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Insight & Intelligence : Aug 17, 2011
For Some Emerging Companies, the Road to Growth Connects the U.S. and China
While American firms are tapping China’s size and regulatory path, Chinese biotechs are going west for money and expertise.!--h2>
In North Carolina’s Research Triangle Park (RTP), drug developer Ascletis, a joint venture of Chinese and U.S. entrepreneurs, is preparing to establish a U.S. headquarters for R&D. It expects to bring some 20 of its scientists to the campus of The Hamner Institutes for Health Sciences. Hamner and Ascletis signed a memorandum of understanding in July, two months after the company said it raised $100 million in Series A private equity financing.
Across the U.S., in the San Francisco suburb of Burlingame, CA, Epitomics signed a lease to expand its facilities by 10,000 square feet. Within its new space, Epitomics plans to build a GMP manufacturing lab for diagnostic products. This is part of a larger expansion by the company into that specialty both in the U.S. and China, Guo-Liang Yu, Ph.D., Epitomics’ president, CEO, and chairman of the board, told GEN.
The two companies illustrate opposite sides of the same trend—emerging biotechs eager to grow in both the U.S. and China. That expansion reflects the growth of China’s biotech industry. Between 1998 and 2009, the compound annual growth rate (CAGR) of China’s biopharmaceutical industry reached 18.6%, more than double the 8.5% CAGR of the global pharmaceutical market, according to a Research and Markets report released last year.
As part of its 12th Five-Year Plan for developing its economy between 2011 and 2015, made public in March, China declared biotech to be one of seven strategic emerging industries whose growth the country wants to cultivate over the next decade. The other six are energy, high-end equipment manufacturing, energy conservation and environmental protection, clean-energy vehicles, new materials, and next-generation IT.
China has set aside a combined RMB 4 trillion (about $623.2 billion) of state funding for biotech and the other six industries. China wants all seven to comprise a total 8% share of GDP by 2015 and a 15% share by 2020.
Chinese Companies Setting Up in the U.S.
For Chinese-funded biotechs like Ascletis, a significant share of growth will come from operations overseas. “There’s a technology gap between the U.S. and China in terms of biotechnology, and it’s very hard to identify people with 20 years’ experience with drug discovery in China. But it’s easy to identify people from recent graduates to people with three to four years’ experience in industry, who are really motivated and willing to work hard for innovation—and they are less expensive,” noted Jinzi J. Wu, Ph.D., Ascletis’ president and CEO.
Ascletis “will have 85% of our R&D scientists based in China, 15% based with Hamner Institute. The people working from bench are based in China, but people who have experience in terms of drug discovery and development are based at Hamner,” explained Dr. Wu, who divides his time about evenly between the two countries. Hamner will also contribute researchers to the partnership. The company’s management team includes executives from both nations as well as from the U.K. and Canada.
Just how many Ascletis people will ultimately work from Hamner is hard to predict, he added, though currently “a handful” of people are based at the institute’s RTP offices. By the end of this year, Dr. Wu said, the company’s workforce will grow to 50 people, about 10 of whom will likely be at Hamner. That workforce will eventually grow to between 100 and 150 people, with up to 20 of them expected to work from the institute. Chinese-based staffers will work at Ascletis’ labs at the National High Tech Industry Development Zone in Hangzhou, China, a 35-minute high-speed rail ride south from Shanghai.
Ascletis specializes in developing drugs for cancer and infectious diseases. The company plans to disclose soon what its lead candidates will be. “We may use sRNA as one technology to pursue siRNA drugs. We may use other technologies that use antibodies or medicinal chemistry,” Dr. Wu said.
“We have a two-prong strategy for our company. Number one is to in-license clinical-stage drug candidates from the U.S. and European countries, bring them to China, and develop them for the Chinese market and Chinese patients,” Dr. Wu said. “At the same time, our discovery effort is ongoing for global markets. But it takes a longer time to bring a drug from the bench to the clinic, so that’s why we believe we may have drugs for Chinese patients sooner through in-licensing.”
In developing new drugs, Ascletis hopes to partner with multinational companies. Funding for infectious disease drugs, though, may be more likely to emerge from nonprofit foundations, Dr. Wu said.
“We can do Phase III clinical trials and commercialization in China, but we’re not ready for commercialization globally. If there is a drug with global potential, most likely we will partner at Phase II, after proof-of-concept clinically, with a big pharma company,” Dr. Wu said. “We’re going to retain China rights, and we’re going to partner out the rights to the rest of the world.”
For its drug discovery effort, Ascletis wants to tap Hamner’s expertise in liver toxicity and drug safety as well as the institute’s interest in nurturing Chinese partnerships. Back in 2009, Hamner joined the China Medical City (CMC) complex in the city of Taizhou to create a biomedical research partnership called The Hamner-China Medical City Institute for International Drug Development.
