China Today: Biopharmaceutical Exports

Converting China's pharmaceutical manufacturing capacity to biopharmaceutical exports
Aug 01, 2007
Volume 20, Issue 8

Eric Langer
More and more biotechnology and pharmaceutical companies in China are considering converting excess capacity to contract manufacturing as part of their overall biopharmaceutical products strategy. However, due to the significant capital investment, high operating costs, and quality requirements associated with contract manufacturing, this segment in China has not expanded as rapidly as it has in other Asian and Western markets. Moreover, until only recently, contract manufacturing of pharmaceuticals was not permitted in China. Even today, the State Food and Drug Administration (SFDA) regulations do not allow vaccines, China's main biological exports, to be contract manufactured.

With $25 billion in excess pharmaceutical production capacity in China, and much of its production facilities standing idle,1 many Chinese pharmaceutical organizations are beginning to evaluate the strategic value in biopharmaceutical production. Recombinant proteins are considered more technically complex, and the regulatory hurdles for these are higher, compared with other therapeutics, therefore, moving into this area requires a thoughtful approach.

Dr. DC Yu, of Kanghong Biotechnology Co., Ltd., in Chengdu, China, has seen a move among pharmaceutical firms in China to get into the biopharmaceutical field, including the conversion of existing resources or changes to their business directions. Many firms have started working on biologics, approaching it in a number of ways. "A few approaches these companies are taking include building a biologics division, converting existing space into production facility for biologics, and building new facilities specifically for biologics, " said Dr. Yu. Publicly listed companies, in particular, want to add 'sexy' products or capabilities in biotechnology. "A few biotech firms have been recently acquired by pharmaceutical companies,"continued Dr. Yu. "The Gendicine manufacturer (Ad-p53, the first gene therapy product in the world) has been recently acquired by a pharmaceutical company, and Endostar (endostatin, which failed in the US in trials) was recently acquired by Simcere, which was recently listed in NYSE."

Table 1. Leading biopharmaceuticals in China
According to Advances in Biopharmaceutical Technology in China, the recent BioPlan Associates and Society for Industrial Microbiology study, an issue in considering contract manufacturing in China today is how companies will allocate excess production capacity, or obtain the resources needed to establish a biopharmaceutical CMO operation. "The reason we chose to conduct contract manufacturing for international pharmas is exactly to solve the problem caused by idle production capacity," said Changchun Wang, manager of contract manufacturing at Xi'an Chiho Pharmaceutical Co., Ltd, a contract manufacturer in China. "We feel that contract manufacturing is the solution. The significance of conducting international contract manufacturing to us is strategic."

China is already an international supplier for active pharmaceutical ingredients (APIs) and intermediates, and as domestic consumption increases, China will continue to attract the attention of global pharmaceutical and biotechnology companies. As Chinese fine chemical companies increasingly move into more complex areas like biopharmaceuticals, industry experts expect large global biopharmaceutical companies to consider China as a materials, labor, and service resource. Large biopharmaceutical companies in China will likely become a more significant global resource for APIs and advanced intermediates.

According to government statistics, China's biologics market exceeded $2.5 billion in 2004 and is growing at a rate of 13% per year. This market is primarily dominated by generics manufacturers. Most of these companies are small domestic players that compete on price and tend to have excess manufacturing capacity. With excess capacity and compressed margins, Chinese biopharmaceutical manufacturers are ideal to partner with or acquire.

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