GROWING BIOLOGICAL EXPORTS

China's biological product exports are growing rapidly. In 2006, China exported a total of $890 million in biologics to other countries—a 30.61% increase compared with the previous year. This increasing focus on exports is likely to include expansion of contract manufacturing services. Tonghua Dongbao Pharmaceutical Co. exported $8 million of recombinant human insulin products to 10 countries in 2006. Its export destinations included Russia, Poland, Mexico, and other developing countries. The company is planning to enter the EU and US markets by obtaining required certifications in 2009. It is acquiring a Sweden-based plant, which has received both EU and FDA certifications, to be its base for manufacturing Insulin in Europe.

Others are following a similar path. 3 S Bio Inc. is also planning to increase its recombinant human erythropoietin (rh EPO) exports. The company exported a modest $753,000 in recombinant products in 2006, but plans to expand its exports to other developing countries.

Beijing Kawin Bio-tech Co., Ltd., National Engineering Research Center for Viral Bio-Technology

In 1999 the SFDA issued its "announcement concerning regulations on drug production in different places and entrusted drug processing."² This allowed drug contract manufacturing; however, crude drugs, blood products, and vaccines continued to be prohibited from CMO production. In 2001 the SFDA stipulated that, "A drug manufacturer may accept contract production of drugs upon approval by the drug regulatory department under the State Council...."³ The new law legalized pharmaceutical contract manufacturing in China. In 2003, the SFDA clarified its "regulations on processing drug for export," noting that Chinese drug manufacturers may conduct contract manufacturing for a pharmaceutical company outside China.⁴ In 2004, the SFDA lifted the ban on contract manufacturing of crude drugs.⁵ In January 2006, a record-keeping regulation clarified that a GMP-certified Chinese pharmaceutical manufacturer may accept contract processing of drugs from foreign companies, provided the processed drugs are not sold inside China.⁶ The SFDA regulations continue to exclude vaccines, blood products, and Chinese herbal injections from contract manufacturing.

CURRENT GMP SITUATION

China completed the good manufacturing practice (GMP) certification for all the drug manufacturers present in China in July 2004. Most manufacturers were required to modify their facilities according to the GMP standards before passing GMP inspections. At the end of 2005, more than 5,000 Chinese drug manufacturers had obtained their GMP certificates. Although the GMP certification process eliminated a number of small-sized manufacturers, the overall production capacity of Chinese pharmaceuticals increased dramatically as a result of GMP modification. Manufacturers invested an average of $10.6 million to modify their facilities. The Chinese government recognized that it must improve the current capacity utilization rate (currently 45% excess facility capacity),⁷ and give priority to the pharmaceutical contract manufacturing industry.

BIOPHARMACEUTICAL CONTRACT MANUFACTURING

Biopharmaceutical contract manufacturing in China is young. According to Desheng Zhou, the GM of Beijing Kawin Biotech Co., one of China's few biopharmaceutical contract manufacturers, "Today, the biggest challenge for Chinese biopharma CMOs in winning overseas manufacturing contracts is building confidence with overseas pharmas." Beijing Kawin has a fully automatic production line in China with a staff of 200 employees, and an output of 100 million vials of Interferon each year.

Other biopharmaceutical CMOs in China include Hangzhou Acon Biotech and Shenzhen Watsingene Engineering Co. Also, some bio-parks in China, such as the Liuyang Biopharmaceutical Park, have indicated that they plan to become major centers for contract manufacturing in China.