pharmaceuticals china report 2013

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ChinaPharma reportMarch 2013

Acknowledgements

Focus Reports would like to thank all individuals, institutions and companies involved in producing this report.

Special thanks go to

Yu Mingde, President, CPEA

Ting Lei, General Manager, Beijing Pharma & Biotech Center

Zhang Ze Gong, Deputy Director General, Beijing Pharma &

Biotech Center

Cheng Wei, Director General, ABO

William Keller, Owner, Keller Pharma Consultancy

And

David Jiang, Managing Director, BIOCOM China Consulting

who showed us their strong support and interest throughout our project.

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This report was prepared by Focus ReportsProject Director: Arthur Thuot Project Coordinators: Mathilde Paquet & Chiraz BensemmaneProject Publisher: Julie Avena Graphic Assistance: Christine Guiang

CopyrightAll rights reserved. No part of this publication maybe reproduced in any form or by any means, whether electronic, mechanical or otherwise including photocopying, recording or any information storage or retrieval system without prior written consent of Focus Reports.While every attempt is made to ensure the accuracy of the information contained in this report, neither Focus Reports nor the authors accept any liabilities for errors and omissions. Opinions expressed in this report are not necessarily those of the authors.

CONTENTS

INTERVIEWS

5 The Long March Marches Onward

8 Table: Sales Growth by Company

8 Found in Translation: Ancient Wisdom from the Middle Country, vol 1

9 Table: Sales Growth by Product

10 View From the Top

11 Specialization Nation

12 Here to Serve: Your Pleasure is Their Business


14 Buchang Group: By the Numbers

16 Critical Mass, Critical Competition


20 Interview with: Dr. Wu Xiaobing - Country Manager, Pfizer China

22 Interview with: Eric Baclet, President of Eli Lilly China

24 Interview with: Jean-Luc Lowinski - Senior Vice President, Asia Region & Vice President, Greater China Global Operations, Sanofi

26 Interview with: Eric Zwisler - President, Cardinal Health China

28 Interview with: Jonathan Zhu - General Manager, Celgene China

30 Interview with: Yuwen Liu - Chairperson & CEO, BioBAY

22 Interview with: Dr. Bill Guo - Chairman and Founder, Venturepharm Group

34 Interview with: Dr. Ge Li - Chairman & CEO, WuXi AppTec

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5Special SponSored Section

MarcH 2013 FOCUS REPORTS S2

china report

This sponsored supplement was produced by Focus Reports.

Project Director: Arthur ThuotProject Coordinators: Mathilde Paquet & Chiraz BensemmaneProject Publisher: Julie AvenaGraphic Assistance: Christine Guiang

For exclusive interviews and more info, please log onto or write to [email protected]

For every manager with a surefire strategy for China, William Keller has one piece of advice: “Let it go!” Keller should know. He founded Roche’s China affiliate in 1994 and built it into a market leader. In the meantime, he became an eminence whose

wisdom is sought industry-wide, from his role as spokesman for the Zhangjiang Hi-Tech Park, the world’s highest concentration of Life Science companies, to lobbying for Shanghai’s successful bid to host the 2010 World Expo. “Don’t try to control everything,” Keller goes on, “and see what comes out. Some will fail, and some will get very good insights to go further. It’s a journey of exploration. Explorers have a different mindset than followers!”

“Tsai Shen, God of Wealth”

The Long March Marches OnwardCHINA:

6 China pharma report March 2013Special SponSored Section

S3 FOCUS REPORTS MarcH 2013

china report

Indeed, China’s pharmaceu-tical journey has reached record heights. Just four years ago in 2009, China surpassed the UK, Spain, Italy, and Canada to be-come the world’s 5th largest market. Now it has exceeded both France and Germany to achieve 3rd place, and by 2015 will leapfrog Japan to sit behind only the US as global #2. Behind the 20%+ compounded annual growth, structural changes from the central govern-ment have put healthcare and innovation at the foremost of policy priorities.

Effective April 2011, the 12th Five Year Plan focuses for the first time away from pure growth, toward more sustainable and equitably distributed initiatives, including billions of dollars in “Strategic Emerging Industries” (SEIs). These include biotech-nology, which will see RMB 12 billion (USD 1.9 billion) earmarked for new drug R&D from 2011-2015, out of a total RMB 4 trillion (USD 0.64 trillion) alongside oth-er high value added like next-generation energy and IT.

