Did you know?

ChinaBio® Group is a consulting and advisory firm helping life science companies and investors achieve success in China. ChinaBio works with U.S., European and APAC companies and investors seeking partnerships, acquisitions, novel technologies and funding in China.  

Learn more >>

Free Newsletter

Have the latest stories on China's life science industry delivered to your inbox daily or weekly - free!

  Email address:
   

A Big Pharma Perspective on Leveraging China’s Resources

publication date: Sep 17, 2009
 | 
author/source: Richard Daverman, PhD

ChinaBio® Day was held on Tuesday, September 15 in San Francisco in conjunction with BioPharma America™. Participants discussed the current China biopharma landscape and their experience with cross-border partnering. The Keynote Panel was organized around the theme of Cross-Border Partnerships: Leveraging China’s Resources from a Big Pharma Perspective. Each of the panelists was a distinguished representative of big pharma with line responsibility for partnering in China. The discussion was wide-ranging, including pertinent issues such as deal structure, the existence of innovation in China, IP protection in China, and cultural differences between China and the west. The following is a summary of the discussion.


Panel Moderator:
Greg B. Scott, President and Founder, ChinaBio® LLC

Panel Members:
Tao Fu, MBA, VP Business Development, Johnson & Johnson Pharmaceuticals Group
Michael Heerde, PhD, MBA, Director, Strategy and Business Development, Bayer HealthCare China
James M. Schaeffer, PhD, Executive Director, Worldwide Licensing and External Research, West Coast, Merck Research Laboratories
Steve Yang, PhD, VP and Head of R&D Asia, Pfizer Global Research


Scott (ChinaBio®): There are many kinds of deals available. What kind are you looking for in China? Hutchison MediPharma seems to be doing the most innovative scientific work, so perhaps that is the best place to begin, and J&J announced a major deal with Hutchison this year.

Fu (J&J): In the last 10 to 15 years, there has been a growing amount of cooperation between big pharma and biotech. For the most part, biotechs were paid on a FTE basis. However, the incentives in that kind of deal are not aligned with each party’s interest because biotech always gets paid, even if the project is not successful. Big pharma was concerned about costs, while the smaller company was interested in keeping the project going. That caused inherent problems in R&D decision making as the structure does not encourage risk taking.

Our deal with Hutchison is set up to encourage innovation. It has a milestone-based, risk sharing structure. Hutchison carries out all activities. Their payment is based entirely on milestones; there is no FTE component. It is an interesting model, though it’s still in infancy. We want to see how it works.

[Earlier this year, J&J optioned work that Hutchison had done on an inflammation target. See article. ]

Scott (ChinaBio®): Are all of Hutchison’s deals set up like yours?

Fu (J&J): They are all similar, though there are nuances in each.

Schaeffer (Merck): Risk sharing is what Merck is trying to do as well. It seems to be good for all sides. The problem is that, while the first milestone is easy to get to, the second milestone is more difficult and takes longer to accomplish. Is there some way to get around this problem?

Fu (J&J): That’s a difficult problem. We want to work on this as well.

Scott (ChinaBio®): How about Pfizer, a latecomer to the market?

Yang (Pfizer): Pfizer announced two deals this year: one each with Peking University and Fudan University. We were the second big pharma to establish an R&D center in China, and we have grown to the point where we have 340 employees in the center. Unfortunately, scientists don’t learn how to do drug discovery in school (they learn how to write papers), and we have set up a program with Fudan University to teach these skills (see article). We also set up a platform deal on a basic science level with Shanghai Institutes for Biological Sciences (see article). Altogether, we have spent $150 million in R&D in China over the last 4 years in a combination of outsourcing and partnerships and the company’s own R&D.

Schaeffer (Merck): Merck does not have an R&D center in China. We have signed some deals, especially with CROs including WuXi PharmaTech, ChemPartners and BioDuro. For us, flexibility is important. We are doing clinical trials with the Fuwai hospitals in Beijing, and we are constantly looking for small molecules.

Scott (ChinaBio®): How much novel molecule activity is going on in China?

Heerde (Bayer): You won’t find a lot. There aren’t a lot of companies involved. The government is laying the foundation for more activity [through their various grant programs]. As the interest in innovation grows, individual companies are becoming interested in IP.

Scott (ChinaBio®): That’s a great point about IP. Tao Fu, do you have questions about the strength of China IP protection?

