Life Sciences Biotechnology [China - East China] Sector Report Life Sciences: Biotechnology China (East China) Produced by: Paul Wills Consul Trade & Investment Jing Li Trade & Investment Officer British Consulate-General Shanghai Last revised February 2009 Whereas every effort has been made to ensure that the information given in this document is accurate, neither UK Trade & Investment nor its parent Departments (the Department for Business, Enterprise & Regulatory Reform, and the Foreign & Commonwealth Office), accept liability for any errors, omissions or misleading statements, and no warranty is given or responsibility accepted as to the standing of any individual, firm, company or other organisation mentioned. Published February 2009 by UK Trade & Investment. Crown Copyright www.uktradeinvest.gov.uk
Table of Contents OVERVIEW 3 CHARACTERISTICS OF MARKET 3 OPPORTUNITIES 7 KEY METHODS OF DOING BUSINESS 8 EVENTS 8 CONTACT LISTS 9 www.uktradeinvest.gov.uk Page 2 of 9
OVERVIEW See Chinawide Biotechnology report for overview of the sector. The Consular area of the British Consulate-General Shanghai covers the Shanghai Municipality, and Zhejiang, Jiangsu and Anhui provinces in East China. The Yangtze Delta Region (YRD) comprises Shanghai, South Jiangsu and North Zhejiang with a cluster of 16 medium-large cities. Along with the Bohai Rim (Beijing/Tianjin); and Pearl River Delta (the region including Guangzhou and Shenzhen neighbouring Hong Kong) the YRD is one of the wealthiest economic hubs of China, accounting for around 1/3 of China s imports and exports. Snapshot The Chinese biotechnology market is split between local generic companies, who operate on tight margins; domestic Traditional Chinese Medicine (TCM) companies; and multinational biotechnology companies. Leading CROs have also been riding on the wave of multinational demand and venture capital interest. As well as hosting their regional HQs, a number of biotechnology multinationals are currently establishing major R&D centres in Shanghai. Main reasons for this are the global size and projected growth of the domestic pharmaceutical market, trying to speed market entry for new drugs to maximise return on patents through increased early stage research, availability of top talent, and the possibility of tailoring drugs to local needs. In the long term Shanghai may become a major centre for global R&D equivalent to UK and US; and the spill over of staff from multinational R&D centres may speed the creation of a domestic biotechnology market based on western biotechnology principles centred on Shanghai. Despite Beijing being the regulatory hub and having an equally talented domestic talent pool, multinationals have chosen to locate their R&D in Shanghai over Beijing. The key reason is probably the multinational environment of Shanghai being more attractive to returned overseas Chinese talent. This does not of course mean Shanghai-based multinational R&D centres will not be seeking high quality partners elsewhere in China. CHARACTERISTICS OF MARKET What is biotechnology in China? As the Chinawide biotechnology report mentions, the domestic definition of Traditional Chinese Medicine (TCM) is incredibly broad, ranging from western pharmaceuticals to massage. This means that information on the Chinese biotechnology market is often confusing and focus of domestic biotechnology-related events is often too broad to be relevant for an international audience. Reliable information on the Chinese market is generally hard to come by without first hand contact and biotechnology is not an exception. Domestic priorities are often different from those of the foreign multinationals, given government incentives to publish academic papers to achieve citations without analysis of their potential intellectual property value; and focus on subsidising development of TCM. Domestic companies generally focus on TCM and generic drugs. Their R&D capabilities are usually very limited. Although new start ups, including returned talent and university spin-offs, focus on early stage drug discovery with the aim of linking into the international supply chain, there aren t many high quality companies emerging yet, and most that are, are still small scale. www.uktradeinvest.gov.uk Page 3 of 9
The expectation is that the catalyst for change in the market will be the investment by multinationals in helping build a complex regulatory system that can oversee their own R&D and enable early stage research to be done in China to international standards. This will add to the impact multinationals have already had working with CROs such as NYSE-listed Wuxi Pharmatech and research institutes such as Shanghai Institute of Materia Medica. The Chinese government expects this change to spill over to domestic companies in the medium term, following the model of the domestic IT industry. Whilst this is possible, the timeline for radical domestic change probably won t begin to be clear for several years. Depending on the success in building a robust and transparent national and local regulatory environment, it