“In China, we do believe the govern-ment will have an even bigger role to play, because of the way the country is set up, and because of the stage the industry is evolving through,” says Sheryl Jacobson, senior part-ner in Monitor Group’s China Healthcare practice, speaking to the role of innovation in the sector. “We’re still at a stage where the MNCs (Multinational Corporation) are USD 1 billion businesses at most, and pri-marily commercial entities. Local compa-nies are anywhere, in terms of manufactur-ing revenue, from almost nothing to USD 0.5 billion. The typical company that does innovation from the lab to in-patient trials – the traditional US or European model – simply will not work in China.”

Jacobson points to innovative industrial parks as platforms for China’s fast catch-up on innovation, and suggest that there’s potential to achieve world firsts, such as the elusive Electronic Medical Records, thanks to a scientific central approach. “What’s important for people outside of China to understand about China is the experimen-

tation that the government does province by province, city by city. The sheer number of experimentations means there’s a huge number of opportunities for healthcare companies, and it also means that every-thing shifts.”

Examples include the implementation of an EDL (Essential Drug List), which Jacob-son lists as one of many initiatives which can spread to the entire country, or be shut down in six months. “You really have no idea,” she continues. “And that has huge implica-tions on how you go to market. The govern-ment does, in fact, drive a huge amount of innovation deliberately in all sorts of ways, to figure out what works best. Fortunately, they’re willing to have really good learnings, for instance what’s happening on the EDL has led to significant quality issues.”

“But now,” Jacobson concludes, “[the government is] rethinking quality, with a price premium for some of the generics that are deemed to be the highest quality, and that’s something that you just don’t see in any other market.”

Good tidinGs we brinGMinister of Health Chen Zhu immortal-izes his enthusiasm for forward-looking policies in this excerpt from an occasional poem he penned: “Wind and thunder move across the country, health reform brings good tidings.” The Minister re-fers to 2009’s ongoing “Healthcare Re-form Plan” which has completed its first phase, bringing upwards of 95% of the population under some form of medical insurance, increasing accessibility and affordability, and building a network of basic healthcare facilities. Although there is still room for improvement – of total

healthcare spend, drugs ac-count for 50% (compared to only 13% for the US) and per capita spend remains among the lowest in the world, at USD 35 annually – China is not only a market anyone can afford to ignore commercially, but one that is increasingly lo-cally competitive. This trend has resulted in an oft-lamented

lopsided market split for MNCs with only 25% share, compared to locals at 75%. With the difference only growing in fa-vour of locals, the Minister’s tidings are unlikely to be shared equally by all.

Fortunately, for foreign players, there is a bright side in China’s estimated 4,700 domestic manufacturers. According to Dr. Brian Mi, general manager of IMS Health China, “not all of them abide by the GMP quality standard. There’s a big gap. This makes local manufacturers perceived as lower quality and associat-ed with less effectiveness and higher side effects. Because of that, MNCs enjoy a price premium, and doctors are very willing to prescribe the branded original products – because if the doctor mis-treats a patient, it’s the doctor’s liability.”

This, Dr. Mi says, has resulted in a quasi-evergreen phenomenon, evidenced in products like Glucobay, BMS’s old oral anti-diabetic, which continues at 30%+ growth. But as he also notes, “If you ask me what will happen in five years – with China un-dergoing a second round of GMP and the government tightening up quality – I always warn MNCs that the party may be great, but it’s ending. When locals start to produce high-quality products, the government will have a very good reason to reference and lower your price – because why shouldn’t they? You don’t have a patent!”

MnC vs. LoCaLs: iLLusion and ConfusionJoseph Cho, managing director of RDPAC (R&D-based Pharmaceutical Association Committee), adds a historical perspective to Dr. Mi’s. “The Chinese pharma industry started with generics, and coverage avail-

From left: Sheryl Jacobson, Senior Partner, Monitor Group; Minister of Health Chen Zhu; Brian Mi, General Manager of IMS Health China

Special SponSored Section


china report

able from a good health system was only recently available. It has really only been since 2005 that more advanced products have had the opportunity to penetrate to tier-3 hospitals in major cities.”

