China plans to signficantly boost its research efforts in biotechnology, according to its Minister of Science and Technology. “Our goal is to turn China into a major player in the biological industry by 2020,” said Wan Gang, speaking at an international conference on biological economy in Tianjin in June. He predicted a total output value for the industry of 2.5 to 3 trillion yuan ($334 to $400 billion) by 2020.
Speakers at last month’s Cambridge Healthtech “Drug Development in China” conference in Philadelphia also delivered a clear message: China represents an emerging frontier for preclinical and clinical drug development activities, with opportunities to lower costs and access to large patient populations for clinical trial enrollment.
Yet the rosy picture painted of economic growth, government support for innovative R&D ventures, and an evolving and maturing regulatory environment was tempered by the reality of doing drug development in China at present—the risks, the cultural and language barriers, regulatory uncertainty, and concerns regarding the labor pool, long-distance oversight, animal welfare, and ethics and corruption.
Conference speakers presented a broad spectrum of information and perspectives on strategies for launching drug discovery and development activities in China, whether through outsourcing, partnerships, or establishing subsidiary operations in a country undergoing quick change and modernization.
“China is changing so rapidly that every piece of information you get is suspect” and may be wrong, opined Mark Engel, chairman of Excel PharmaStudies (www.excel-china.com), a Beijing-based CRO. Describing a picture of what it is like to do business in China, Engel drew several conclusions: business strategy is often more important to success than product; there are regulations but everything is ultimately decided on a local level; and relationships mean little compared to knowledge, product, and operational capability.
The key to success for pharmaceutical companies is “consistent senior management,” in Engel’s view.
Yiyou Chen, Ph.D., CSO of Crown Bioscience (www.crownbio.com), offered advice on navigating the complex regulatory landscape in China. Her company is a U.S.-based biomedical outsourcing firm focusing on preclinical research services with a wholly owned research center in Beijing that includes an animal vivarium.
Dr. Chen exposed three myths that persist despite the evolving regulatory climate. First, companies can shorten the time to approval if they work with someone with the right connections. This was true, she conceded, but is less likely now, echoing Engel’s point.
The second myth relates to acquiring fast-track status for novel biological drugs. Fast-track status is still not clearly defined, she explained.
And finally, that some trials can be initiated without regulatory approval due to loopholes in the system; again, maybe once true but no longer, as tightening regulatory control takes hold.
Regulatory Environment Is a Concern
The biggest concern echoed by multiple presenters when discussing opportunities for drug development in China was the regulatory environment. Using HIV clinical trials as an example, Hua Zheng, M.D., Ph.D., director of global regulatory affairs at Tibotec (www.tibotec.com) described some of the complexities inherent in the regulatory environment in China.
For example, the regulatory framework in China does not distinguish between the review of an investigational drug and a drug-approval application. The approval system is based on a specific site of manufacture and not on approval to market.
Dr. Zheng pointed to the SFDA’s (the Chinese equivalent of the U.S. FDA) “overall lack of guidance for innovative drugs,” due in part to the agency’s lack of familiarity evaluating NCEs and APIs, having largely focused in the past on traditional Chinese medicines, generics, and me-too drugs. He further suggested that scandals involving top officials at the SFDA and accusations of too lax a drug approval system (in 2004 the SFDA approved more than 10,000 new drugs, compared to 148 approved by the FDA) could result in a shift toward a more conservative review strategy and longer regulatory timelines.
It is believed that to show its concern over the safety of Chinese pharmaceuticals, China executed Zheng Xiaoyu (the former head of the SFDA) in July for taking bribes to approve drugs that had not been tested.
Filings of clinical trial applications (CTAs) are risky because there is no well-defined process and no mechanism for pre-submission consultation with the agency. CTA data is analyzed “as if for a market approval dossier,” according to Dr. Zheng, and the entire application and all supporting documentation must be translated into Chinese. The sponsor must provide detailed information about the synthesis of the drug substance and manufacture of the product, as well as validation of analytical methods at the CTA stage.
Furthermore, when a foreign company files a CTA, the sponsor must authorize a Chinese official to serve as its legal representative.