could be as little as 5-10 years or far longer. A number of factors such as lack of access to non-government-backed venture capital for early stage companies could hold the domestic industry back longer. Whether Chinese government-backed venture capital has the expertise to succeed in allocating resources effectively is yet to be seen. Human Resource Issues Multinationals are generally seeking a mix of local talent with international mid to senior manager experience, local talent from top universities, foreign managers and foreign academics to set up their R&D centres. Finding staff with a mix of technical expertise, experience, and managerial skills for non-r&dbased multinationals is already a challenge in China, due to the sudden growth in demand since China opened up. Domestic managers with more than 10 years experience in a multinational environment are rare. Many companies operate with 15-40% staff turnover per annum unless they adopt successful global HR strategies to bring on their globally mobile talent. Recruiting experienced senior managers is a big headache for the Western-oriented biopharm industry. There is a major generation gap between young and flexible internet-age staff and traditional top-down mentality older staff over forty. The concentration of overseas biotechnology R&D centres being established in Shanghai companies means there is likely to be a very competitive environment with a focus on recruiting young biotechnology R&D talent from top Chinese universities. But inexperienced young staff are unlikely to be able to manage the balance between operating in China s complex regulatory environment and working for multinationals without significant investment in mentoring and coaching. Biotechnology R&D in China is therefore not a low cost HR option. East China regional overview As east China is a huge area, it is important to focus your resources. Due to the need to attract returned Chinese and overseas talent to support them, establishment of multinational R&D centres have chosen to locate in Shanghai. Chinese returnees have usually started in Shanghai but some have now expanded or migrated to Suzhou Biobay. This report therefore focuses on Shanghai and Suzhou. Worthy of note but not central to this report, Zhejiang province s Zhejiang University, located an hour and a half by train from Shanghai, ranks No.3 in China after Beijing s Beida (Beijing University) and Qinghua (Tsinghua) University. www.uktradeinvest.gov.uk Page 4 of 9
SHANGHAI Shanghai is split in two halves, with one centre Puxi on the west side of the river and a new centre, Pudong, on the east. Each of Shanghai s districts has populations larger than many global cities. Shanghai is one of the main domestic talent pools for the Chinese biotechnology industry, with two of China s top 6 universities, Jiaotong and Fudan, and a number of top institutes (see details below). Multinational pharmaceutical companies including AstraZeneca and GSK have their headquarters in Shanghai. Multinationals including the UK s AstraZeneca and GSK, are in the process of establishing their first major R&D investments in China in Shanghai information on these can be found from press releases on their websites. There are a large number of domestic and several international CROs based in Shanghai, the majority of which are located in Zhangjiang High Tech Park. The business models for their services offer vary widely. The larger and more established CROs such as Wuxi Pharmatech, work with the leading biotechnology multinationals and invest in world class equipment. To give an example of the speed of growth and change possible, Wuxi Pharmatech was established in December 2000, listed on NYSE in August 2007, and has a market capitalisation of around USD1,421m. As compared to 2006, total net revenues increased 93.3% to USD135.2 million, net income increased 283.0% to USD33.9 million and it acquired US-based AppTec Laboratory Services Inc for USD151m 1 However, companies seeking to work with domestic CROs should consider whether it is possible that there will be a shakeout, given the rate at which they are expanding, and sustainability of venture capital enthusiasm to fund new entrants. Companies should do thorough due diligence if large amounts will be at risk in working with CROs. R&D location choices in Shanghai: Puxi side Fenglin Biomedical Centre, Xuhui district, in the centre-west of the city, is the equivalent of Cambridge as a biotechnology hub, based on its central location and the strength of its universities, hospitals, and branches of Chinese Academy of Sciences (CAS) although its restrictions on available land are likely to mean it will not be the only hub within Shanghai. Other districts are competing for R&D investment, but less central. Shanghai Caohejing Hi-Tech Park www.caohejing.com/en Established in 1988, Caohejing Hi-Tech Park is a State-level Economic & Technological Development Zone covering an area of 14km 2 and comprises of high tech (IT, biopharm, new materials, aero and auto industries) and export processing bases, and has attracted more than 1200 companies, including 500 foreign invested companies of which over 40 are Fortune 500 companies. In 2006 IT accounted for RMB101bn, 82% of the park s total sales revenue. 1 sources:www.wuxipharmatech.com, www.ipohome.com/common/ipoprofile.asp?ticker=wx http://www.bizchina-update.com/content/view/456/2/ www.uktradeinvest.gov.uk Page 5 of 9