This view, shared by many MNCs, explains how the locals have managed to capture and maintain share. But rep-resentatives from the locals’ side, such as Yu Mingde, chairman of CPEA (China Pharmaceutical Enterprises Association), doubts the statistics altogether. “The re-sults of comparison depend on different standards and methods employed. We can see the accurate statistics from IMS, and talking about distribution or profitability rates, MNCs have done much better than locals. But local companies have a higher market ratio than MNCs and do better in basic drug supply,” he concedes, “because most MNCs produce patented drugs while locals do generics. The basic policy is to choose the lowest-priced drugs because of financial reasons and the large population.”

With such conflicting messages, it’s imperative to separate the noise from the signals. Jay Dong, general manager, Asia Pacific Region & China, of antibody and research leader Cell Signaling Technology, acknowledges this as a widespread diffi-culty. “People see opportunities, but at the same time, are perplexed by the many chal-lenges or opportunities that are not mate-rialized or over-exaggerated. They want to capture whatever real opportunity there is, while taking China as part of a global strat-egy, and figuring out how to leverage it.”

Dong breaks it down: “There are two challenges to focus on. The first is identify-ing what’s the real opportunity. The second is developing a strategy, so that whatever signal or noise there is, you are able to iden-tify it. An integral part of that is having the right team to capture the opportunity, implement the strategy, and manage risks.”

1.3 Billion Reasons to smileUltimately, the platitude of people as num-ber one asset is rampant in China. As some insiders put it, the talent war is a cliché as big as a house, but one that remains the most pressing issue for companies of all size. Headhunting abounds, resulting in a subgenre of employee known as the “job-hopper” – a person who will change jobs up to once per year for salary increases as little as 300RMB (USD 48) per month – al-though most increases result in total pack-ages increase by 20-30%, and contribute to rapid wage inflation that has touched every segment of the Chinese economy.

From left: Joseph Cho, Managing Director of RDPAC; Yu Mingde, Chairman of CPEA

Deloitte has acquired substantially all of the business of Monitor, one of

the world’s leading strategy consulting firms. The combination of Monitor’s

talent and business with the consulting strategy service lines of Deloitte will

result in a new global presence that will redefine the industry.

The new combined practices will operate under the Monitor Deloitte brand,

creating a broad-reaching strategy and execution presence with world leading

strengths in multiple domains, including innovation and marketing strategy.

Monitor Deloitte, through an integration of core strengths, capabilities, and

assets of both networks, is designed to offer a distinctive set of services that

fuse intelligent strategic insight and innovation with disciplined execution,

enabling organizations on their journey to be leaders and shape the future.

As used in this ad, “Deloitte” means certain member firms of Deloitte Touche Tohmatsu Limited (DTTL) that participated in the acquisition of the business of Monitor Company Group Limited Partnership (Monitor) and “Deloitte Consulting” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP, the DTTL member firm in the U.S. Each of DTTL and its member firms is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2013 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

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china report

able from a good health system was only recently available. It has really only been since 2005 that more advanced products have had the opportunity to penetrate to tier-3 hospitals in major cities.”

This view, shared by many MNCs, explains how the locals have managed to capture and maintain share. But rep-resentatives from the locals’ side, such as Yu Mingde, chairman of CPEA (China Pharmaceutical Enterprises Association), doubts the statistics altogether. “The re-sults of comparison depend on different standards and methods employed. We can see the accurate statistics from IMS, and talking about distribution or profitability rates, MNCs have done much better than locals. But local companies have a higher market ratio than MNCs and do better in basic drug supply,” he concedes, “because most MNCs produce patented drugs while locals do generics. The basic policy is to choose the lowest-priced drugs because of financial reasons and the large population.”

With such conflicting messages, it’s imperative to separate the noise from the signals. Jay Dong, general manager, Asia Pacific Region & China, of antibody and research leader Cell Signaling Technology, acknowledges this as a widespread diffi-culty. “People see opportunities, but at the same time, are perplexed by the many chal-lenges or opportunities that are not mate-rialized or over-exaggerated. They want to capture whatever real opportunity there is, while taking China as part of a global strat-egy, and figuring out how to leverage it.”

Dong breaks it down: “There are two challenges to focus on. The first is identify-ing what’s the real opportunity. The second is developing a strategy, so that whatever signal or noise there is, you are able to iden-tify it. An integral part of that is having the right team to capture the opportunity, implement the strategy, and manage risks.”

