Friday, 10 June 2011

Return of the Sea Turtles Hastens Chinese Innovation

It's a generalization – but by all accounts true – that the biotechnology industry in China today is big on low-cost services, yet lacking in innovation.
"The generalization is to say, 'The bridge they haven't crossed is original innovation," said Biotechnology Industry Organization (BIO) President and CEO Jim Greenwood, who led a delegation of U.S. biotech execs to China this spring as a preliminary to BIO's first China International Partnering Conference in October in Shanghai.
"There's nothing remotely like innovation," said Ron Cohen, founder, president and CEO of Acorda Therapeutics Inc., of Hawthorne, N.Y., chairman of BIO's emerging company section and a member of the delegation that visited Beijing and Shanghai in late March and early April. Biotech in China today is a collection of service providers, preclinical research organizations and generic drug makers, he said.
But where a Chinese industry stands one day is less significant than where it expects to be in a few years, according to Cohen and others who have visited or returned to China.
What the Chinese are saying today about growing biotech is what they said not long ago about their semiconductor, computer and aircraft industries. With the Chinese government deciding to back biotechnology with massive government investment and the return of thousands of world-class scientists, biotech is expected to go far and go fast.
"Like any other successful industry in China, the critical qualities of energy, speed and entrepreneurial spirit need to be the hallmarks of China's biotech industry," said George Chen, who recently became chief medical officer for Beijing-based start-up BeiGene Ltd. "While all of those elements may not be as evolved for China's biotech industry as they are for mature industries such as high tech, just watch how quickly the biotech industry catches up to the West over the next five years."
Chen knows China and the West. He is a hai gui – a sea turtle – which is a pun on haiwai guilai or "returned from overseas." He earned a medical degree from Shanghai First Medical College of Fudan University and his MBA from the University of Pennsylvania's Wharton School. He did post-graduate medical training at Shanghai Cancer Hospital and New York Medical College. During the past dozen years he's worked at the Johnson & Johnson Pharmaceuticals Asia R&D group in Shanghai, Greater China Region at GlaxoSmithKline plc, Sanofi-aventis Global Oncology, in Shanghai, and Eli Lilly and Co., in Indianapolis.
"China represents the next frontier in the life sciences and pharmaceutical industry," Chen explained. "I feel I can have greater impact here and more quickly see the results of my efforts to actively build a therapeutics development infrastructure in China."
Sea Turtles – Working Fast, Furious Pace
Chen's BeiGene colleague and fellow sea turtle Judy Tian recently was hired as senior vice president of regulatory affairs, the latest step in a career that has included graduate work at the University of Texas-Southwestern and 14 years regulatory affairs experience in the U.S. and in China at Bayer HealthCare, Solvay Pharmaceuticals Inc. and Encysive Pharmaceuticals Inc.
She and other Chinese biotech professionals have returned to China, she said, because "China's life science and pharma industry is undergoing a rapid transformational change into an innovation-driven industry. It is exciting and invigorating to be a contributing force to this transformation. Is biotech in China becoming more innovative? Absolutely, and the pace of advancements are fast and furious. Returnee scientists and physicians are leveraging their broad, deep experience in drug and biologics R&D from the West, their knowledge and appreciation of what China needs, and, most importantly, their understanding of how to effectively realize the advantages that China has in executing on biotech innovation. Innovation and proprietary intellectual property generation and development are core elements of BeiGene's strategy."
Chen and Tian were preceeded by scientist-entrepreneurs like Ge Li, who earned his PhD in organic chemistry from Columbia University and went on to become one of the founding scientists of Pharmacopeia Inc., of Princeton, N.J., before returning to China to found WuXi PharmaTech, the parent company of WuXi AppTec, of Shanghai, in December 2000 and serve as the service provider's chairman and CEO.
What's happened to WuXi PharmaTech since testifies to how fast things are moving in China.
By August 2007, the company was listed on the NYSE (NYSE:WX) and in 2010 had net revenue of $334 million and GAAP net income of $90.8 million. The client list includes Pfizer Inc., Merck & Co. Inc., AstraZeneca plc, Novartis AG, Genentech Inc. and Millennium, a unit of the Takeda Oncology Co. There are 4,500 employees in China and the U.S., including about 3,500 scientists, most with advanced degrees.
"In the late 1990s, I realized that China would be the next platform to provide skillful chemistry services to the pharmaceutical and biotech industry because of China's vast talent pool in the physical science field, including chemistry, combined with the low operation cost in China," Li said. "That was my dream, and I acted on it and moved back to China to start WuXi. Other returnees came back to China because they [wanted to] ride the trend that more and more pharmaceutical R&D would be conducted with external partners, and the trend is outsourcing."
