Author Archives: Chloe Liu

BIO 2012: Development cost comparison, China vs. US

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I attended BIO this year, and while there I felt responsible for China as a Trade Secrets contributor, so I settled in at “The China Day” – a day-long program organized around China, and was happy to take down some interesting numbers from the morning session.

Two domestic Chinese biotech companies shared their development stories. Beijing Continent Pharmaceuticals and Beta pharmaceuticals have a lot in common – both started 10 years ago from discovery research, both developed pipeline in specific therapeutic areas, and both got their first innovative drug approved by Chinese SFDA last year. There are not many Chinese biotech companies who had gone through the drug development and approval process, so their perspective offered some valuable insights.

According to Ying Luo, chairman of Beijing Continent pharmaceuticals, his company’s development experience was that China costs about 1/3 to 1/2 less than the US at the discovery stage, with the pre-IND cost in China being between US$600,000 to US$1 million.

The cost of clinical trials between US and China were estimated as following:

China (million, USD) U.S. (million, USD)
Phase I 0.3 – 0.8 3-5
Phase II 2-3 20-50
Phase III 3-7 60-300

 

Mr. Luo pointed out that the cost saving in China seemed not significant at the early stage but obvious at the clinical trial stage. This seems especially true at phase III, where the cost could be 10- to 20-fold less than that is in the United States. (Continent pharmaceuticals has its own in-house clinical development team.)

Beta pharmaceuticals started 10 years ago by screening for  EGFR- Tyrosine kinase inhibitors based on Gefitinib (Iressa) and Tarceva’s molecular structure. In early 2000, Beta discovered Icotinib. Mr. Xinxiang  Wang,  CEO of Beta pharma, said that they were able to develop Icotinib with a relatively small team, by efficiently using contract research organizations. The trial was double-blinded and multicenter, comparing Icotinib and Gefitinib in advanced non-small cell lung cancer. It involved 500+ patients, and, thanks to the large number of hospitals involved, the total recruitment time was only 11 months.  He said that they spent about 60 million RMB (US$7+ million) in Icotinib’s phase III trial.

This number is low – their full China clinical development program could be less than $11 million. Globally, 10 years and $1 billion has been the price tag of a new molecular entity, though people say it is getting longer and more expensive.

I caught up to Mr. Luo in the hall way and asked about this large difference in cost.

Luo was friendly and stressed that trials are different by drug, size, protocol and patient number, so one cannot generalize the cost. In addition, his numbers are not from a comprehensive poll, but individual experiences of his company and his peers. “But innovative biotech companies are rare in China, maybe not more than a dozen,” he said.

Global pharmas in China usually use global CROs, and the statistics I quoted before may come mostly from global multicenter trials. In which case, part of the cost reduction by Chinese companies might come because “global CROs are a lot more expensive than local CROs… global multicenter trials are a lot more expensive than local trials… “ Luo said.

Another contributing factor to the cost difference in the clinical trial may pertain to the number of patients tested, Luo pointed out. Global pharmas usually conduct several phase III trials globally on one drug candidate, each ranging from a few hundred to a couple thousand patients. In China, there is a requirement on the patient number for phase III trials, which is to have statistical significance and with minimum 300 patients on the test arm.

Beta pharma’s 10 years development seems to have created a blockbuster in China. The product was launched in August 2011. Sales reached RMB 100 million in February 2012, and is projected to reach one billion RMB by 2016. Mr. Wang said Beta is preparing to file FDA approval in the United States.

Chloe Liu

Demystifying China: Understanding the Chinese IND approval process

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Last year, several inquiries to us at Modular R&D, where I am a managing partner, were from companies new to China, on the subject of filing clinical trial applications. We hear comments such as “It’s taking too long,” “I cannot give out this information,” and “Why do I need to do an expensive long-tox study for a phase II?”  These are usually expressed in great frustration. So we did a workshop recently at the ChinaTrials conference, and worked with experts in regulatory affairs and preclinical studies from US, Europe and China, to look at the Chinese IND process in detail, especially how it compares to the US investigational new drug (IND) application and EU Clinical Trial Application (CTA).

In order to conduct clinical trials in China, one needs to obtain approval from the State Food and Drug Administration (SFDA). The process for doing this is called  药物临床试验申请, and is translated either as Clinical Trial Application (CTA) or Chinese IND (CIND).