1.3 Billion Reasons to smileUltimately, the platitude of people as num-ber one asset is rampant in China. As some insiders put it, the talent war is a cliché as big as a house, but one that remains the most pressing issue for companies of all size. Headhunting abounds, resulting in a subgenre of employee known as the “job-hopper” – a person who will change jobs up to once per year for salary increases as little as 300RMB (USD 48) per month – al-though most increases result in total pack-ages increase by 20-30%, and contribute to rapid wage inflation that has touched every segment of the Chinese economy.

From left: Joseph Cho, Managing Director of RDPAC; Yu Mingde, Chairman of CPEA

Deloitte has acquired substantially all of the business of Monitor, one of

the world’s leading strategy consulting firms. The combination of Monitor’s

talent and business with the consulting strategy service lines of Deloitte will

result in a new global presence that will redefine the industry.

The new combined practices will operate under the Monitor Deloitte brand,

creating a broad-reaching strategy and execution presence with world leading

strengths in multiple domains, including innovation and marketing strategy.

Monitor Deloitte, through an integration of core strengths, capabilities, and

assets of both networks, is designed to offer a distinctive set of services that

fuse intelligent strategic insight and innovation with disciplined execution,

enabling organizations on their journey to be leaders and shape the future.

As used in this ad, “Deloitte” means certain member firms of Deloitte Touche Tohmatsu Limited (DTTL) that participated in the acquisition of the business of Monitor Company Group Limited Partnership (Monitor) and “Deloitte Consulting” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP, the DTTL member firm in the U.S. Each of DTTL and its member firms is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of DTTL and its member firms. Certain services may not be available to attest clients under the rules and regulations of public accounting.

Copyright © 2013 Deloitte Development LLC. All rights reserved. Member of Deloitte Touche Tohmatsu Limited

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Though any elementary economics textbook would suggest an easy fix for a shortage – pay more – many managers, such as Jona-than Zhu, general manager of Celgene China, have found a way around this expensive alternative. “Our statistics for turnover rate in the last 12 months are very, very low,” Zhu says bluntly. Howev-er, his HR strategy is somewhat counterintuitive: “My philosophy is that I’m not necessarily recruiting “the best” – simply because

it’s so hard to define. One must take into account all the human qualities, inclusive of competence and knowledge, personality and experience. It’s very difficult to define. I’m going to recruit the appropriate talent and labor, which fit in very well for the long-term – people who speak a common language and share common values, and they will adopt the corporate values and compliance in turn. The result is a group that works together as an effective and productive team.” This has seen a doubling of headcount, from 30 to 60, in the company’s Shanghai office, in prepa-ration for the China launch of Revlimid, a multiple myeloma drug, for mid-2013.

Think and Grow rich: china’s napoleon hillZhi Yang, managing partner, & founder of BioVeda China Fund, never intended to be a healthcare investor. But his remarkable story – from a restaurant worker in the Cultural Revolution, to being selected to earn his PhD at Harvard, and returning to China to start the first international investment fund focused on healthcare – is rivalled only by his history-making exit, which at the time was the largest acquisition in the Chinese pharmaceutical industry since 1949.

In 2011, he turned his $7.8 million stake in CITIC Pharma into an approximate $550 million exit in just five years. Yang, in a brief history of healthcare sector investment in China, says that when he started BVCF in 2005, “the talk was always about “low-hanging fruit.” Later, many people began to notice that all the low-hanging fruit may be ripe and ready to serve, but ripe fruits are also the soonest to rot. When you hold low-hanging fruit in your hands, if market conditions are not right, you can find yourself holding hand-fuls of rotting fruit. On top of that, a lot

SALES GROWTH BY COMPANY

TYPE CORPORATION RANKSALES VALUE GROWTH

MAT2Q12

MNC PFIZER GROUP 1 21.89%

MNC ASTRAZENECA GROUP 2 11.00%

MNC SANOFI GROUP 3 16.37%

MNC BHC GROUP 4 18.27%

LOCAL JS.YANGZIJIANG FTY 5 17.09%

LOCAL SHANDONG QILU FTY 6 33.81%

LOCAL KE LUN GROUP 7 22.59%

MNC ROCHE GROUP 8 28.92%

LOCAL JS.L.Y.G HENGRUI 9 23.24%

MNC M.S.D. GROUP 10 20.27%

Source: IMS CHPA (China Hospital Pharmaceutical Audit) >100 beds

Jonathan Zhu, General Manager of Celgene China

“There is nothing you can’t do, but there are things you may not think of.”