Fu (J&J): With respect to IP, China does not have a global view, though that is changing. They are concerned mainly with protection inside China. There is still not much real innovation in China, as Michael said. These things will take time, but the change has started. China has an “under appreciation” for how important IP is because they don’t have the experience with novel products.

Scott (ChinaBio®): IP is also a money issue because it is expensive and companies don’t have money.

Heerde (Bayer): But the major point is that there is now a rule of law in China about IP. That is a very positive development.

Schaeffer (Merck): We have looked at some very early-stage, basic science from universities. With this, if there is IP, it is only in China.

Yang (Pfizer): At Pfizer, we have a range of risk management strategies for IP as a way of mitigating IP risk.

Scott (ChinaBio®): When I was starting out in China, I read the books about how to do business there, which emphasized the cultural differences with the West. They were filled with advice, not all of which proved to be true. One conspicuous example was the warning that any deal would involve a late night with much drinking, and one should be prepared to drink oneself under the table. That never happened to me. Despite the bad advice, are there actual cultural differences about how to do business in China?

Fu (J&J): In China, people try to “sell” their data, exaggerating its significance. In the US, people let the data speak for itself. The China approach does more harm.

Schaeffer (Merck): I’ve run into scientists selling their data in the US, too.

Heerde (Bayer): The longer you are in China, the less you know about cultural differences. However, in China, before and after the deal, there is always negotiation.

Schaeffer (Merck): I don’t have much experience because I don’t work in China. However, according to my China scout, it’s important to be introduced to people in China. People are not likely to respond to a meeting request from someone they do not know. So, you must find someone to introduce you, make the acquaintance, and then ask for a meeting.

Yang (Pfizer): There are many similarities between the two worlds. But one difference is that there are only a few degrees of separation in China’s scientific world.

Scott (ChinaBio®): I found China to be open, though the friendliness happened only after introductions. My initial requests for meetings, before introductions, went nowhere.

Yang (Pfizer): You might mention that you are from San Francisco [where the ChinaBio® Day conference was held]. It’s a big asset because so many people in China have spent time in the area or have some connection to it.

Audience Question: How can a company with fewer than 50 employees make headway with China connections?

Fu (J&J): Find a local partner you trust. And then you must monitor what they do.

Audience Question: You’ve thought about how important government officials are. Can you give some guidance?

Yang (Pfizer): Your needs from local governments determine how much help you will get. The bigger your needs (big projects), the more local governments will and can help. If you propose hiring lots of people, there will be more help.

Scott (ChinaBio®): Governments in China have lots of resources. If you can help them achieve some of their objectives, then they can be a great deal of help.

Audience Question: My company does very early stage research drug discovery. Can you give examples of how government has given money to early stage companies?

Yang (Pfizer): Much of that money is going to universities. According to a war story I heard, the experts in charge of deciding which projects were to be funded were locked in a room, and their cells phones were taken away. These were people who were from universities and had themselves submitted requests for funding. They could not vote for their own projects, and they were not allowed to lobby for their own projects. At the end of a very long session, the decisions were made.

Audience Question: What is the most interesting, the most exciting thing happening in China’s biological science?

Schaeffer (Merck): For us, the really early stage stuff is the most interesting. This includes work on unmet needs such as Alzheimer’s, diabetes, obesity and cardiovascular disease.

Audience Question: Is big pharma interested in TCM?

Yang (Pfizer): Yes, it’s very interested. TCM is a rich source of diversity. Merck has two projects currently underway, though neither one is in China. We are also looking for hits from herbal libraries.

Schaeffer (Merck): Our China scout uses TCM and believes in it. For us as a company, we’d want a single molecule that is patentable and has data available

Heerde (Bayer): It is difficult for multinational companies to compete with local China companies in TCM. The locals have a natural advantage in this sector.

Fu (J&J): TCM is no different from other drugs that we look at. One of our drugs already in development is actually derived from an herbal product.

Disclosure: Greg B. Scott is the Publisher of ChinaBio® Today.


 

Share this with colleagues:

 

ChinaBio® News

Greg Scott BIO-Europe Interview
Greg Scott Interviewed at BIO-Europe Spring

How to bring your China assets to China in 8 minutes


Greg Scott Mendelspod Interview
"Mr. Bio in China."
Mendelspod Interview

Multinational pharma held to a higher standard in China

Partner Event
November 2-3, 2023 | Shanghai
November 7-8, 2023 | Digital