China biotech promise fights to keep foreign innovators

Bloomberg

As money rushes into China’s fledgling biotechnology sector, Eli Lilly & Co. and other foreign drugmakers are scaling back.
Eli Lilly, along with GlaxoSmithKline Plc, announced plans the past few months to cut research teams in China, after Novartis AG shuttered a biotech research unit there a year ago. “This closure comes after careful study and consideration, and is meant to provide better synergies and efficiencies within Lilly’s global R&D operations,” Indianapolis-based Eli Lilly said in an email.
The high-profile cutbacks, part of a broader restructuring that pharmaceutical companies are undertaking, contrast with the Chinese government’s push to speed the uptake of innovative drugs that’s spurred a rush of money into the industry.
Life-science venture capital and private equity funds are poised to invest almost $11 billion in China this year, more than double the $5 billion they injected in 2016, according to ChinaBio Consulting.
Novartis closed a biologics group of about 30 people in Shanghai and a larger team in Schlieren, Switzerland, last year. “The Shanghai biologics team was closed because there was a limited portfolio of biologics programmes at the site,” Novartis said.
Chinese consumers spent $116.7 billion on medicines in 2016 and the amount will probably increase by 5 to 8 percent a year to as much as $170 billion in 2021, according to QuintilesIMS. Prospects for basic medical science in China are less positive: the world’s most populous nation has contributed relatively little to the production of groundbreaking therapies. Among the top 12
countries contributing to global pharmaceutical research and development in 2015, China accounted for 4 percent, while the US contributed almost 50 percent, according to a report published last October by four industry groups. Of the new molecules discovered from 2007 to 2015, 2.5 percent came from China, compared with 56.3 percent from the US.
In the past, “big pharma” anticipated it could benefit from “large supplies of raw talent coming out of universities,” said John Wong, chairman of greater China for Boston Consulting Group.
Among the local R&D activity in China, “there is a little bit of innovative work, but this is also largely copycat. So, the promise of a large talent pool and lower-cost R&D has not really delivered.”

Fattening Pipelines
Large pharma companies are tending to rely on mergers and acquisitions—buying innovations from others, rather than starting from scratch—to have a constant supply of new products, he said. “Their pipelines are not very attractive. There are exceptions, but I think they have to be much more cost-conscious than they have in the past.” While drug discovery may have disappointed, pharma giants are doubling down on the development part of R&D in China.
In Pudong Zhangjiang Hi-Tech Park, “China’s Silicon Valley,” in suburban Shanghai, Glaxo is preparing for growth, the London-based company said in August when it announced it would narrow the range of global neuroscience research and development activities, including terminating some projects.
“In the next two years, our drug development team based in Pudong Zhangjiang Hi-Tech Park will continue to expand and actively push forward drug development work in China,” Glaxo said.
The plans come amid regulatory changes in China over the past two years, culminating in policies announced Oct. 8 to accelerate the approval of medicines and medical devices, and streamline the introduction of new treatments.
The prospect of faster drug approvals will encourage multinational companies to bring more of their innovations to China, Boston Consulting Group’s Wong said. Under new rules, data from overseas clinical trials can be submitted in applications to register new drugs in China.
China is eager to catch up with global biotech innovation. Only 19 new drugs first hit the market in China between 2006 and 2015, compared with 196 in the US, according to a report on drug innovation by local industry associations.