Describing the CTA approval in China as “a long process,” Dr. Zheng said that the typical timeline spans about 9–10 months, with an accelerated, fast-track route only lowering the time estimate to 7–8 months. Recent modifications to the regulatory process in China have shortened the time for technical review of a CTA by the Center for Drug Evaluation (CDE) from 120 to 90 days. The estimated total time from complete document submission to trial initiation for a new medical entity is 10–15 months and 10–12 months for a new indication.
Describing the clinical research services industry in China as “very immature,” Engel explained that until 1990 there were essentially no regulations, no expertise, and few studies conducted. Trials undertaken during the 1990s were mainly sponsored by multinational companies in China and were mostly Phase IV or Phase IIIb trials. The regulations governing those stuiides fit on six sheets of paper.
Since 2000 both the quality and quantity of Phase III trials in China have increased rapidly. This spike has largely been fueled by the establishment of well-funded, development-oriented centers initiated by companies such as Pfizer (www.pfizer.com), Eli Lilly (www.lilly.com), Roche (www.roche.com), AstraZeneca (www.astrazeneca.com), GlaxoSmithKline (www.gsk.com), and Novartis (www.novartis.com), according to Engel.
CROs Making Strides
The CRO industry in China is only about 10 years old, and Engel told conference participants that no full-service provider capable of conducting global trials existed in China until about two years ago. China is “a generics-driven marketplace,” says Engel, noting that it is now evolving to include innovative drugs.
He identified several key drivers for expanded clinical research activity in China, including the overall high quality of trials compared to other East Asian and European countries. The monitors tend to be physicians and the senior investigators are typically involved in the day-to-day trial activities.
With its large population, China offers an attractive patient base. It has a hospital system that funnels patients to disease-specific hospitals, and a ready supply of naïve patients. However, access to patients remains a challenge. Engel reported that at present only about 250 million people are covered by insurance.
However, they “are typically similar to U.S. patients in their thinking about trials,” said Engel, with participation in a trial viewed as a last resort to consider when conventional treatment strategies have failed. Another 250 million are partially covered by insurance. The bulk of the population, or 800 million people, have no medical insurance, are often located in rural areas, are difficult to locate, and have poor access to the research centers where trials would be conducted.
Certain medical conditions have a relatively high prevalence in China, such as hepatitis B and C and liver and stomach cancer, while others are becoming increasingly common, including hypertension, diabetes, depression, and lung cancer. In general, cancer is on the rise in China, with the oncology market estimated at $375 million in 2006 and predicted to grow to nearly $1.4 billion by 2020.
Cost savings on a line-item basis is an obvious driver, although additional expenses such as for translation services, training, site monitoring and management, and travel, must be factored into the total cost of doing business in China. Engel presented cost-comparison estimates for various types of activities: chemistry, 30–60% of costs in the West; toxicology and animal testing, 30%; Phase I clinical trials, 25%; and Phase II/III trials, 30%.
Whereas a one-day stay in a hospital in the U.S. might cost $750–$1,000, that compares to $40–$100 in China. An MRI is $1,500–$3,500 in the U.S., versus $150–$300 in China. The annual salary for a senior oncologist in the U.S. is upward of $225,000 on average, while a key opinion leader in China might earn $40,000 a year.
Clinical Trials as a Marketing Tool
The local talent pool is another attractive feature. China is turning out a lot of scientists that are available as “inexpensive talent” to try out for positions in international companies, said Engel. In addition, Japan has begun accepting Chinese clinical trial data for drug registration applications, another reason for companies to consider pursuing drug development in China.
Above and beyond all these advantages, though, is what Engel described as the number-one driver, the opportunity to penetrate the Chinese pharmaceutical market; in other words, the value of using clinical trials as a marketing tool.
By 2010, China will represent the fifth largest pharmaceutical market—the third largest market by 2020—with an annual growth rate of 16–20% projected for the next five years. These projections do not include the effects of obesity and pollution, noted Engel.