Sea turtles contribute to biotech innovation in China, Li noted, with their advanced education in top U.S. schools and vast experience acquired from working many years in big pharma companies and top biotech companies in the U.S., Europe and Japan. "Innovation and entrepreneurship have no boundary," he explained. "China's biotech industry is growing faster today because it is still at its early stage. Strong government support and great interest and commitment from returnees have also propelled the fast growth of China's biotech industry."
Joshua Boger, who in 1989 founded Vertex Pharmaceuticals Inc., of Cambridge, Mass., served as CEO until May 2009, and continues as a Vertex director, thinks Chinese biotech innovation is approaching faster than many think. Boger has spent time in China and gotten familiar with WuXi AppTec, whose subsidiary Shanghai SynTheAll Pharmaceuticals Co. Ltd., is the manufacturing site for starting materials for Vertex's recently approved hepatitis C drug Incivek (telaprevir). (See BioWorld Today, May 24, 2011.)
Innovation: Backed by Massive Infrastructure
Boger contended that young Chinese companies like WuXi started as service providers because, lacking Western-style venture and midstage capital support, it was the way to build a financial foundation. Boger said he expects those companies to increasingly start doing their own proprietary research. "And then they will not start it with 20 or 30 people, but with 2,000 or 3,000 people."
Greenwood agreed that China Increasingly is stockpiling bright scientists, many who were educated or worked in the U.S. and have returned. "There is a deep bench of scientists able to do some very good frontline research," he said.
Chinese government incentives to stimulate biotech are expected to support that trend. But Greenwood said he thinks the restrictions of a collective communist Chinese society and culture, that until recently limited individual expression, will cause innovation in biotech to take longer than people like Boger and Chen estimate.
"Our society is steeped in a culture of free thinking, entrepreneurship, the profit motive, strong intellectual property – all of the things that are strong ingredients to innovation," he said. "A lot of those aspects of entrepreneurial culture are very new to China. There were obvious limitations on freedom of expression. You might not think there is a connection between the First Amendment and innovation, but there is."
Strong, enforceable intellectual property laws tops Greenwood's list of things that would help grow biotech in China. Indeed, during the recent visit, he and the BIO group met in Beijing with the Chinese State Intellectual Property Organization.
Greenwood said it is critical that IP be protected if Chinese biotech entrepreneurs are going to be expected to take the risks involved in developing innovative drugs – and for investors to back them. "You have to have that in place to boost home-grown innovation," he said, "but there are more than Chinese nationals who have an interest in IP protection."
Boger and others agree that there is good reason to be cautious about IP and the Chinese legal system. But he thinks the Chinese will make needed changes and that innovation will flow, thanks to China's entrepreneurial history and the guidance of sea turtles.
"Most of the forces in biotech in China are returnees who spent sign time in the West," Boger said. "But this isn't just about Chinese nationals. We're starting to see experienced people from the U.S. and Europe, who are not Asians, come to China as part of their careers because there is so much opportunity and the quality is so high."
"China has a 4,000-year history of entrepreneurship," Boger adds. "Culturally, it is just not true that the Chinese don't get cultural reinforcement for entrepreneurship. Is it hard to innovate? Yes. But before you judge the Chinese ask Pfizer how hard it is to innovate. We put ourselves to sleep by saying it will take them 20 years. That's not what I see."
Cohen suggested that it might take 10 to 15 years to develop the "critical mass" necessary for innovative biotech.
Compared to the U.S., "China doesn't have a great cluster of innovation," Cohen said. "However, you can already see the seeds of that growing. The sea turtles are more numerous every year. We met several people [in China] who were at Amgen, Genentech and other premier biotechs. They got PhDs here [in the U.S.] and had productive careers and now they have taken all of that knowledge and gone back to China."
Education: The Multiplier Effect
Cohen said he has heard estimates that as many as 80,000 sea turtle scientists have returned. Many who came from U.S. biotechs are now building Chinese biotechs, and a few have novel molecules that are they are beginning to put into the clinic, he said. Many others are teaching in Chinese universities and that, Cohen said, will have a "huge multiplier effect.
"Put it together [with the government investment in biotech] and it's a pretty potent brew," Cohen said. "It's not perfect. It's not going to happen in a straight line. But it cannot be dismissed rationally."
But, for Cohen, it is not just a question of how fast Chinese biotech innovation will catch up. There also is the question of how fast the U.S. might fall behind.
"Really, it is the contrast that scares me," said Cohen of his visit to China. "You see a U.S. that, in many respects, is in decline politically, economically, even technologically. Look at how our students place in math and science. We're not investing in infrastructure, and it is decaying. In the meantime, China is building gleaming new airports, high-speed rail and experimenting. The whole country feels like, 'We've got tons of money, we have infinite ambition and we're smart.'"

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