review of their data. If the data was found to be inadequate, companies had to either withdraw their application or face a three-year penalty imposed by the China Food and Drug Administration (CFDA) that prevented them from submitting another application. This policy led to the withdrawal of 60-80% of trials, and manufacturing standards were also raised during this period. As a result, many companies closed down or were acquired by other Chinese companies, leading to a higher quality environment for the industry in China.

To what extent do you believe Shanghai has emerged as a defined pharmaceutical ecosystem in China?

Shanghai has indeed emerged as a defined pharmaceutical ecosystem in China. Several life sciences and industrial parks, such as Zhangjiang Hi-Tech Park, have played a significant role in supporting the development of the ecosystem. While in the U.S., clusters typically develop organically around universities, large pharma companies, and spin-outs, Zhangjiang Hi-Tech Park in Shanghai was created through a concerted effort involving substantial investments in money, people, and property. Over 600 life sciences companies are now located in Zhangjiang, and the park has tripled in size from 25 square kilometers to 75 square kilometers, with ongoing expansion. This kind of government-led development has contributed to the emergence of Shanghai as a defined pharmaceutical ecosystem in China.

What do you perceive as the most critical issues that need to be addressed in order for China to recognize its full potential as a leader in the global pharmaceutical market, and what role will ChinaBio play in this future?

The primary issue that needs to be addressed for China to recognize its full potential as a leader in the global pharmaceutical market is the need for better understanding and awareness among Western companies. While China has significant capabilities, there are still concerns and misconceptions among some Western companies, particularly regarding intellectual property (IP) protection. However, many big pharma players are actively developing IP in China, indicating that IP protection is not as significant an issue as perceived. We believe it is essential for companies to come to China, understand the progress the country has made, and become more comfortable with the business environment. Additionally, it is crucial for companies to have guidance and sufficient resources when entering the Chinese market, as there are unique challenges and cultural differences. ChinaBio aims to serve as a bridge, providing guidance and support to companies navigating the Chinese market, helping them overcome hurdles, and facilitating their successful entry and growth in China.