The Chinese IND is functionally similar to the IND in the U.S. and the CTA in EU. The application process is like any other:  You fill out an application form, supply required materials, submit them to the relevant agency, then wait for approval, or lack of disapproval in the case of the US IND.

The required materials are similar across the regions, with minor differences.  The materials supporting clinical trial conduct are organized into four parts: Summary, CMC (Chemistry, Manufacturing, and Controls) data, pharmacology and toxicology data, and clinical trial information. Each region has its guidelines on content and format of the application materials, but the Common Technical Document (CTD) format is accepted worldwide.

Then there are the differences.

One is that the review and approval of a Chinese IND application takes a lot longer. A regular new drug application takes at least seven months, and could sometimes go to a year. This compares to the 30 day review time by the FDA and 60 day review time for the EMEA.

The reason given for the long timeline is usually the lack of personnel in the Chinese Center for Drug Evaluation (CDE), the agency under the SFDA responsible for the technical review of the application.  There are around 120 reviewers in the CDE to review over six thousand applications per year. The State Council sets employment quotas at the SFDA, so hiring more people is not as simple as a corporation adding head count. The CDE went through a reform early last year, to increase the efficiency of the approval process. However, there are parts of the timeline that are not under the control of the CDE, and the published official review time is still the same as before the reform.

Another issue is that the China IND application has high CMC requirements. This is shown in two aspects. One is that sample testing is required for several types of drugs, including imported drugs being submitted for market registration. For local drug IND, not only does the drug need to be tested, the manufacturing facilities are also inspected at the time of IND submission. The other aspect, which is more challenging for international companies, is that the China IND requires extremely detailed manufacturing protocols that many drug development companies may consider sensitive or even trade secrets.

The Chinese drug approval system was developed in the context of a large generics manufacturing industry. At the beginning the agency was faced with ensuring the production quality of thousands of small manufacturing facilities, instead of the drug safety and efficacy concerns of innovative new drugs. The regulations have been improved upon four times in the past two decades, yet one still find vestiges of this generics background. The high CMC requirements are one of these.

In a way, the long timeline issue is one of the easier to deal with, since it is predictable – you should simply plan ahead if you want to integrate China into your global development plan. In working with high CMC requirements, it’s necessary to decide the company’s comfort level in terms of sharing protocols and know-how. If what is asked for goes beyond that threshold, then China plans may need to be put on hold.

Then there are sentiments such as, “Our IND is approved and we have already started clinical trials in the States, why is SFDA still asking us to do…” which are based on generalized assumptions that the SFDA will operate like the more familiar FDA or EMEA. The Chinese regulatory system adopted many parts of US and EU system, but have adaptations and adjustments based on China’s preexisting conditions. Understanding and working with these differences is a good way to avoid frustration.

We learn to drive on the left in Britain and Japan, we learn to use inches and yards in America, and when we go to Rome, we do what Romans do. The globalization of drug development sometimes requires dexterity of mind, to understand how things come to be the way they are, and when in China, do what SFDA asks you to do.

Chloe Liu

Demystifying China: Funding sources for startups

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During lunch the other day, Walter Lau and I tackled a question raised by a Trade Secrets reader: “How can a small biotech raise funding in China, after having biological proof of concept?” Walter is a managing partner of Cenova Ventures, one of the few healthcare-focused VC funds in China.

The question really needs to be answered in two parts: one for the Chinese biotech companies, the other for international biotech companies hoping to get funding in China.

For typical Chinese biotech companies, the first and main source is most often the government. The funding comes from national as well as local levels, and goes not only for research, but also to commercialize the research from the labs. The national funding comes through a variety of ministries via different programs. Two of the biggest biotech funding sources are the Ministry of Science and Technology and the Natural Science Foundation. Some of the highest profile programs, such as the 863 program, the 973 program and the Torch Initiative, are under the Ministry of Science and Technology.

Local governments usually offer support through industry parks. Science and technology parks in large cities give incentives to scientists to start companies in their city, and offer lab space, startup funds, tax rebates, and administrative support in return. It is said that local government spending on biotech R&D is about 65% that of central government funding.

For international biotech startups hoping to get funding in China, the options, unfortunately, are limited. Government programs mostly do not fund foreign companies. Local industry parks do offer incentives, but hardly in meaningful startup funds. The typical VC funding path familiar to the US biotech startup is almost nonexistent here, despite the fact that there are many VCs and a lot of money in China.