Pudong side Zhangjiang Biotech & Pharmaceutical Base Company Ltd www.zjbpb.com ZJBP is located in and part of Zhangjiang High Tech Park in the new east side of Shanghai, Pudong. ZJBP is supported by the Ministry of Science & Technology, Ministry of Health, Chinese Academy of Science, and Shanghai Municipal Government. Established in 1992, Zhangjiang Hi-Tech Park is a State-level High Tech Industrial Development Zone and comprises of several bases for, bioscience (including R&D investments from GSK, AstraZeneca, Novartis, etc), IT and science & technology entrepreneurship programmes, etc and has attracted 300 investment projects from international and domestic companies. It hosts Shanghai Synchrotron Radiation Facility (SSRF), the No.4 most powerful 3rd generation radiation device in the world. Zhangjiang Hi-Tech Park is a Shanghai Pudong district government-backed management company. All the multinational biopharm investment in R&D is currently located in ZJBP, including AstraZeneca, GSK, Novartis, Roche, Lilly, Pfizer, and GE. As the new ZJBP site is a shuttle bus away from the metro line which services the likes of major Nasdaq-listed domestic Chinese computer gaming company Shanda, in the older ICT part of the park, attracting and retaining top academic staff may be an issue to consider. It also hosts a number of state level R&D institutes and top universities:- Shanghai Institute of Materia Medica Chinese Academy of Sciences (CAS) www.simm.ac.cn, National Human Genome Centre, National Centre for Drug Screening, National New Drug Safety & Evaluation Research Centre (Shanghai), National Bio-Chip Engineering Centre (Shanghai); National Pharmaceutical Engineering Research Centre for TCM (Shanghai), National Engineering Research Centre for TCM, National Innovation Research Centre for TCM, Shanghai TCM University, and Fudan University Pharma School. Other key research institutes are: Shanghai Institute for Biological Science (SIBS) SIBS was established through structural reorganisation and institutional innovation of the 8 former CAS (Chinese Academy of Sciences) biological institutes, with 1810 employees. Address: No. 320 Yueyang Road, Shanghai, 200031 Tel: +86-21-54920126 Fax: +86-21-54920078 www.sibs.ac.cn Shanghai Institute of Pharmaceutical Industry (SIPI) Founded in 1957 with 2500 employees and 1 billion total capital, SIPI is one of the largest and most comprehensive research institutes in the Chinese pharmaceutical industry. Address: No. 1320 Beijing West Road, Shanghai, 200040 Tel: +86-21-62479808 Fax: +86-21-62890729 Email: zhucb@sipi.com.cn www.sipi.com.cn SUZHOU, JIANGSU PROVINCE Suzhou Biobay Suzhou is one of the richest second tier cities in east China. A new biomedicine and nanotechnology cluster, Suzhou Biobay has been formed in Suzhou Industrial Park (SIP), a www.uktradeinvest.gov.uk Page 6 of 9
state level development zone. SIP has long been a location for overseas manufacturing investment by multinationals. Suzhou BioBay is a municipal government-backed management company for a bio cluster, located half hour by train to the west of Shanghai, in Suzhou Industrial Park (SIP), a joint program between Singapore and China government. SIP has traditionally been a major location for FDI into China, for multinational manufacturing, including companies such as GSK and Smith & Nephew. Xi an Jiaotong-Liverpool University www.sipedi.cn is also in SIP. Suzhou BioBay has a dedicated 1,000,000m2 site on the edge of SIP. They have 50 management staff which will expand further in the near future. Biobay's management staff are unusual in that they come with corporate life science experience and fluent English. BioBay have attracted over 100 companies in 19 months since their establishment, mainly SMEs established by Chinese returnees from overseas who were formerly located in Zhangjiang High Tech Park's pharmaceutical biotech base in Shanghai, such as www.genepharma.com which focuses on RNAi; but also attracting international investment from Cold Spring Harbour Lab who have established their Asia conference centre in BioBay, and Charles River who are establishing a pre-clinical test facility there. Biobay help SMEs setting up there not only in terms of seeking venture capital funding and administration but also in terms of recruiting bio talent from top universities across China. BioBay is under the Suzhou Venture Group, an investment group who manages an over GBP1billion fund, from seed stage to expansion stage across different industries. The Biobay site also includes the newly established GBP40m Chinese Academy of Science (CAS) National Nano Technology Cluster. Address: Suite 101, A2 Building, 218 Xing Hu Road, Suzhou Industrial Park, China, 215125 Tel:86-512-62956666 