Nature Publishing Group put out – what was for me, an admitted pedestrian when it comes to biotech – an informative Biotech in China Supplement. For industry insiders there is plenty of detail about what company is investing where,while more casual readers (again, like me) have to search a bit for more general information.  The following is what I got out of it.

1) By some estimates the pharmaceutical market in China grew 27% between 2008 and the third quarter of 2009, and is meant to grow by 20% every year until 2020.

2)  China really wants to move from  chemical science  into actual drug development.  There are many challenges to getting there. Currently, China is behind India when it comes to clinical outsourcing, something China needs to be able to do if it wants to develop novel drugs.

Estimates of approval time for moving on to clinical trial range [in China] from 9 to 12 months. This puts China at a disadvantage compared with its clinical outsourcing rival, India. There,late-stage clinical trial approval takes 2–3 months. India also has an advantage because of fluency in English, cheaper labor and a more westernized commercial environment.

Furthermore, Chinese hospitals are overburdened due to still unmet patient needs, which makes it difficult to organize Phase I trials.

“Almost all hospitals in China were established for and are overwhelmed with patient care,” says Zhen. But with more trials and the presence of big pharma, this situation is improving. “We anticipate that the overall sophistication of investigators in major academic hospitals and the quality of trials in general will quickly get up to the standard as required by international regulatory bodies in the near future,” says Zhen.

3) China’s idea for how to get there is to reduce the amount of redundant paperwork that goes into clinical trials, and to invest a lot of money into research parks. Last September the MoH started funding large health discovery project, and absorbed the previously independent State Food and Drug Administration (SFDA), after the administration’s chief executive was executed for corruption charges (!!!!!).  The government has instituted a ‘megaproject’, which will disburse $12 billion over the next five years to help Chinese research institutions to develop internationally competitive drug development programs.  According to insiders, just around $1 billion has been earmarked for the first phase.

Greg Scott, founder and CEO of consulting and research firm ChinaBio has tracked 80% of the megaproject funding and its matching funds from local governments and industry. According to Scott, US$525 million is going to some 50 “large projects,” over US$10 million each, focused on drug safety and clinical trial infrastructure. US$670 million is being divvied up among hundreds of small new drug development projects with specific drug targets in mind. In China, there is always concern that extra funding will go merely to buy impressive buildings. Scott says his trips to 53 universities and institutes have shown otherwise—that rather than “real estate” scientists are investing in expensive, crucial instruments such as mass spectrometers and electron microscopes. “The majority of people receiving funding are research scientists. From our experience, they are sharp people who should be able to put the funding to good use,” he says.

“The big money goes to academic research institutes for preclinical and discovery infrastructures and to hospitals for creating centers for Phase I clinical trials. Companies working on new drugs are the smallest part of the pie,” says Chipscreen’s Lu. Chipscreen is however getting about US$2 million from science and technology ministry as one of the National Innovative Drug Centers, “a showcase of innovation by China.”

4) China figured out how to make generics, but when it comes to making innovative products, the SFDA made a real mess of things. Up until recently, a lack of proper cataloging mechanisms for newly developed compounds, corruption, and slow processing times  made it very unattractive for companies to try and create novel compounds since “the few truly novel drugs are mixed in with hundreds of copycat products.”

5) The SFDA has been improved, and a new, faster “Green Channel” has been developed

“The SFDA is aggressively trying to remodel itself,” says Zhang, who chaired BayHelix’s SFDA working committee that sought advice from US FDA counterparts. In January 2009, for example, the SFDA started the Green Channel, an accelerated application process for new chemical entities, new combination treatments, or in case of severe medical need. At the same time, the SFDA established the office that gives pre- IND consultation.

6) The leaders of China Biotech are the ‘sea turtles’, Chinese PhD’s and research experts coming back to China from overseas.

(This now familiar phenomenon still astounds in degree: education ministry figures show the number of returnees jumping nearly 60% in 2008 from a year earlier to 70,000). A growing number of biomedical-industry hands, many with experience in multinational pharmaceutical companies, are establishing profitable arms of multinational contract research organizations (CROs) or independent domestic CRO start-ups. These companies, of which Shanghai claims the lion’s share, are fiercely competing, setting a premium on international standards in preclinical research.

7) The reports itself is overly optimistic about reform. Specifically, it assumes that China’s health reform plan is a done deal.  It’s not.  If the promised $120 billion dollar health reform, in China, were not to fully manifest, that would be very much in line with the PRC’s pattern of talking a bigger game than it is willing to play.  To wit, this means that one should make conservative estimates for when China’s medical schools, management structure, and hospitals are going to be strong enough to fully support a large scale research operation.  I’ve italicized and marked in bold the overly optamistic assumption in the following excerpt.

“We anticipate that the overall sophistication of investigators in major academic hospitals and the quality of trials in general will quickly get up to the standard as required by international regulatory bodies in the near  future,” says Zhen.

The report is appropriately confident about one thing – sooner or later, a Chinese company will join the ranks of drug development giants.

The pieces of the drug discovery puzzle are falling into place in China. Will China start producing potential blockbuster candidates? All agree it is matter of time, with some arguing for 4 years and some saying 20 years. As Kewen Jin says, “the next step is to show in China that you can take a compound all the way from candidate stage to Phase II trials.”