– Chinese proverb, trans. courtesy Amy Bi“Family go bankrupt, person die,” is the literal trans-

lation of “jia pò rén wáng,” a devastating situation the families of many Chinese cancer patients find themselves in, according to James Huang, managing partner, Kleiner Perkins Caufield & Byers China

Found In Translation: Ancient Wisdom from the Middle Country, vol. 1

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of veteran Chinese investors now agree that the low-hanging fruit is gone. You have to look at the higher fruits which are less ripe, and find the ones that can quickly become the best fruits with the right nurturing. That means investment, like most things, is a game of differentiation and skill.”

Yang describes the field of investing with a uniquely Chinese metaphor. “Sometimes I compare investing to a TV show about ap-praising ancient Chinese antiques. On the show, an antique is presented to two pan-

els: a panel of regular people, and a panel of antique experts. First, the common panel must decide if the antique is real or fake, and if it’s real, then which dynasty did it come from? These are hard questions! They look at obvious things like color and markings, feel whether they trust the antique’s owner, or even crowd-source an opinion from the audience. In reality, they make their best guess. Most of the time they don’t get it right – obviously!”

As an example, Yang offers another successful investment, where he began by buying out the stake of a local Private Equity fund, which had priced their investment at under $100 million. “In China, that’s not a small number!” he says. “They were happy that they made good money on the deal. We were happy that we got an asset which was quickly becoming a $1 billion company.”

31 Provinces, 31 FlavorsDidier Dargent, general manager of Servier’s China affiliate, is can-did about differing strategies across China’s 31 provinces, and even city to city. “For MNCs, the true market is not the rural market. The fact remains that only 25% of the rural market goes to MNCs, while 75% goes to local companies, which is the opposite situation of many markets. Today, Servier China covers 100 cities and plans to expand to 130 cities in the near fu-ture, but I’m not sure we will run after every rural area.”

“You can’t escape the fact that Beijing, Shanghai, and Guangzhou make up 63% of the total market,” Dargent continues. He emphasizes that “China is all about priori-tizing, and you must learn to make choices about where to go, and in some cases be able to take the decision to stop. In some provinces, the pressure is just too high. A case in point is Anhui province [a major province just west of Shanghai], where many MNCs have given up.”

But Servier is not likely to give up. At over 1200 people, it ranks number one in personnel and uplift of all affiliates. This growth has been driven by three major products that constitute 90% of the China portfolio: Vasorel, Diamicron, and Acertil – and with more on the way. “We’ve been waiting for the reimbursement of Valdoxan, Coralan, and Coveram, but this is unlikely to happen

SALES GROWTH BY PRODUCT

MANUFACTURER PROD_DESC TYPE RANKSALES VALUE

GROWTH MAT2Q12

SANOFI GROUP PLAVIX MNC 1 18%

SHANDONG QILU FTY SHEN JIE LOCAL 2 52%

GUANGXI WUZHOU FTY XUE SHUAN TONG LOCAL 3 28%

LN.JZ. AOHONG PH ADEGOLD LOCAL 4 82%

SD.JN.BUCHANG PHAR BEI TONG LOCAL 5 23%

MUDANJIANG YOUBO SHU XUE TONG MNC 6 23%

SHENZHEN JIUXIN CO XIN TAI LIN LOCAL 7 25%

GO.BAIYUNSHAN FTY XIAN LI SU LOCAL 8 44%

BHC GROUP GLUCOBAY MNC 9 14%

JIANGXI QINGFENG XI YAN PING LOCAL 10 93%

Source: IMS CHPA (China Hospital Pharmaceutical Audit) >100 beds

Zhi Yang, Managing Partner, & Founder of BioVeda China Fund

Didier Dargent, General Manager of Servier China

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before 2014. In the meantime, we will need to get on national and provincial reimbursement lists and win hospital tenders. The delay between marketing authorization and actual availability for the

patient can be anything between 1 and 5 years.” One way to reduce such oft-lamented delays is to partner with

local CROs. But while market leaders like WuXi or Hutchison can

Kewen Jin, serial entrepreneur and former executive of Wy-eth and Charles River, now heads Nimbus Innoworks, a com-pany which has most recently forged a groundbreaking part-nership between Roche, Harvard, and the technology park BioBAY. He gives a brief history and future prospect on what many believe is the sector’s most promising niche:

In China, the emergence of a research-based life sci-ence industry probably is a symphony in three movements, or a trilogy.

