China factors heavily in the global strategies of many pharmaceutical and biotechnology companies. Multinationals have typically commenced operations in the country with marketing and production facilities and then expanded into research and clinical trials.
For example, Novartis has an integrated program that includes R&D, production facilities, collaboration on traditional Chinese medicine (TCM), and training. Smaller biotech companies, on the other hand, have gained entry to the Chinese market through joint ventures with local CROs. These business models differ in their objectives and breadth, and it is too early to ascertain the success of a particular strategy.
Even prior to its devolution to China in 1997, Hong Kong had a pivotal role in China’s development. Hong Kong’s financial institutions and companies are the largest investors in China, and they have consistently profited from their Chinese operations.
In the 1990s, three studies were commissioned to examine the potential for biotechnology in Hong Kong. The consensus was that Hong Kong should strengthen its scientific infrastructure and take advantage of its status as a Special Administrative Region of China. It should direct its commercialization efforts toward generic drugs and the modernization of TCMs.
It was thought that such initiatives could take advantage of the lower R&D and production costs in China, as well as provide access to China’s growing markets. The basic concept was that Hong Kong would provide financing and know-how while the actual operations and markets would be in China, thus a transition from “Made in Hong Kong” to “Made by Hong Kong.”
Growing a Scientific Infrastructure
Unlike many Asian regions, Hong Kong has followed a noninterventionist industrial policy that is pro-business. It has a low tax rate, no capital gains tax, and provides allowances for investments in selected sectors. There is also a competent government and abundant sources of capital.
The Closer Economic Partnership Arrangement (CEPA) between Hong Kong and mainland China facilitates access to China’s markets for Hong Kong companies. This agreement has been responsible for attracting foreign companies. In biotechnology, CEPA’s principal efforts have been directed at strengthening the R&D infrastructure. The Hong Kong Innovation and Technology Commission has a similar mission—to support and develop R&D, develop appropriate policies, and build scientific infrastructure.
There are a number of major sources of research funding in Hong Kong, including:
- The General Research Fund’s Research Grant Council, which in 2008–2009 provided HK$165.6 million ($21.2 million) in grants for biology and medical research,
- The University Grants Committee, which initiated the Areas of Excellence program with HK$525 million ($67 million) in 1998,
- The Research Fund for the Control of Infectious Diseases, which has provided HK$450 million ($58 million) for infectious disease R&D,
- The Innovation and Technology Commissions’ Funds for Applied Research, which has invested HK$332 million ($41.5 million) for 140 projects in bioinformatics, drug discovery, and modernization of TCM,
- In addition, The Hong Kong Jockey Club, which derives its revenues from horse races, makes major contributions to projects recommended by the government.
There are six major universities in Hong Kong—City University of Hong Kong, Hong Kong Baptist University, Chinese University of Hong Kong, Hong Kong Polytechnic University, Hong Kong University of Science and Technology (HKUST), and the University of Hong Kong.
Many of these universities have programs that focus on TCMs, including the School of Chinese Medicine (at Hong Kong Baptist University), Institute of Chinese Medicine (at the Chinese University of Hong Kong), and the Biotechnology Research Institute (at HKUST). There are also two autonomous research institutes, the Hong Kong Institute of Biotechnology (HKIB) and the Hong Kong Jockey Club Institute of Chinese Medicine (HKJCICM).
Though both of these institutes were established with support from the Jockey Club, they have very different missions. HKIB is a downstream research institution that works on the standardization of TCM, the modern formulation of TCM, and, in collaboration with companies, produces TCM for clinical trials. The HKJCICM performs preclinical research on TCM formulations for the treatment of cardiovascular disease, rheumatoid arthritis, menopausal symptoms, depression, irritable bowel syndrome, and diabetes.