Conducting clinical trials in China “represents future sales of products,” without having to spend money to do the trials again. At present the sale of a drug in China requires a local Phase III trial. Additionally, due to the nature of prescribing practices in China, where most drugs are sold in hospitals, the clinical investigator influences prescribing habits. Participation in a clinical trial can be a valuable mechanism for convincing them of the benefits of one drug over another.
Engel described the rural market, comprised of 700 million people and dominated by domestic manufacturers, as “the next great driver,” based on a fundamental shift in government policy that is beginning to support health insurance programs for the rural population. The government’s goal is for all Chinese to have medical insurance by 2015.
Many hurdles for pursuing clinical drug development activities in China remain, acknowledged Engel, and overcoming these requires careful localized planning to consider regulatory lead times and protocols, patient recruitment issues, challenges related to transport/export of patient samples (especially blood), language and cultural barriers, the need for staff training, and issues related to standards of care and working practices.
Engel urged companies to consider taking their products to China to pursue innovative trial strategies, such as repositioning failed or killed compounds, exploring proof-of-concept in alternative indications, laying the groundwork for additional labeling, and evaluating dual drug development programs targeting markets in the East and West.
In his concluding remarks, Engel compared the pharmaceutical market in China to an onion, saying, “The market may look very much like markets worldwide, but when you peel the onion and look at the third or fourth layer, the market is considerably different and requires local knowledge and information to deal effectively with a very complicated system.”
Eric Meyers, vp of global initiatives at Cambridge Healthtech Associates (CHA, www.chacorporate.com), a professional services firm that organizes and facilitates multicompany collaborative projects in pharmaceutical R&D, presented the results of a case study, completed earlier this year, aimed at assessing the feasibility of conducting preclinical safety studies in China with a particular emphasis on GLP toxicology studies. The study evaluated factors related to current GLP-compliance status, cost and operational viability, optimum investment and implementation strategies, animal welfare concerns, and the potential tradeoffs associated with working in an emerging outsourcing paradigm.
Among the conclusions drawn from this study, Meyers emphasized that although SFDA has a GLP-accreditation process, it is not sufficiently robust to use as a proxy for U.S. accreditation. Furthermore, animal health and welfare regulations do not, in general, meet Western standards. Companies should carefully evaluate the quality of animals available for purchase, the quality of the supply chain, processes to ensure security at animal facilities, and animal health screening practices. One of the greatest deficiencies, Meyers noted, was the availability of expertise in veterinary pathology.
CHA’s cost modeling of a six-month GLP study in nonhuman primates, based on 2007 and projected 2012 costs, led Meyers to conclude that “there is a sustainable cost advantage” over at least the next five years. Based on total costs, savings are roughly 50% at present, rising to 60%. Similar results emerged from a cost modeling analysis of a one-month rat GLP study.
“The GLP mindset takes a while,” concluded Meyers, noting that a number of CROs in China are much closer to operating according to U.S. GLP standards.
“The laboratories in China seeking to work with Western countries understand that they can’t trip up right out of the box,” Meyers said. “Lab automation and computerization are rare, animal welfare standards and processes need improvement, English language capabilities are modest at most facilities, and the talent pool is shallow in some notable areas, particularly at the senior level.”
Meyers was encouraged by the enthusiasm among Chinese companies to learn and work with Western partners. He cautioned companies considering outsourcing preclinical development work to China to look carefully at the specific offerings and limitations of a particular facility. High-quality sites, equipment, and staff are available “in some pockets but not across the board,” said Meyers. He predicted that within 18–36 months a lot more GLP tox studies will be done in China.
“The government has picked biotech as the new driver to sustain China’s economic phenomena for the coming decade,” according to Suresh Poosala, D.V.M., Ph.D., chief of comparative medicine and animal program director at the National Institute on Aging. With more companies looking to conduct preclinical animal testing in China, Dr. Poosala presented an overview of lab animal welfare and research opportunities.
“U.S. trained pathologists are almost absent, on-site pathology help is very minimal,” and well-trained executives from the U.S. are scarce, Dr. Poosala added. “Very few of the laboratory animal facilities are U.S. GLP regulatory compliant.”
