Nature Biotechnology | Trade Secrets

Monoclonals in China

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In late 2009 a Chinese-American friend asked me if I might consider working on a project in China, to which I responded enthusiastically “yes.” The business concept is to develop a contract manufacturing organization (CMO) in China to capitalize on an emerging China market, take advantage of the lower costs of manufacturing that China’s skilled labor force has to offer, and produce products in compliance with FDA and EMEA standards for international and/or domestic distribution. As my simplistic generalization, I thought that since China manufactures so many products for the West, why not pharmaceuticals? At that time I was naïve in thinking this was a novel concept, because Big Pharma was already in China doing this and had been for years. (As an aside: I recently saw a quote from the new FDA commissioner stating that 40% of all prescription drugs sold in the US are produced outside the US.)

The difference is that there are no therapeutic monoclonal antibodies produced in China for international distribution. This is my focus, and the big initial hurdle was getting the financing to do this, which as it turns out, my business partner had already been scouring the landscape to find money. He looked for incentives in Beijing, Shanghai, and Suzhou with some success, but then he came upon China Medical City.

China Medical City is in Taizhou, Jiangsu Province, and is an initiative from the Central Government to build the largest Medical Science technology park in China. I was told that ¥100,000,000,000 (~$15 billion) was earmarked for this project, which will contain all aspects of product development, from R&D to manufacturing to marketing and distribution, both domestically and abroad. It is 85 sq km, with its own municipal government, police and a provincial office for the SFDA to facilitate regulatory filings. I first visited China Medical City (CMC) in May 2010, where we discussed some of the business terms as well as site selection to determine if this was an appropriate environment to set up a CMO. Not only did it appear that it would work, but there was a terrific amount of enthusiasm on the part of the CMC leadership, since it fit into the overall strategic vision for what China Medical City was to become.

In June a contract was signed to establish a cooperative joint venture with the local government and commit sufficient funding to build and staff a 20,000 sq. meter cGMP manufacturing facility. We would provide the Western management team with the required experience, and the Chinese government would provide the funding and infrastructure support to get the company up and running. I moved to China in August 2010, and since then have been working with design firms to engineer the facility, and I’ve been pounding the pavement to find potential customers and strategic partners to participate in and ensure our success. By the way, I did not speak Chinese before moving, but am slowly learning the language as best as my aging brain will allow.

In subsequent posts I will be happy to answer any questions to elaborate on my personal and business experiences in China.

David Wilson

Comments

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    Andrew Marshall said:

    Some have remarked that in terms of business environment, China resembles the United States at the turn of the last century—-a Wild West like incredible energy and entrepreneurial spirit but also a very lax business environment and murky laws as to the legality of investments and enterprises in the eyes of state and city officials. Given that China Medical City has the imprimatur of the local government, I presume you’ve been somewhat insulated from these issues thus far?  How much of challenge are such issues?

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    David Wilson said:

     Hello Andrew,

     

    The environment in China does have some similarity to the US biotech environment 20 years ago.  Anything was possible and investors were willing to take risks on a good idea to establish proof of concept.  The business environment is a bit dicey at times and one has to be very cautious.  I have developed a very skeptical attitude at this point and when considering collaborations or alliance I reserve the right to conduct due diligence of the raw data and talk to the advisors and academics associated with the technology.  Everything must be proscribed my contract, because that is the only thing that binds commitments of the parties, regardless of how many dinners or social events have transpired.  In the US I gave people the benefit of the doubt until proven otherwise.  In China I have learned to doubt and give the benefit once proven credible.  I don’t think this is unique to China or the US in the world with the mindsets of our two countries.  In China, City and State officials want technology-based enterprises in their jurisdiction that help them compete with other politicians doing the same thing in their towns and provinces.  Their motivation is to get promoted and raise their rank with the government.  As a consequence there is some showmanship, but there is also sophistication, strategy and the desire to keep squeaky clean when it comes to financial matters.  I’m impressed with how hard government officials work in China Medical City.  If our government worked half as hard in the US to support businesses, we wouldn’t be left in the dust by developing countries.  With respect to murky laws, I have found that there is strict adherence to the law, but if expediency is needed sometimes the bureaucracy and requirements can be backfilled if they can’t keep up.

    The experience I have found interesting, and frustrating at times, is the inconsistency of cash flow to support investments.  In other words investment commitments are made and funding gets the enterprise off the ground, but the stability of that funding depends on the priorites of the government at the time, not the cash flow requirements of the individual enterprise.  If others would like me to elaborate, I will in a later post.  Other issues that might be interesting to discuss are labor costs, quality of the workforce, obligations of an employer, worker’s rights and government involement in decision making when they are an investor in your enterprise, English as a second language, etc.  

    Hope this sheds some additional light on my expereience in starting a biotech enterprise in China and that others might learn from it, if they are thinking about starting something.  

    David

    PS  The funding for China Medical City was understated by 1000 times in that the total government commitment is for 100 billion RMB