Fax: 86-512-62956633 Email:info@biobay.com.cn www.biobay.com.cn/en/index.html OPPORTUNITIES - For UK biotechnology companies, partnering with Chinese biotech start-ups, universities and larger CROs on trials, development, commercialisation, talent, licensing in/out of R&D etc. - For UK suppliers of high tech instruments, market entry through distributors or Wholly Foreign Owned Enterprises (WFOEs) focusing on supplying multinational R&D centres, larger domestic companies, and larger CROs. - For UK CROs, working with multinationals and domestic biotech start-ups. UKTI publishes international business opportunities gathered by our network of British Embassies, High Commissions and Consulates worldwide. These opportunities appear in the Opportunities portlet on the relevant sector and country pages on the UKTI website. By setting up a profile you can be alerted by email when relevant new opportunities are published. New or updated alert profiles can be set in My Account on the website. www.uktradeinvest.gov.uk Page 7 of 9
KEY METHODS OF DOING BUSINESS See China pages for the China Business Guide and Chinawide Biotechnology report on www.uktradeinvest.gov.uk for overview of key methods of doing business. Many common market entry problems are avoidable through sound research and making use of existing sources of advice such as UKTI, China Britain Business Council and the British Chambers of Commerce in China. When considering doing business in China, it is essential to obtain professional advice. A useful contact list of lawyers and other relevant professional bodies as is available from the Embassy and Consulates. In order to make the most of opportunities, consider using UK Trade and Investment s heavily subsidised Overseas Market Introduction Service (OMIS). Available at different service levels, OMIS can be tailored to your individual needs, from research and meeting programmes to advice on market entry and in-market business development. We now offer a flexible call-off contract service to allow customers to pay in advance for UKTI staff time that can be drawn down across China by agreement as necessary. Ask one of our China offices for more information. Contact your local International Trade Advisor if you are interested in accessing this services, or for general advice in developing your export strategy. Other background information on doing business in China can be found on UKTI s website. Simply go to the China country page where you will find information on: Economic background and geography Customs & regulations Selling & communications Contacts & setting up Visiting and social hints and tips EVENTS March 2008 - UK-China Innovation in Biotechnology Chinese media visit to UK 16 June 2008 - UK-China Innovation in Biopharm seminar, Shanghai, sponsored by GSK R&D China, AstraZeneca Innovation Centre China, Marks & Clerk and Simmons & Simmons. September 2008 Analytica China biennial international event, Shanghai see www.analyticachina.com Association for Instrumentation, Control, Automation & Laboratory Technology (GAMBICA) www.gambica.org.uk will bring a delegation to this event. November 2008 UK-China Innovation in Biopharm reception for Secretary of State for Health the Rt Hon Alan Johnson in Shanghai www.uktradeinvest.gov.uk Page 8 of 9
CONTACT LISTS UKTI Shanghai & UK PARTNERS Paul Wills Consul, Trade & Investment British Consulate-General Shanghai Address: Suite 301, Shanghai Centre, 1376 Nanjing Xi Lu, Shanghai, 200040 Tel: +86 21 6279-8025 Fax: +86 21 6279-7388 Email: paul.wills@fco.gov.uk www.uk.cn/shanghai Jing Li Trade & Investment Officer British Consulate-General Shanghai Address: Suite 301, Shanghai Centre, 1376 Nanjing Xi Lu, Shanghai, 200040 Tel: +86 21 6279-7650, ext. 4824 Fax: +86 21 6279-7388 Email: jing.li@fco.gov.uk Life Sciences Sector Group - Biotechnology Mina Joshi Sector Manager Life Science Team UK Trade and Investment Tel: 44 1223 484 670 Fax: 44 1223 200 853 Email: mina.joshi@uktibiotech.org.uk China-Britain Business Council (CBBC) CBBC has east China regional offices in Shanghai, Nanjing and Hangzhou. CBBC is UKTI s partner in delivering OMIS services in China Website: www.cbbc.org.cn The British Chamber of Commerce, Shanghai Brit Cham in Shanghai has over a thousand members. Website: www.britcham.org UKTI s International Trade Advisers can provide you with essential and impartial advice on all aspects of international trade. Every UK region also has dedicated sector specialists who can provide advice tailored to your industry. You can trace your nearest advisor by entering your postcode into the Local Office Database on the homepage of our website. For new and inexperienced exporters, our Passport to Export process will take you through the mechanics of exporting. An International Trade Adviser will provide professional advice on a range of services, including financial subsidies, export documentation, contacts in overseas markets, overseas visits, translating marketing material, e-commerce, subsidised export training and market research. www.uktradeinvest.gov.uk Page 9 of 9