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 Shares in firms such as Chi-Med, Beigene and Zai Lab have soared on
international markets this year, fueled by hopes for their drugs and
recent reforms to China's regulatory system that should speed up
approvals.
"It's almost a coming out party for China biotech," said Christian
Hogg, chief executive of Hutchison China MediTech or Chi-Med, which
presented promising data at a global medical congress this week on a
lung cancer drug it discovered in China and is developing with
AstraZeneca.
"China is in vogue because of the positive moves on the regulatory
side, as well as advances at companies. It's a big, big change
versus 10 years ago and it is accelerating."
Importantly, national and provincial authorities are also moving
faster to agree payments for innovative drugs, albeit after
negotiating price discounts in many cases.
Yet amid the euphoria it is easy to lose sight of the fact that
China still has far to go. It contributes just 4 percent of global
drug innovation - as measured by the number of products in
development and recent launches - against 50 percent from the United
States, according to an October 2016 report from four Chinese
pharmaceutical associations.
"It is very apparent they are trying to transition to being more of
a novel drug development environment and bring in more innovative
research," Scott Gottlieb, head of the U.S. Food and Drug
Administration (FDA), told Reuters.
"I think it's going to be a long transition ... we built up an
ecosystem in this country over decades and decades."
China's traditional strengths lie in generic drugs and the bulk
production of active pharmaceutical ingredients that are found in
pills in pharmacies worldwide.
The shift in focus to original research is a change in mindset,
although it builds on the success of contract research and
manufacturing company WuXi Biologics, which does much of the legwork
for China's budding biotechs.
REFORMING DRUGS WATCHDOG
Bi Jingquan, the reformist bureaucrat who has led China's drugs
watchdog the CFDA since 2015, views innovative - and affordable -
drugs as the key to meeting the country's growing clinical demands.
China is now the world's second-biggest drugs market after the
United States, with more cases of cancer and diabetes than any other
nation, fueled by fast food, smoking and pollution.
But the CFDA head lamented in a recent speech that Chinese domestic
drug industry R&D investment was only 42 billion yuan ($6.3 billion)
last year, a small slice of the $157 billion spent worldwide by drug
companies in 2016, according to market intelligence group
EvaluatePharma.
Redressing the balance is a priority.
"We want to make our pharma industry big and strong, make our drug
companies more competitive, so that we can shift our country's
long-standing reliance on imported new drugs," said Bi Jingquan's
deputy Wu Zhen.
A big part of that involves overhauling regulation, with a new
system now in place to accelerate full and conditional drug
approvals as the CFDA strives to narrow a typical five to seven year
lag between how long new drugs reach the market in China compared
with Western countries.
Plans announced last week mean the agency will now accept data from
overseas clinical trials. That was applauded by Pfizer, the top
foreign drugmaker in China, highlighting the stiff competition still
facing local biotechs.
So far many of the new drugs discovered in China are follow-on
medicines in established therapeutic classes rather than
ground-breaking first-in-class treatments.
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Some global companies like Swiss-based Novartis and Roche, with
deeper institutional scientific knowledge, are also tapping into
China's science base to discover their own promising new drugs in
the country.
Still, Chinese firms are notching up their first home-grown
successes, particularly in cancer, with Shenzhen Chipscreen
Biosciences winning a CFDA green light for the first modern oncology
drug, used to treat a rare lymph-node cancer, in 2015.
Now Chi-Med, working with Eli Lilly, hopes for approval of what
would be a broad-use bowel cancer medicine, fruquintinib, around the
end of this year.
On the international stage, Beigene and Chi-Med are also racing to
be first to bring China-discovered cancer drugs to U.S. and European
patients, often doing deals with global firms that can provide
marketing expertise outside China.
In July, Beigene signed a deal worth up to $1.4 billion with Celgene,
licensing a promising cancer immunotherapy drug candidate to the
U.S. group in the largest ever transaction involving a Chinese
medicine.
LONG-CYCLE BUSINESS
Beigene CEO John Oyler is convinced Chinese drug discovery is on a
roll, backed by powerful interests in Beijing who want to forge a
leading position in the sector, just as China has done in energy,
finance and telecoms.
"The day you see a China-grown company that is one of the five major
global pharmaceutical companies is approaching," he said, though he
admitted recent big share price rises were "not commensurate with
clinical data being reported".
Others pointed to an under-developed academic ecosystem in China and
the fact most big local drugmakers were deeply rooted in generics,
despite outward talk of innovation.
"It's easy to say I want to do new drug development, but then it's
harder to see yourself spending $100 million and then fail,"
Samantha Du, chief executive of Zai Lab, told Reuters at the
company's headquarters in Shanghai. Du was also a co-founder and
chief scientific officer of Chi-Med until 2011.
Zai Lab, which listed on the Nasdaq stock exchange in September, has
a drug discovery program focused on immuno-oncology, though for now
its pipeline is dominated by molecules bought in from the likes of
GlaxoSmithKline, Sanofi and Tesaro.
Du hopes to change that one day but says it won't happen overnight.
"It's such a long cycle, if you want to discover and develop drugs
from ground zero, that's 12-15 years," she said. "It's going to take
time."
(Additional reporting by Bill Berkrot in New York; Editing by Pravin
Char)
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