Certainly, in the global landscape, the Chinese biopharmaceutical industry remains small, accounting for less than 7% of the world's total biopharmaceutical market. Also, 95% of the Chinese domestic biopharmaceutical market is made up of biogenerics (copies of biotherapeutics developed outside China). The overall innovative capability of the industry today is quite limited. Most manufacturers are very conservative and their investments in product R&D are small, because of lack of capital and venture capital (VC) support. Government funds and grants are not sufficient to subsidize major research projects at biopharmaceutical companies. As a result, Chinese organizations have sought subsidies and investments from banks and other capital markets, both domestic and international. Today, public and university research institutes receiving government funds play a key role in the R&D of biopharmaceuticals.

In addition to producing a variety of biogenerics to supply its domestic market, China has succeeded in developing and commercializing several innovative biotech drugs and vaccines. Some research-oriented Chinese biopharmaceutical companies such as Shanghai Sunway Biotech, Yantai Medgenn, and Beijing Biotech Pharma have developed a handful of novel protein therapeutic drugs. These companies have won grants from the National 863 Program, a Chinese government-sponsored technology support program that has funded the R&D of more than 300 new biotech drugs across the country. Beijing Biotech Pharma has attracted foreign investment from a variety of sources, including Cuba, but it has yet to see substantial market penetration for its key product—hR3 MAb.

FUTURE TRENDS

Regulatory Trends

Increasing government support

In many countries, government support is one of the most important forces fueling biotech development. The Chinese government emphasizes the biopharmaceutical industry in the 11^th Five-Year Plan period. China's National Medium-and Long-Term Science and Technology Development Plan Outline (2006–2020) indicates that in the next 15 years, China will deploy a series of cutting-edge technologies in the biotechnology sector. These include target discoverY; animal and plant species and drug molecular design; gene operation and protein engineering; human tissue engineering based on stem cells; and a new generation of industrial biotechnology. The government also will increase investment in the biopharmaceutical sectors.

IP protection enforcement

China is making strides in protecting IP rights in conformity with World Trade Organization requirements. This trend will continue in the future, and these efforts are leading to increasing confidence in China's IP protection system. For example, this improved IP protection was a key reason Novartis chose to set up its eighth global R&D center in China in November 2006. Several other multinational companies also have established R&D centers in China.

Regulatory reforms

China's State Food and Drug Administration (SFDA) is modifying policies to encourage innovation and restrict imitation. It is also issuing policies to encourage biopharmaceutical outsourcing. Moreover, the country is on the way to establishing an effective VC system to attract foreign venture capital in the biotech sector.

Drug price cuts

The government has conducted 19 waves of drug price cuts and is planning more in the coming years. This may affect the country's biopharmaceutical revenue growth but will benefit Chinese consumers. The overall increase in volume may offset the reduction on per-unit revenue.