China Today: Next Steps Toward Globalization

China's services sector is expanding to meet the needs of its biopharmaceutical industry
Jul 01, 2007


Eric Langer
For years, China's domestic biopharmaceutical companies have completed most steps in the biopharmaceutical value chain in-house. The domestic industry was simply not large enough to support a substantive services segment. This situation is changing as China's pharmaceutical services sector expands to meet the emerging needs of the biopharmaceutical industry. As the country's domestic industry grows, it demands higher quality and more cost-effective external services from both home and abroad.




Eliza Yibing Zhou
China's domestic companies have broad service needs, compared with the larger multinational organizations established there, which typically have greater in-house resources and talent. Most domestic biopharmaceuticals are small-scale companies and are attempting to broaden their R&D-to-production value chain. This requires access to specialized capabilities.






Table 1. Biopharmaceutical services required in China
Creating the in-house expertise required for the broad array of services essential for a successful biopharmaceutical company is unrealistic for most Chinese companies (see Table 1). Also, because China's services industry is at an early stage and the critical mass of customers required for such new services is not quite there.

REQUIRED EXTERNAL SERVICES

Today, most Chinese biopharmaceutical companies have realized the importance of external services and are looking for those that meet their needs and standards. This issue was discussed in detail with CEOs and senior executives at five Chinese biopharmaceutical companies: 3S Bio, Inc., Shanghai Sunway Biotech, Beijing Four Rings Biopharma, Beijing Tri-Prime Gene, and Shenzhen Interlong Biotech Co.

Most Chinese biopharmaceuticals are relatively small and there are not enough of them to sustain a robust services sector. According to Dusheng Cheng, general manager at Beijing Four Rings Biopharma, "Most Chinese biopharmas are small and product distribution is relatively scattered, because most companies have only a few strong-selling products." Cheng says that additional funding would be required to enable companies to complete the entire pharmaceutical process value chain. More importantly, he believes, "Completing the process value chain [internally] would be a waste of capital, manpower, and material. Some of the time-consuming, investment-demanding processes would become a big burden to companies [if they were brought in-house]." More and more Chinese biopharmaceutical companies are seeking external service providers to help complete the whole process.

Yongqing Cheng, general manager at Beijing Tri-Prime agrees, "Facing harsh competition in the domestic market, Chinese biopharmas certainly wish to invest their limited resources in ways that will allow them to be most competitive. Therefore, they really need external services."

Analytical testing, toxicology, and animal test services are among the services that have a great demand in China today. Four Rings Biopharma's Cheng believes that these services are critical because, "Chinese biopharmas find these assays are more strictly evaluated by the State Food and Drug Administration (SFDA)."

Dr. Jing Lou, CEO of 3S Bio, Inc., notes that his company has already contracted out analytical testing such as carbohydrate structure analysis of glycoproteins from mammalian cell-expressed process. Dr. Lou believes that such external services can help ensure in vivo activity in certain glycoproteins such as erythropoietin (EPO) and thrombopoietin (TPO).

Other services in demand include clinical research services, technology transfer, and cell line construction and development. According to Dusheng Cheng, though, "The companies providing these services are still early stage and large-scale professional service companies are not available." Moreover, quality management, training, and drug distribution services (contract sales) are sparse in China. Services that may be required in the near future, but are not in high demand yet, include contract manufacturing, formulation, and stability studies, which today are needed at relatively few companies.