“Few of the VC funds in China are focused on life science and healthcare,” Walter noted. “And the ones that are in life sciences tend to invest in areas of faster return, such as healthcare services, medical devices and diagnostics, and in companies in the growth and pre-IPO stages (For more on this topic, click here).

While “early ” in the US may mean biological proof of concept straight from the lab, “early” in China means just beginning to have revenue. A company with revenue of tens of millions of renminbi and a profit of several millions of renminbi can still be considered an early stage company. “So ‘early’ in China translates to early growth-stage in America,” Walter pointed out.

Another possible funding option is domestic angel investors. “Coal boss and real estate” as people like to refer to them collectively, are individual investors who made their wealth in more traditional ventures, and look for new investment frontiers. Biotechnology has at times been deemed a trendy investment, but when it becomes clear that it does not have a six-month investment time frame, enthusiasm wanes.

So I pointed out that startups outside China don’t qualify for government funding, are considered too early for VC money, and that private money is quite elusive. I asked, “Have we concluded that there is not a lot of hope?”

“There are certainly viable business models for drug development startups,’’ Walter replied, “There are money and resources in China, but one has to be creative.”

We talked about Lead Therapeutics as an example. It was a preclinical-stage drug development company. The company’s business model was to generate improved leads on clinically validated targets, and take them through to pre-IND candidates for partnership, licensing or acquisition. To enable this model, all the discovery and preclinical studies were conducted in their China lab for the cost advantage. Lead Therapeutics was started April 2007 with initial US and China VC funding, discovered a promising PARP-inhibitor November 2009, and was acquired by BioMarin February 2010.

So another way of financing is by way of saving. It is said that one can do three preclinical programs in China for the cost of one in the US. That figure is roughly 2:1 on the clinical side – this is the same as raising two to three times as much money.

As the Chinese put it: when money is tight, spend a penny twice.

Chloe Liu

Demystifying China: Start up

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People read a lot about China these days. There is the booming economy, maintaining over 8% GDP growth in the midst of a slow global recovery. The Chinese pharmaceutical market is projected to climb into the world’s top three in 2011. The healthcare reform plan is supposed to inject US$128 billion into the healthcare system between 2009 and 2011, and has already helped double pharmaceutical sales one and a half years into the plan. We also hear trendy phrases such as the globalization of drug development, the new paradigm of drug development, FIPnet (Fully Integrated Pharmaceutical Network), superpharma, virtual biotech…and they all seem to be related to China one way or another.

But for many people just starting a company, China might seem at most a remote possibility. Surely it is fine for large global pharma companies to enjoy double digit sales in China. Surely there are good reasons that all the top ten pharmas have opened R&D

centers in China.

But wouldn’t you first need some product to sell, a few million dollars to invest and a sizable on-the-ground team? Wouldn’t results in the lab and in clinic, an M&A deal or another VC investment be more concrete and relevant than learning how to start a biotech company in China?

It leads to this question: How could a startup or an entrepreneur take advantage of the world of resources in China?

What is offered to large pharma in China is also available to small biotech and device companies (click here for more on opportunities in China). The factors making it difficult for a smaller player a decade ago – the requirements of a large investment in time, money, government relations and other human resources – is hardly there. Through two decades of rapid adaptation and adjustment, the Chinese drug development system has largely come into line with international standards, from the enabling infrastructure of regulatory approval process and intellectual property protection, to the quality of service providers and general operational excellence. It is getting easier and easier for little companies to take advantage of what China has to offer.

How the international biotech community uses these resources may have to be different from how large pharma uses them. Indeed, as small biotechs enter China, each seems to be taking on a different strategy and is slowly figuring out how to succeed in this new market.

For most of us, starting a biotech company is hard. In addition to being challenged with the long-term investment, low success rate, and risky nature of the new technology, we struggle with all the other things small business owners struggle with, such as limited resources and lack of experience in areas outside our field. We need all the resources we can find, and in this regard, China can be an additional resource, another tool in the tool chest. It is something you keep in mind when you need solutions, at times tactical, at time strategic. Figuring out when and how to use it is something that needs the creative and resourceful mind of an entrepreneur.

Chloe Liu