The Chinese outsourcing industry is playing an increasingly important role in today’s global pharmaceutical arena. The capabilities of this industry are limited at present, and no China-based service providers are currently able to provide totally integrated service. This situation is due to change soon as a result of the consolidation between domestic companies and the entrance of an increasing number of multinational service providers.
Although a late starter, China’s outsourcing industry is catching up quickly; it is currently experiencing explosive growth. The country has become one of the primary destinations for companies looking to outsource APIs. In addition to the constant emergence of new service providers, an increasing number of traditional pharmaceutical companies and R&D-oriented biotech companies are being approached by Western companies for partnering. Also, an abundance of multinational service providers have entered this market and are bringing in the Western service standard.
Despite fast development, the majority of Chinese service providers are still limited in their capabilities. At present, there is not a single service provider that is able to provide fully integrated services covering all areas of drug discovery, development, and manufacturing.
Classification of Providers
At present, three large groups of companies make up the Chinese pharmaceutical outsourcing industry. Each group plays a different role in the value chain.
The first group includes traditional Chinese pharmaceutical companies that historically were only engaged in manufacturing and marketing of APIs and off-patented pharmaceuticals for the domestic market. However, Western companies are increasingly approaching these traditional pharma companies for manufacturing of APIs or pharma intermediates.
Among this group are several major Chinese pharma companies that were originally owned by the state and presently provide large-scale manufacturing of APIs or formulated drugs under cGMP conditions. Examples include Shanghai Pharmaceutical Group and Harbin Pharmaceutical Group. Shijiazhuang Pharmaceutical Group, another example, recently formed a joint venture with Unigene to build a new facility in the Shijiazhuang economic and technology development zone.
In addition, many Chinese API manufacturers have also become targets for partnership or acquisition by Western companies. For instance, Hisyn Pharmaceutical was recently acquired by Hovione, and Chiral Medicine Chemicals was bought by Actavis.
The second group of outsourcing providers or potential partnership targets are R&D-oriented biotech companies. An increasing number of these companies have emerged in recent years. Many of them have been recognized by Western pharma/ biotech companies for their capabilities in drug R&D and/or manufacturing of biologics. Shanghai Sunway Biotech, one of the fastest growing biotech companies in China, is an example.
The third group is composed of young outsourcing firms. This segment of the industry is growing much faster than the other segments, which is significant as Chinese CROs didn’t exist before 2000. Today there are more than 200 CROs in China that provide a variety of services to pharma and biotech companies, about half of them were founded by expat scientists and technicians who received advanced education and training in the West.
While new service providers continue to emerge, the older ones have grown exponentially, both in size and service capabilities. Five years ago WuXi PharmaTech employed less than 300 scientists, today it possesses a scientific staff of more than 3,000. Similarly, ChemPartner, another Shanghai-based CRO, is hiring more than 1,200 scientists. Both companies recently added preclinical research services to their original chemistry-focused service scope.
In addition to emerging Chinese-founded service providers, an increasing number of Western entrepreneur-founded service providers has emerged recently. Both Bio Duro and Chemizon were founded by American entrepreneurs and are based in Beijing.