The world of China biopharma is very different from its western counterparts, and its high rate of change makes it a moving target. That was the common theme that ran through four presentations at yesterday’s ChinaBio® exeecutive Workshop, “Leveraging China to Build a Global Biotech.” As Masood Tayebi, Executive Director and Co-founder of BioDuro said, “It’s amazing how fast things are moving.”

The event, organized by ChinaBio® LLC and hosted by Wilson Sonsini Goodrich & Rosati at their San Diego offices, featured four speakers, each of whom imparted some of their expertise on the current biopharma scene in China.

Structuring A Global Life Science Company -- Yung-Hui Lee, Attorney, Wilson Sonsini, Goodrich & Rosati

Dr. Lee pointed out that corporate law is very different in China, which allows two types of corporations: Domestic and Foreign. Unfortunately, there are advantages to each: a domestic corporation is more likely to garner subsidies and attractive taxation rates. A wholly foreign-owned enterprise (WFOE) offers greater ease of returning capital to foreign investors and is, therefore, a more likely target for U.S. investment M&A activity.

The problem is that many times investors want the best of both worlds. The solution is a domestic corporation with contractual obligations to a foreign entity – including money transfers. All such obligations must be stipulated by contract at the outset, or the opportunity to implement them is lost.


Building a Global Patent Portfolio -- Jeffrey W. Guise, Partner, Wilson Sonsini Goodrich & Rosati

Dr. Guise discussed strategies for building a global patent portfolio. The goal is to protect a company’s IP around the world, because the patent portfolio builds value in the company. That is an expensive process, and unfortunately, it takes place before a company has marketable products, which is also the time when companies seek to conserve capital.

Because there are so many countries in which a company must secure a patent – emerging markets such as Brazil are important to big pharma, for example,– costs mount. Guise discussed innovative ways to use timelines most effectively, serving the dual goals of protecting the IP and preserving as much capital for as long as possible.


Reducing Drug Development Costs -- Masood Tayebi, Executive Chairman and Co-founder of BioDuro

BioDuro, a CRO headquartered in San Diego but with its lab operations in Beijing, has grown quickly from its start four years ago to a company with 650 employees. Dr Tayebi explained his formula for success: “You need a critical mass of A+ caliber people.” Because of the need for top-notch scientists, BioDuro established itself in Beijing, which is home to the world’s two universities that produce the most PhDs in science every year: Tsinghua University and Peking University.

Dr. Tayebi also broke down the growth in China’s CRO industry into distinct phases:

• 2000-2004 – most of the work was low-cost outsourcing; the industry provided largely crank-turning commodity services;
• 2004-2007 – higher quality work, more protein drugs, DMPK, ADMET, basic pharmacology; influenced in part by growing numbers of returnees;
• Since 2007 – collaboration grows between client and CRO as risk sharing increases to modest levels; CROs contribute their innovative skills; and
• Future – CROs providing scientific breakthroughs for their clients.

In BioDuro’s early years, pharma companies were most interested in fee-for-services arrangements. But as the services provided by BioDuro become more respected, the company entered more collaborative risk sharing agreements. Big pharma, which is becoming increasingly dependent on outsourcing, also is growing comfortable with an outside organization that can provide leadership in drug discovery.


The State of China Biotech & Attracting Investment Capital -- Greg B. Scott, CEO of ChinaBio® Accelerator

Greg B. Scott, CEO of ChinaBio® Accelerator and Editor of ChinaBio® Today, discussed the low cost/high quality world of China biopharma. He also hit on the theme of change. That change is caused by many factors, but one major catalyst has been the more than 40,000 sea turtles who have brought their western experience back to China.

Using original research into China patent filings, Scott showed China’s science research is indeed innovative. After screening 120,000 filed patents; ChinaBio’s researchers found that over 2,000 patents are new molecular entities or new targets.

Furthermore, Scott pointed out the government stimulus is driving research at a critical time when venture capital has become difficult to find. The Mega New Drug Development Program will provide as much as $12 billion in funding over the next five years – all of it for drug development. In addition, provincial and local authorities have grants to give, and China’s life science parks will also help support young enterprises. Not the least important, big pharma will fund promising early stage research in return for a first-look at the products that develop. As recently as even two years ago, big pharma wasn’t interested in any molecule until it was in late-stage testing.

The cluster effect is also operating in China. While American biopharma clusters have taken years to develop, China’s biopharma parks have been built and sometimes filled up within just 10 years. Scott cited Zhangjiang Hi-Tech Park in Shanghai as the #1 life science park in China. It began only about seven years ago, and is now considered full, serving as home for many of the big pharma’s China R&D and business development operations, as well as over 400 early and mid-stage biopharma companies.

Scott also mentioned that BioBay in Suzhou Industrial Park was the fastest growing and one of the best managed life science parks in China. BioBay has attracted over 130 companies in just over two years since its opening in June 2007.

VC investment may be coming out of its slump; IPOs have begun appearing after a nine month shutdown; M&A slowed in the first half of 2009 (though that may be a short-lived phenomenon); and partnerships are growing quickly, up 55% from the first half of 2008.

While Scott declined to directly predict the future, he stated that based on anecdotal data from venture capitalists and others involved in the industry, China could see a pickup in investing late this year or early next year. This should bode well for an industry poised to become a significant player in the world market.

Scott will present this and other data at the upcoming ChinaBio® Day conference in San Francisco in September 15, 2009. (See www.ebdgroup.com/cbd for more information.)

Disclosure: none.