Changing Regulations and ‘Sea Turtles’ Drive China Biotech Boom

Backed by US$260 million, Brii BioSciences is the latest firm benefiting from regulatory and economic changes in China. Insider spoke with expert David Deere to discover why the Chinese market is finally opening up.

Funded by a group of six venture capitalists firms, Brii Bio is the latest, and one of the largest, examples of the surge of investment and innovation in Chinese biotech.

“Brii Bio aims to accelerate the development and delivery of breakthrough medicines in China through partnerships, best-in-class research and development, and the disruptive application of digital and data insight,” the newly launched biotech said last month.

According to David Deere, founding chief commercial officer of PaizaBio, this launch has all the markings for success in what is opening up to become the world’s largest pharmaceutical market.

“While US & Chinese venture capitalists/private equity have ‘chased’ IP and often ‘bid it up too high’ by most opinion, few have the breadth of industry experience needed to foresee and fully understand the level of infrastructure required and regulatory hurdles to overcome to reach for final commercialization,” he said.

Deere – whose firm describes itself being a ‘portal of entry’ for Western pharmaceutical companies seeking to enter China – told BioProcess Insider “instead of a pure ‘IP biotech investment play, Brii, ‘checks’ several government checkmarks,” one of the most important being an up-front commitment to outsource R&D and manufacture.

Third-Party Reliance

Brii has entered memorandums of understanding with WuXi AppTec and WuXi Biologics for R&D and manufacturing services within China. The firm will also access US-based biotech Vir Biotechnology’s pipeline.

These actions are “exactly what the Chinese government wants Chinese Biotechs to do to better allocate resources and put money into innovation,” and fulfil the expectation to manufacture domestically, Deere said.

However, other domestic companies have struggled due to limited availability of CROs and CMOs in China who operate to global standards.

“WuXi is probably the best integrated CDMO organization, domestically, and certainly has an aggressive strategic vision. However, breadth & depth of staff have likely not kept up with their extremely rapid rate of expansion and a minimal level of Chinese language proficiency limits the pool of international candidates. But they are moving fast.”

Meanwhile, firms such as Zai Lab and Beigene – both of which received funding from US IPOs – are investing in their own domestic manufacturing capabilities but Deere said capacity and capabilities remains problematic in China due to limited global cGMP-trained management and operators.

Sea Turtles

The rise of Chinese biotechs can also be correlated by returning Chinese ‘Sea-Turtles,’ Deere said, referring to a term penned to describe nationals educated and trained in the West who then return to China, often encouraged via special treatment by the Chinese government.

“They get backing from astute Western multinationals and venture capitalists hoping to quickly capitalize on domestic innovation. Most of the pharmaceutical innovation could be described as additional ‘me-too’ drugs or therapeutic improvements over known and established pathways; there is very little truly novel work.”

However, more expertise garnered in the West is returning to China to lead the new wave of domestic innovators. Brii, for example, is led by, seasoned executive and former-head of Infectious Diseases at GlaxoSmithKline, Zhi Hong.

Regulatory Changes

And the new regulatory environment is helping to further drive investments and innovation in the market.

“China is playing catch-up in the pharma sector having lost-out on patient access to the first generation of biological drugs,” Deere said. He added it has “never really been innovative in the biotech space, principally, because they did not have a robust clinical research heritage nor a functioning drug regulatory agency.”

But this is changing, driven by changing regulations. Quality rules for pharmaceuticals have been phased in over the past few years, starting in 2011 when the China Food and Drug Administration (CFDA) – then known as the SFDA – introduced the requirement that drugs must be made in compliance with cGMP standards.

And in February 2015, “The government strategically intervened by appointing a member of the highest national administrative, The State Council, to head the CFDA with a mandate to transform the agency in order to facilitate a modern pharmaceutical sector operating to global standards,” Deere said.

In less than three years, the CFDA completely rewrote regulations governing the way that pharmaceuticals, are manufactured, researched, clinically developed, regulatory reviewed and approved with sister agencies changing how the products are distributed, priced, dispensed and reimbursed.

In short, a complete transformation of the Chinese pharmaceutical sector, which is still in the process of full implementation.

All Eyes on China

One example of these reforms is best exemplified that in 2017, the CFDA experienced a 6-fold increase in new product approvals/launches, with a 90% reduction in CTA/IND review time over previous years; now on par with US FDA review performance metrics.

China had a major Cabinet reorganization earlier this year. The CFDA, now called the State Drug Administration (SDA), is incorporated into a large ministry headed by the former CFDA Director. Since many market regulatory enforcement agencies – as well as the national IP Office – are all sister agencies and equally accountable, rapid implementation and enforcement of the past three years reforms is assured, said Deere.

These regulatory changes are synergistically combining with multiple financial movements, said Deere: more domestic and foreign capital, a restructuring of financial markets to facilitate non-revenue, emerging technology companies launching IPOs.

Therefore, all eyes should be on the Chinese biotech space over the next few years. “By 2019, all will explode onto the broader global scene!”