As part of the Fall Issue of DDW’s Market Report, Sy Chyi Yeoh, Director of Business Development at global regulatory service provider ELC Group, explains why the biotech sector in China is worth watching and offers advice for those keen to take advantage.
Pharmaceutical firms from China are increasingly interested in international markets, particularly drug developments in the biological field. Numerous changes in domestic market policy inside China, changing manufacturing practices and government support for businesses that invest in external markets, have encouraged Chinese pharmaceutical companies to review opportunities across Europe and the US. This has also been boosted by the country joining the ICH (International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use).
This is on top of a substantial and growing local market. China is now the world’s second-largest pharma market, behind only the US. According to estimates from GlobalData, its value is expected to reach $300.9 billion by 2025, growing at a compound annual rate (CAGR) of just over 12% . As the domestic market changes its emphasis from generic drugs to more novel, innovative therapies, it will be important for pharma companies to capitalise on the global opportunities for these more-targeted offerings.
For organisations keen to make the most of the potential, there are some practical considerations. For instance, should they establish proprietary operations in their target markets, buy local companies, or partner with sales representatives already in the region? How can local compliance be expedited in new markets, in particular with regard to the diverse provisions seen across the EU? If they decide to set up a base in Europe, where should that be now that the UK, which was once the favourite destination for Chinese pharma companies, has left the EU?
The pent-up interest in the market in China is tangible. The market is growing, with 48 new drugs approved by China’s regulator, the NMPA (National Medical Products Administration) in 2020, 20 of which were domestically produced. This indicates both substantial demand for new drugs for the Chinese domestic market and a surge in the development of new drugs.
Meanwhile, global pharma companies have their eyes on the sizeable Chinese market. Certain moves made by China, such as joining the ICH and the country’s adoption of a marketing authorisation system similar to that Europe, along with enhanced pharmacovigilance (PV), are reducing the time to market for drugs from abroad. China’s population can now gain access to drugs much closer to a product’s global launch, rather than later, and that prospect of quicker return on investment makes China an attractive market for overseas pharma companies.
Pharma companies must assess the best models with which to maximise their new market potential, while at the same time minimising their risk exposure.
One common approach for pharma companies expanding into new territory is to hire a global or local contract research organisation (CRO)/outsourced service provider. These can bridge a company’s gaps in regulatory knowledge, understanding of local market dynamics, and on-the-ground resources. CRO relationships are relatively seamless to set up and manage between China and the US, because in the past, scientists have often moved back and forth between the two countries. Having English as the dominant language in the US, plus a single authority in the shape of the FDA, helps to strengthen ties, not to mention the US’s favourable environment for biotech innovation.
Entering the EU post-Brexit
Since Brexit, however, Europe has been more of a challenge for ambitious Chinese pharma companies. The UK was once a natural base for firms looking to expand into Europe, due to its language and culture of pro-collaboration. But since Brexit, the UK no longer offers the same bridge to the Continent and strategies for European expansion have had to adapt. Germany and Spain are now the most popular bases for pharma companies from China. Germany for its transparent and comprehensible regulatory demands and Spain for its advantageous tax environment.
The EMA set out harmonised requirements for the EU member states but each market in Europe still interprets the rules in its own way and sets its own priorities. That means overseas companies are faced with a diverse set of parameters that they have to navigate, quite apart from multiple languages and cultures, both within the EU bloc of 27 nations and among the other European countries that are outside the bloc, such as the UK.
Chinese companies entering European markets for the first time need to find the best ways to manage trials and registrations across the different nations and here, CRO support can prove crucial. The EU’s quality and safety standards are the highest in the world, so this is an important market for firms to get right from a pharmacovigilance and quality compliance perspective. If a company can develop systems and processes that meet European standards, it is more likely to obtain accelerated compliance in other markets.
Adaptation and relocation
Companies must understand the relative market opportunities for products and perform independent local due diligence. When Chinese companies enter external markets such as Europe, this is not only a chance to blaze a trail with innovative drugs or vaccines: Europe is also a potential market for therapies such as oncology and immunology plus affordable generics and active pharmaceutical ingredients (APIs). (China now accounts for around 40% of worldwide APIs.) A company may have as its goal being able to apply or adapt an existing product for EU use, and might choose to relocate its manufacturing operations to the EU or form a local sales partnership with an established EU brand.
