Chinese labs begin R&D for Big Pharma and other biotech companies 　　It came down to three countries for Bridge Pharmaceuticals’ new animal testing lab: India, Singapore and China. In the process India fell out of the equation. “India doesn’t have primates or dogs,” said Glenn Rice, the Menlo Park, California-based company’s president and CEO. India is a great place for small molecule manufacturing but not for toxicology testing on animals because the right breeders are not available there, Rice said.
　　“We need dogs,” said Lu Shengming,
　　co-founder of Bridge Pharmaceuticals Inc. and the company’s chief veterinarian. “Mostly we use a beagle; it’s quite good with people and less influenced by other factors like stress,” said Lu, who also mentioned that beagle testing has been banned in India because of animal welfare concerns. While there are some animal rights activists in Beijing, “so far they are pretty mild,” said Lu, who was quick to note that Bridge is concerned for animal welfare. Living space, for example, is appropriate and up to international standards, he said.
　　Meanwhile, Singapore has a lot of smart people, Rice said, but it was only half as costly as it would be to maintain a lab in California.
　　“If I was going to do this I needed to cut costs a lot more than that,” Rice said.
　　
　　China would be it.
　　
　　Location, location, location isn’t just the mantra for real estate anymore. It’s the mantra for contract research organizations like Bridge, which perform outsourced R&D work for Big Pharma and major biotech companies. Increasingly, that location is China.
　　LINKED: Foreign pharmaceutical companies are contracting with Shanghai-based WuXi PharmaTech Inc., one of the leaders among Chinese research contractors
　　Currently there are about 100 local contract research organizations in China, according to a recent article by Michael Chu, President of life sciences consulting firm AsiaBizCo LLC. Within five years, the Chinese contract research industry will offer fierce competition to its counterparts in other Asian countries like India, his article said.
　　Big Pharma and Western biotech companies appear to have gotten over their concerns about intellectual property protection in China, traditionally a barrier to outsourcing this type of work. They have found that the grass is greener for drug development in China, where costs are much lower.
　　This is perhaps most evident in how many pharmaceutical companies are contracting with Shanghai-based WuXi PharmaTech Inc., one of the leaders among Chinese research contractors.
　　“Eighteen of the top 20 Big Pharmas are our clients,” said Tao Lin, Vice President of Internal Operations at WuXi PharmaTech. WuXi began performing outsourced chemistry research in 2001.
　　“We set up a lot of security systems from the Internet or intranet in our companies to make sure our employees will not screw up the intellectual property protections,” Lin said candidly.
　　Rice added that Bridge, which christened its first Chinese laboratory in November, also has security measures such as locking up lab notebooks and having employees sign confidentiality agreements.
　　The big pharmaceutical companies aren’t only concerned about security. They’re also concerned about quality control, which Bridge also has addressed, especially since finding a fraudulent lab entry at one of its subcontractor’s facilities.
　　“We saw a [lab] entry on a Friday afternoon for the following Sunday,” Rice said. “They didn’t want to come in on the weekend so they entered Sunday data.”
　　Rice said he decided at that point to do away with subcontractors and build his own animal testing lab in Beijing, which is nearing completion. He plans to hire 64 employees there by the end of the first operating year and keep headquarters in California lightly staffed at 25.
　　Previously, no major pharmaceutical company was interested in doing business with his company. Now, he said, they all are.
　　
　　Not up to FDA speed yet
　　
　　Before a drug reaches trials that test its safety and efficacy in humans, there is a lot of work to be done. Researchers often work with what are called chemical libraries to find compounds that could fight disease. Then those compounds are tested on animals. In the meantime they are constantly being modified, for example, to find the right dosage.
　　More and more of this preclinical work is being done in China by contract research organizations.
　　Companies like Shanghai-based ChemExplorer Co. Ltd. and WuXi PharmaTech focus on chemical screening while Bridge Pharmaceuticals’ new facility will perform animal testing.
　　What most of these contractors do not offer at this point is a direct route from preclinical testing to human studies for regulatory authorities like the U.S. Food and Drug Administration (FDA), which are necessary for drug approval in the United States and other big markets.
　　“Typically, not many Chinese research centers can live up to standards where data can be automatically accepted by FDA,” said Bill Liang, Managing Director of Los Angeles-based China Healthcare Consulting.
　　What they can do is the preclinical work very well and at a deep discount.
　　“The book on building a [high quality] lab is about 2 inches thick,” Rice said. “We have a very detailed design for temperature, air handling, humidity, water treatment, sewage treatment, room size, door jam size and hallway size; it just goes on and on.”
　　Meanwhile, for a full-time Ph.D. employee, a U.S. company would have to spend $250,000 to $300,000 annually, said Jonathan Wang, General Manager of Burrill Greater China Group at life science merchant bank Burrill & Co.
　　“For the same Ph.D. and above-level chemist in China, it costs about $30,000,” Wang said.
　　Overall, the preclinical savings are usually at least 50 percent in China, Liang said.
　　
　　Case study: soul outsourcing
　　
　　One of those big preclinical savers is Big Pharma giant Eli Lilly, which outsourced such work to ChemExplorer.
　　It’s a bit ironic as, according to Lilly’s website, longtime company president Eli Lilly himself once called research “the heart of the business, the soul of the enterprise.”
　　Now the Indianapolis-based company’s heart and soul is in China under foreign leadership.
　　“Lilly is one of the earliest among the multinational pharmaceutical companies to outsource R&D projects to a Chinese company, and the first to do so on such a scale,” according to a Lilly media release.
　　Robert Armstrong, Lilly’s vice president of discovery chemistry research and technology, said his company saves about 40 percent of the cost of doing the same basic research in Indianapolis.
　　“We really have been very impressed all along,” Armstrong said.
　　
　　As for ChemExplorer, it didn’t just start recently--it started small.
　　
　　The company had only five employees when it began in 2002, according to a recent report by the Asian Technology Information Program, a not-for-profit organization that seeks to help the United States communicate with Asia about technology advancements.
　　Since then, ChemExplorer has expanded to employ more than 200 people, 15 percent with doctoral degrees and 15 percent with master’s degrees, the report said. “We have had a superb track record of being able to attract and retain really some of the best talents in China in the area of synthetic chemistry,” Armstrong said.
　　That’s due in part to ChemExplorer’s location, Zhangjiang Hitech Park in Pudong, Shanghai. This hitech area, established in 1992, is considered to be the most successful park among the 53 national high-technology parks in China that have arisen from the Torch Program initiative, the ATIP report said. The Torch Program is a 1988 government initiative to develop new
　　hitech industries in China. Preliminary
　　statistics show that Zhangjiang’s total sales for 2004 reached 200 billion yuan ($24.16 billion).
　　Michael Hui, co-founder and CEO of ChemExplorer, declined to comment on the company’s relationship with Lilly except to say, “Lilly and us always prefer to keep [a] very low profile on our collaboration within the public domain.”
　　Because ChemExplorer is a private company, it doesn’t have to release earnings or sales figures to the public, so it’s hard to comment on its financial strength. Bridge and WuXi also are private, although WuXi hints at its success.
　　“Since 2001 our revenue has increased over 50 times,” WuXi Vice President Lin said. While Lin said his company is profitable, Bridge’s Rice said he expects profitability in a year.
　　“We think [biotechnology in China] is the future,” Rice said. “It’s the last industry that has not outsourced in China.”
　　But now it is beginning to, he said.
　　

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