The first movement is the emergence of China-based CRO industry. It started in 2001 with the founding of WuXi PharmaTech, followed by other CROs such as ShangPhar-ma. Looking back, it was doing the right thing at the right time at the right place. The global industry was looking for cost-effective R&D solutions; China has very large (albeit relatively green) talent pools; and there is an overseas dias-pora of seasoned Chinese scientists/managers in the West

to draw from. There were notable early successes in NCE (New Chemi-

cal Entity) discovery companies such as Hutchison Medi-Pharma. But generally speaking, it was very difficult to get funded in those days for non-revenue generating biotech companies in the Western sense. After years of explosive growth, the China CRO business is maturing and starting to run into some headwind, such as RMB appreciation, cost increases, global R&D downsizing, etc. The early leaders are either public listed companies or acquired by global CROs, and more consolidation will come. The first movement is mostly done and it built the critical ecology, the infrastruc-ture in both “hardware” and “software” for the innovation.

We are in the early stage of the second movement where China based companies try to leverage the early innovation in the West and utilize the discovery/development resources in China. This aligns with the status of Chinese life science. While we have “pockets” of world class excellence, and are closing the gap in many areas, on a broad perspective, China still significantly lags behind the West, particularly in early discovery biology. Companies like Zhejiang Beta Pharma and Chipscreen Biosciences are mostly using “fast follow-on” on validated targets approach. Given the deep chemistry expertise and ample patient resource, this is a very attractive strategy. Companies like BeiGene and Hua Medicine in-license compounds from major pharma com-panies and bring them to “proof-of-concept” in China. This probably would be the definitive and financially sensible business model in the next 5-7 years.

The third movement of Chinese life science industry symphony will be “de novo” innovation on a broad basis, from target identification/validation, lead generation/opti-mization, and preclinical/clinical development all the way to market. Surely there is already de novo innovation in China today, but these are exceptions, rather than the rule. China has started to pour serious money into academic research and upstream capability building only recently. It will take time for the investment to bear fruit and even longer to commercialize them. The U.S has been investing in early research for more than 50 years. With “China speed,” I am confident we will go through the learning curve much faster, partially as we can learn from what worked and not worked, partially because the “lack of legacy resource”, or “starting from scratch” enables us to leapfrog to the latest business models and technology. I don’t know how far away the third movement is, but the early harbinger is already here. As “de novo” innovation is high risk and (high) reward, the Western biotech industry is full of miserable failures with occasional spectacular success, I suggest we need not hurry and take our sweet time to get there.

View From The Top

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afford to take risks and experiment with unique business models, how do China’s other 400+ CROs compete in such a tight space? Many fall back on the buzzword: integration. “It’s interesting to talk about integration,” says Dr. Chun-Lin Chen, CEO of Shanghai-based Chinese CRO Medicilon. “Medicilon was one of the first truly integrated companies. When in 2005 I came with a proposal, nobody believed me!”

Being on the leading edge has resulted in nearly 70% of the company’s business remaining international, although Dr. Chen says the Asia portfolio is growing, with goals to reach 50% of turnover from current levels at 30%. This strategic focus was one of the drivers initiating a recent buyback out of a much-publicized JV with US-based CRO MPI.

However, Dr. Chen is cautiously opti-mistic about integrated services: “I don’t think many companies in China can offer it. Of course, it always depends on how you define your terms. Some companies consider integration as combining chem-istry and biology; others, chemicals plus animal studies; others, IND studies. Ulti-mately, it doesn’t matter what slogan you use. Medicilon is concerned, to a certain degree, about whether we have too many branches, that we will still remain focused! Integration, at the end of the day, is not al-ways easy.”