Ascletis’ partnership with Hamner represents an early success in the institute’s outreach effort to Chinese biotech businesses. In January, Hamner signed an agreement with China’s XY Group, a private international investment and trade concern, to create a “bioscience gateway” at the institute’s 56-acre campus.
The goal was to facilitate investment and trade between U.S. and Chinese biotech and pharmaceutical companies. The plan will begin with a 150,000-square-foot research facility projected to create 400 jobs when it opens in 2013. That’s part of an overall 1 million-square-foot expansion scheduled for the center.
Leveraging China's Speedier Development and Big Market
Unlike Ascletis, Epitomics was established in the U.S. in 2001, only to begin expanding a few years later into China. It operates a wholly owned subsidiary in Hangzhou where 200 employees are based, of which about 150 are researchers. There, Epitomics produces antibodies using its RabMAb® (rabbit monoclonal antibody) technology. Epitomics says RabMAb as well as its Mutation Lineage Guided method for humanizing antibiodies produces superior binding affinity and bioactivity in a variety of assays.
Dr. Yu also has his own laboratories at CMC. He persuaded the city to pay the roughly $15 million cost of developing a clinical materials GMP manufacturing facility for making protein drugs plus an R&D facility or “antibody innovation center” equipped with RMB 35 million (roughly $5.45 million) worth of equipment.
In return, Dr. Yu agreed to manage the facilities and establish another company there, the Jiangsu T-mab BioPharma. The firm has some 60 employees and holds Chinese development rights to an undisclosed number of RabMAb programs.
“The government put up a lot of money to build those facilities, which a small company like ours would not otherwise be able to afford,” Dr. Yu pointed out. “We have a pipeline of six protein drugs, and at the same time we do CRO or CMO [contract manufacturing] for people to make clinical materials.”
Why did Epitomics seek to expand into China? Dr. Yu said it was not for the reason most often cited when U.S. companies gain a foothold there. “Cost was our second reason,” he recalled. “Our main reason was actually speed. We develop antibodies and we have a lot of competitors. We were small. We couldn’t make antibodies fast enough, so I wanted to build a tech facility and a team that would, as I call it, industrialize the process.”
Speed also explains why Epitomics is pursuing trials in China with a pair of China-based companies that are publicly traded in the U.S. Later this year, Epitomics plans to team up with Simcere Pharmaceutical on a Phase I trial of an antivascular endothelial growth factor (VEGF) antibody, believed to inhibit formation of new blood vessels in cancer tumors. “We expect to receive the government certificate for entering Phase I this year,” Dr. Yu said.
Epitomics and 3SBio expect to file an IND application in China “either at the end of this year or early next year” for an antitumor necrosis factor (anti-TNF) antibody, expected to stop inflammatory diseases such as rheumatoid arthritis, Dr. Yu added.
Looking ahead, Dr. Yu reported plans to continue the company’s expansion into diagnostics by building facilities in China as well as the GMP lab in Burlingame: “The Chinese population makes for a very attractive market, and we’re also venturing into that anyway in the U.S.”
The company made news July 26 when it announced it had launched 23 cancer-related antibodies developed through a partnership with the NCI’s Center for Cancer Research. The collaboration aims to develop new reagents for cancer researchers.
With its catalog already at 2,500 antibodies and increasing, Epitomics has grown at about 35% per year and has been profitable every year since 2008. Dr. Yu said the company generates $20 million to $30 million in annual revenue but wouldn’t be more specific.
Epitomics raised $30 million during its first decade in business and is in the process of filing an IPO on the Taiwan Stock Exchange. Required filings are expected to be completed by September. The amount to be raised through the IPO has yet to be determined.
Intent on generating some business in China for stateside biotechs, the Commercial Service of the U.S. Department of Commerce is recruiting U.S. companies for a Biotech Life Sciences Trade Mission to China that will run between October 14 and 18. Francisco J. Sánchez, under secretary of commerce for international trade, will lead the trade mission, during which leaders of the U.S. businesses will meet decision-makers from the government of China as well as prescreened and qualified potential partners. Participants will also network and attend briefings by ranking U.S. Embassy officials and biotechnology industry experts.
Valuable as that effort is, there’s no reason why Washington shouldn’t also pursue what promises to be an even better path to growing biotechnology in the U.S.—namely following Hamner’s path and working to marry fast-growing Chinese companies with stateside partners, both commercial and academic.
If nothing else, such an effort holds potential for being a successful example, so uncommon these days, of how the U.S. can still gain jobs in a biotechnology industry that increasingly is becoming more global.
Alex Philippidis is senior news editor at Genetic Engineering & Biotechnology News.
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