Similarly, European pharma companies can now look to China and its more-familiar authorisation processes as an additional market for their own established products – particularly for those that re considered high-value drugs in the Chinese market. To make the most of the opportunity, European companies need to understand the potential of the market in China, how regulations are evolving in the jurisdiction, and the different organisational structures/criteria on which local decision-making is based.
Collaborating to build brand profile
As ambitions for biotech and innovative drug developments grow across the globe, collaboration is increasingly popular. It helps companies build brand profiles, gain trust in the local market and accelerate market access.
The equation works both ways, with multinational corporations such as Pfizer having established joint ventures with Chinese companies. Meanwhile, Chinese pharma companies are acquiring European SMEs to gain a foothold in the European market. Chinese pharma companies are also investing in European biotechs to stay ahead of the competition back home.
Finding the right partners
Intercontinental activity is intensifying but finding the right independent help is not straightforward. Global CROs, for example, may lack local insight but still charge substantial fees – particularly to facilitate collaboration opportunities.
Also, few large service organisations have specialist capabilities in China, although they may be well versed in other territories. Issues include language support and understanding the business culture but also comprehending the subtleties that make a Sino-European relationship successful, such as the prevalence of the WeChat platform in China, where it is a favoured communication channel and for discussing and clarifying project initiation and delivery.
Few pharma companies can afford to pay steep fees for unsuitably generic help. It’s crucial to have access to reliable intelligence and insight, and regional and in-country experience to optimise opportunities and contain risk.
Patience is a virtue
At a time of increased cross-border collaboration, it will be necessary to have access to a global perspective and deep, specific knowledge of both Chinese pharma and external markets to extract maximum value from emerging opportunities.
Patience can be a virtue though and speed is not always the goal. If pharma companies are careful to build relationships and pay due diligence to the opportunities, they should be able to cover every eventuality and extract the maximum benefit from new ventures.
Volume 22, Issue 4 – Fall 2021
About the author
Sy Chyi Yeoh is Director of Business Development at global regulatory service provider ELC Group, part of global life science consultancy PLG (Product Life Group).
- “4+7” Drug procurement reform in China, China National Health Development Research Center, March/July 2019: https://www.cgdev.org/sites/default/files/CGD-procurement-background-china-case.pdf
- Major Changes in the Newly Revised Drug Administration Law, China Law Insight, August 2019: https://www.chinalawinsight.com/2019/08/articles/healthcare/major-changes-in-the-newly-revised-drug-administration-law/
- Latest patent reforms to further bolster innovative pharma research in China, GlobalData, June 2021: https://www.globaldata.com/latest-patent-reforms-bolster-innovative-pharma-research-china-says-globaldata/
- Pfizer and LianBio Announce Strategic Collaboration to Expand Development of Novel Therapeutics in Greater China, Business Wire, November 2020: https://www.businesswire.com/news/home/20201119005290/en/Pfizer-and-LianBio-Announce-Strategic-Collaboration-to-Expand-Development-of-Novel-Therapeutics-in-Greater-China
- Chinese pharma firm to acquire Swiss production facility (Bristol Myers Squibb selling Swiss medicine production facilities to Chinese company WuXi STA), February 2021: https://www.swissinfo.ch/eng/chinese-pharma-firm-to-acquire-swiss-production-facility/46338654
- Vivoryon Therapeutics and Simcere Announce Strategic Regional Licensing Partnership to Develop and Commercialize N3pE Amyloid-targeting Medicines to Treat Alzheimer’s Disease in Greater China, Vivoryon Therapeutics, June 2021: https://www.vivoryon.com/vivoryon-therapeutics-and-simcere-announce-strategic-regional-licensing-partnership-to-develop-and-commercialize-n3pe-amyloid-targeting-medicines-to-treat-alzheimers-disease-in-greater-china/