How did China, in just 10 years, establish a sector that took 100 years to build in the West?

 The CRO business within drug discovery started only some 10 years ago in China, with much of the activity centred around Shanghai . 

In the industry’s infancy, Big Pharma mainly used China outsourcing as an inexpensive way to save resources. However, as the sector has matured and gained significant expertise, which has drastically changed the scope of outsourcing  during the intervening years. 

In my explanation of the extreme growth of this industry, I will focus on ChemPartner, my employer, a Shanghai-based company, which is among the more comprehensive and internationally oriented CROs . Our CEO, Michael Hui, founded ChemPartner  in 2002, shortly after returning to China from the US. He set up a small company synthesizing compounds to support medicinal chemistry teams in the West. By the end of the year, the company had grown to five employees. 

In 2003, we expanded the scope of  chemical synthesis, adding, libraries, building blocks and much more medchem support .  Within one year, our employee base increased 20-fold, to 100 scientists.  Growth has continued steadily since then, and today we employ close to 2,000 scientists.

How did China, in just 10 years, establish a sector that took 100 years to build in the West?

To understand the remarkable growth of China’s CRO sector, one must look no further than the support from both local and national government for the foundation of a modern pharma and biotech industry, and the visions of a few entrepreneurs with very clear strategies. 

The CRO-focused development area in Shanghai, which was the country’s first incubator, was built much like cities in Western countries. It offered a complete and modern infrastructure of power, communication and waste management. But it also boasted buses, metro and light-rail streetcars, and close proximity to several top universities. The effect of this was to create an efficient and nurturing environment for the industry.

Yet even with this positive environment, the incentives to set up a new entity or relocate an existing company to the new development area were not substantially different from what was offered in Europe at the same time. To differentiate itself, the government took additional steps to attract companies to Shanghai. Perhaps the biggest breakthrough was the recognition that foreign trained talent—including Chinese who had studied abroad—was required to enable and sustain rapid growth in the fledgling Chinese industry. 

Part from offering very good jobs, attractive tax incentives were set to attract key staff with extensive experience in doing drug discovery to come—or return— to China. The result was a ‘mini reverse’ of the brain drain that had long dogged Chinese development in the most advanced areas of its economy. With the inflow of international talent came the breakneck speed of development of the CRO industry. These incentives are still attractive and effective. In contrast, similar incentives are shorter lived and much less attractive in Western countries. 

Today, we employ  150 senior scientists, each with 10 - 27 years of experience in drug discovery in Western pharma, biotech and universities. They bring diversity and experience from both previous employment and their studies and post doc training at universities like Heidelberg, Lausanne, Harvard, Rensselar and Berkeley, to name a few. 

These elite scientists, employed under the tax-incentive plan, are leaders and mentors to our Chinese-educated talent, with a low mentor/mentee ratio of 1:6.7. This way, the 150 scientists have generated a basis for more than 2,000 permanent jobs, within ChemPartners and our suppliers, so we have no reason to believe the incentives will removed.

We continue to look for experienced scientists from Europe and US, and have no plans to stop.

The international expertise is  also attractive for young Chinese, making ChemPartner a highly attractive employer where young scientists can be continuously challenged by, and benchmarked with, a broad selection of Western companies. The same expertise that makes the company attractive to graduates similarly draws clients who are interested in accessing both the company’s senior experts and also the best and most talented young scientists in China.

This attractive government policy, combined with strong corporate leadership, helps explain how ChemPartner was able to grow from performing ‘simple’ compound synthesis to conducting fully integrated drug discovery research programs in less than 10 years. Today, we cover the preclinical drug discovery continuum within small molecules and MaB, from delivery of mg quantities of novel compounds to design and production of SAR libraries, scale-up and API production. The areas of particular focus in our company are those of CNS, Oncology, Metabolism and Inflammation.

It is now possible to have Target ID & Validation, Lead Discovery, Lead Optimization, Preclinical Development and Pharmaceutical Development available in a single CRO.  We have managed to amass a rather complete pharma discovery unit, but have no plans to become a pharma ourselves – ChemPartner does not have an internal pipeline of discovery or development projects.

Site expansion

The first phase of our multi-purpose GMP facility for scale-up, kilolab and API production has gone on-line early in 2011 – currently with 36 reactor trains from 5 to 3000 liter capacity. 