Few established U.S. CROs have facilities in China. Charles River Laboratories (www.criver.com), which earlier this year acquired 70% of Shanghai BioExplorer, is one example of a U.S.-based CRO expanding into China. It plans to begin providing GLP services later this year and will construct a 50,000 sq. ft. preclinical services facility in Shanghai, to open in mid-2008 that will meet FDA standards for quality and comply with Charles Rivers’ animal-welfare policies.
China does provide several advantages for contract preclinical testing services, not least of which is government backing to build this sector. Also, compared to India, an emerging leader in chemistry and in vitro biology expertise, experimentation with dogs and nonhuman primates is looked on favorably in China. Primate and dog studies are excluded or limited in India due to cultural and ethical norms.
Buy or Build
Ming Guo, Ph.D., vp of pharmaceutical science and manufacturing at Ascenta Therapeutics (www.ascenta.com), an oncology development company, presented his company’s strategy. It combines outsourcing and the establishment of a Chinese subsidiary to conduct late-stage discovery and preclinical development activities. Ascenta’s lead compound, AT-101, used together with Taxotere to treat hormone refractory prostate cancer, is entering Phase IIb testing.
Ascenta established a 4,000 sq. ft. R&D lab in a high-tech incubator in Shanghai in 2005. In February the company moved to its new site, with 8,000 sq. ft. of lab space and 11,000 sq. ft. overall. Ascenta selected Shanghai because of its established infrastructure, proximity to key institutions for drug R&D, and large talent pool including many scientists and managers that have studied and trained in the U.S.
“FTE [full-time equivalent] costs are 10–40% of U.S. costs,” said Dr. Guo, and “GLP and GMP processes are becoming more standardized.” API production and the cost of doing preclinical studies and clinical trials are about 20–60% of U.S. costs.
Ascenta has learned several lessons from its experiences in China, including the importance of having daily technical discussions with the staff at the Chinese facility, frequent video conferences, formal weekly reports to the U.S., regular visits from U.S. management, and continued educational opportunities in both China and the U.S. It is also important to keep a balance between work and everyday life to ensure long-term efficiency. “Our Shanghai colleagues can be overly dedicated,” cautioned Dr. Guo.
Despite the ongoing challenges, Ascenta has found it advantageous to have a wholly owned R&D center in Shanghai. In its dealings with the top Chinese CROs, it began to experience the “food chain effect,” said Dr. Guo. As large, multinational pharmaceutical companies increasingly looked to the Chinese CROs, projects from smaller companies like Ascenta didn’t receive the same attention or level of urgency.
“We tried second-tier CROs, but they needed more supervision and technical support,” said Dr. Guo. With a physical presence in China, Ascenta is better able to communicate with and supervise work at local CROs as well as establish a brand name and strengthen local connections.
Compounds or biologics developed globally are eligible for clinical study in China if they have already been granted marketing authorization in another country or have completed at least one Phase I trial outside of China, explained Joanne Jiang, Ph.D., vp at Fountain Medical Development, a China-based CRO specializing in clinical research services.
Any adverse reactions that occur in studies outside of China must be reported to the SFDA. The agency may require an additional Phase I trial for dosing in the Chinese population.
Dr. Jiang outlined several factors that can contribute to a successful IND application: a strong scientific rationale; effective management of the filing process; effective communication with sponsors and the SFDA; quality documentation; adequate materials, especially of drug sample or reference substrate; and advance agency buy-in to avoid surprises at the panel meetings.
FountainMed is headquartered in the port city of Tianjin, which Dr. Jiang described as the emerging financial center for northern China, as Shanghai has become for southern China. With a population of 10 million, Tianjin’s GDP rose 14.4% in 2006 compared to 2005. Its per capita GDP ranks third in the country after Shanghai and Beijing.
Biotechnology has become one of the focus areas for R&D innovation in Tianjin. To attract high-tech companies to the region, the Ministry of Science & Technology and the Tianjin Municipal Government recently cobuilt the China International Innovation Zone of Biotechnology and Medicine. This includes sections for R&D and for manufacturing and trade and an incubator for start-up commercial ventures.