|Send to printer »|
Feature Articles : Oct 1, 2009 ( )
Hong Kong Sees Opportunities with TCMs
Pro-Business City Aims to Build Biotechnology Industry Around Traditional Chinese Medicine!--h2>
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:
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.
Establishment of the Hong Kong Science Park, which covers 22 hectares and houses over 270 technology companies (19 of them medical or biotechnology firms), has been critical to the region’s biotech development objectives. HKJCICM is a tenant of the park, which is also home to seven foreign companies. These companies are mainly involved in development, technical support, and sales while the Hong Kong companies are involved in a variety of activities such as diagnostics, cryogenic storage, and enzyme technology. Two of the park’s occupants, Lee’s Pharmaceuticals and SinoMab, carry out manufacturing operations in China.
Opportunities for joint ventures (JV) abound in Hong Kong. One notable JV involves an alliance between institutions in Hong Kong and China. Beike Biotechnology was formed by Beijing University, HKUST, and the city of Shenzhen. The firm has a major research laboratory in Shenzhen, which is in the special economic zone adjacent to Hong Kong, as well as 18 laboratories associated with hospitals throughout China. Beike is focused on the therapeutic use of stem cells to repair spinal cord injuries and treat diabetes.
Another JV involves Geron and the Biotechnology Research Corporation (BRC), which was created by HKUST. TA Therapeutics was founded in 2005 and focuses on research directed toward developing telomerase-activation drugs to regenerate the capacity of cells that have been affected by senescence, injury, or chronic conditions.
Hong Kong’s economic success has always been shaped by the actions of its large conglomerates. Chinachem is one of the largest conglomerates in Hong Kong with extensive business interests in real estate, shipping, food, and entertainment. As a private entity, much of its history has been intertwined with that of the Wang family, most recently that of Nina Wang who held most of the shares in the group. She reportedly invested in 30 biotech companies in China, Taiwan, and the U.S. At the time of her death in 2007, she was considered to be the wealthiest woman in Asia with a worth of $4.2 billion.
Li Ka-Shing, chairman of Hutchison Whampoa Limited (HWL) and Cheung Kong Group, is Asia’s richest man with an estimated worth of $32 billion. His conglomerate’s biotech activities take advantage of unique opportunities in the interface between the West and China.
CK Life Sciences is part of the Cheung Kong Group whose Hong Kong listed companies have a market capitalization of HK$800 billion ($103 billion), CK has a major research complex in Hong Kong focusing in therapeutics for the treatment of cancer and AIDS. CK also markets the VitaGain product line, which reportedly boosts immunity. The firm has expanded its nutraceutical distribution network through the acquisition of Sante Naturelle, a nutraceutical brand, and the purchase of Vitaquest International Holdings, a U.S. nutraceutical contract manufacturer.
In the agricultural area, CK markets NutriSmart, an eco-fertilizer based on yeast. According to the company, this product stimulates growth and yield without any of the environmental effects of chemicals as its yeast granules create a symbiotic environment that supplies nutrients to the crops. NutriWiz, a fertilizer composed of a mixture of microbes, can be used as a basic or supplementary fertilizer. Production of the eco-fertilizers takes place in China in a facility built at a cost of more than RMB150 million ($22 million).
In addition to operating container terminals, HWL is also a retailer of health and beauty products. Hutchison Whampoa (China) Limited is the investment arm of HWL in China. Among its investments are firms that manufacture and distribute healthcare, personal care, and TCM products.
Hutchison China MediTech, which is based primarily in China, is listed in the Alternative Investment Market of the London Stock Exchange. Chi-Med’s business is based on TCM R&D for pharmaceuticals, nutritional supplements, and personal-care products.
Chinese government policy has been focused on consolidation of the pharmaceutical industry. HWL’s acquisition of selected drug companies is in line with that policy. HWL started by investing $20.9 million in Baiyunshan Hutchison TCM in partnership with Guangzhou Baiyunshan, a Chinese pharmaceutical company that produces both Western and TCM drugs.
Hutchison MediPharma, which was founded in 2002, is built around a new $30 million TCM R&D Center in Shanghai. The firm’s mission is to use TCM to develop Western drugs through alliances with major foreign drug firms.
Despite the successes of Chinachem and Hutchison Whampoa, so far, Hong Kong has had limited success attracting major initiatives from large pharmaceutical and biotechnology companies. In addition, its start-up companies are at an early stage, particularly as it relates to their Chinese operations.
Unlike many U.S. entrepreneurs who use a novel technology to create a profitable company or business, Hong Kong businessmen see biotechnology as an enabling technology to exploit highly profitable opportunities in both China and the West. It will be of particular interest to see whether Hong Kong’s nascent biotech industry and its foreign partners can successfully use TCM in the development of major modern drugs.
© 2016 Genetic Engineering & Biotechnology News, All Rights Reserved