In Chengdu, we took over a new purpose-built lab in Q2 2011. The lab is 10 floors of completely modern labs. This was a much needed replacement from our old labs that had become too congested. 

In addition to the two facilities we have already in Shanghai and Chengdu, the most recent of the additions being the labs formerly owned by Charles River China, five floors of state-of-the-art toxicology and pharmacology labs. Our use of this new vivarium will focus on disease models, KI/KO rodents and Minipigs.

Working with vivo studies, we decided from the beginning that for both ethical and scientific reasons, we would build our facilities according to Western guidelines, standards and accreditation. In this spirit, we successfully focused on rapidly achieving AAALAC accreditation for all of our facilities. For several years we have served as a reference site in Asia, our vivarium housing many species, from rodent to minipigs.

Today, ChemPartner has facilities in two locations in Shanghai, and one in Chengdu in Western China. Chengdu was chosen because of proximity to one of the highest ranking universities of China and the biggest cancer hospital in China, with which we work closely.

Scientific expansion

Our latest expansion in the scientific arena has, like all of our previous expansions, been driven by requests from customers. In the area we call ‘Biologicals,’ we initially produced just the protein targets that were required for HTS in development of biochemical assays. This gradually developed into cellular assay support, where transfection, expression of receptors and establishment of stable cell lines became requirements. 

Today, this has become an important department, covering everything from protein production and structure to discovery of monoclonal antibodies (MaB). The MaB discovery function has led to several stand-alone services like affinity maturation and humanization – and the group continues to expand.

As ChemPartner’s development highlights, pharma is progressing rapidly in China. Western companies are now setting up independent research facilities in China – no longer subsidiaries established to support science in the West. For Chempartner as a CRO, we now work with both the Western companies and with their Chinese subsidiaries. Also, a new segment of clients has emerged over the past years. Today, mid-sized pharma and biotech of all sizes, ranging from virtual companies, with no employees, to the biggest ones around, are forming a very large segment of our engagement within the drug discovery industry.  

The outsourced projects have changed somewhat too. Originally the outsourced project was relatively straight-forward, today many are research based. Furthermore, the projects outsourced do require a multitude of scientific disciplines. The most extreme examples are collaborations, where only the goal has been clearly defined, and the starting point is an article from literature. Some as far as the complete delivery of a pre-clinical candidate.

Doing full drug discovery from target to clinic is a relatively new activity within the Asian CRO, delivering  projects into clinical development, entirely based on IP generated in China. This trend has been strengthened by the new, and much more strict, IP legislation that has been put in place in China over the past years.

On behalf of clients, ChemPartner has already delivered development candidates, and many are currently in Phase I or further advanced. The starting point typically around assay development or immediately post-HTS.  Patents have been filed in both US, Europe and Asia for these developments.

ChemPartner of today,  offers a stepwise approach to the entire process of drug discovery, focusing on the actual need. Companies often use outsource/internalize several times in the lifetime of a project. Working with a comprehensive CRO, provides the comforting knowledge that if projects do not develop as planned, all other discovery services are also available in support on an as-needed basis. In addition to projects in discovery, we have often seen this being a huge advantage in scale-up and early process development, when impurities need to be characterized, synthesized and tested. 

Consolidation

In order to also offer the transparency of the organization that many Western companies have come to expect, the holding company of ChemPartner, ShangPharma, was listed on New York Stock Exchange in October 2010 (NYSE:SHP). The move mirrors the dramatic maturity of the CRO sector in China. It no longer is necessary to ask what is available before making a decision to work in China. With tremendous capacity in place, the question is simply what work makes the most sense to outsource or to partner. 

With this background, I hope to have provided a little insight into the reason a company like ChemPartner could rise so quickly and now be able to offer very comprehensive levels of collaboration, where 10 years ago, only a very basic industry existed.

Today, there is no “typical client” and no “typical project” – the CRO industry has become accepted as a natural extension of internal resources, where any project that has too low volume to warrant internal expansion of capabilities is immediately outsourced. The new element is that of oursourcing entire discovery projects, either as a supplement to internal efforts, or to gain further expertise and diversity in making a back-up project. 

If you have any questions or comments, please feel free to contact our European office in Denmark.