Interestingly, not only is integration sometimes difficult, but often unnecessary, depending on individual needs. “For many companies, global scale is redundant when they are looking only to conduct studies in China. In that case, what use is a PM in Australia, data management in India, reg-ulatory consultant in Taiwan, and moni-

From left: Ivan Zhai, CEO of GCP CMIC ClinPlus; Chun-Lin Chen, CEO of Medicilon

The head of MicroConstants China, Q. David Yang, co-founded the China operations in 2007 after 10 years of operations in San Diego –with a vision to set up the same quality system in China using local talent to dupli-cate success across the Pacific. “As proof of this approach,” says Yang, “MicroConstants China is the first Chinese bioanalytical lab to receive OECD GLP certification, which is a very strong branding.” This branding has attracted attention from inter-national pharmaceutical companies – including Big Pharma and biotech – which now comprise the majority of Yang’s portfolio, an impressive achievement in such short time frame in regulated bioanalysis field. As Yang continues, “We realized the strong demand for global quality sys-

tem in clinical studies in China early on and teamed up with the Phase I Unit of No. 307 Hospital in Beijing to expand into site management (SMO) business to ensure that our partner-ing clinical sites can also meet ICH GCP standards.”

In China, the focus is expanding to domestic pharmaceutical com-panies, especially those developing novel drugs and generic drugs who want to ensure their data can be ac-cepted by global regulatory agencies and big pharma. “Now these domes-tic companies can conduct their clinical studies in China according to global standards and submit USF-DA NDA or ANDA applications with data generated in China” Yang con-cludes, “and MicroConstants can help them to achieve this.”

Specialization Nation

The experts are here.

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Dr. Ge Li, an icon in the industry, is chairman & CEO of the NASDAQ-list-ed WuXi AppTec, the dominant CRO in China. Li is a thought-leader who champions an open and accessible platform to drive down costs and spur innovation, and in his typically humble way, introduces his company by say-ing that “WuXi positions itself as only knowing what we know. There’s a lot of things we can improve, but we be-gin with a belief in several things. We religiously believe in an open-access platform, which will bring in innovation to materialize and capitalize on knowl-edge and experience, and we believe people will pay for quality. There’s a lot of debate as to whether the Chi-nese will be able to pay for a lot of high-price drugs, but as long as they are high-quality, I believe they will.”

Li digs deeper into the driving force

behind the first “movement” of China’s service-based in-dustry, which saw the rise of global clients and scale. “In the last 12 years of WuXi’s history, we never knew any-thing our client didn’t know. In reality, who has the most completed integrated capa-bilities in the industry? Big Pharma! There’s no doubt about it. Our clients such as Pfizer, Merck, and GSK, they have everything.” However, Li is quick to note the advantages and opportunities that such an em-barrassment of riches has provided his company and others like it. “In a sense, the industry is penalized by the huge success it experienced in the 1980s and 1990s, and built a closed system. All of a sudden, the closed system believes it’s the only

way. Interestingly enough, any knowledge and experi-enced-based industry ben-efits when people take ad-vantage of an open-access platform. When we talk about the iPhone, there’s nothing wrong with Apple developing its own maps,

but you can’t offer an infe-rior product to the customer, because they won’t buy it!

It’s the same in the CRO industry. We need to take advantage of the knowl-edge and experience accumulated in the industry to lift up and meet the needs and patients.” In doing so, Li concludes, the industry must never take its eyes off the true prize: “Pa-tient needs are actually the goal of the industry. For WuXi, as long as we actively address our customers’ needs and keep an entrepreneurial spirit, and we’ll be OK.”

Here to Serve: Your Pleasure Is Their Business

Ge Li, Chairman & CEO of WuXi AppTec

Committed to improving the lives

of patients worldwide

www.ce l g ene . com

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china report

toring in China?” says Albert Liou, Vice Chairman, Asia-Pacific Region for the CRO PAREXEL. “This kind of infrastructure is simply unsuitable for a smaller biotech which may choose PAR-EXEL to work towards marketing a single drug in China.” As a result, Liou has tailored his approach with a dedicated China team, with all the training, project management, and operational execution in China. “The operation is completely China-focused. All the resources are in China, but the quality is the same global gold standard, and we audit everything the same,” says Liou.

Ivan Y. Zhai, CEO and major founder of GCP CMIC Clin-Plus, is clear about his goals, and how he plans to achieve them: “I want to make the company grow faster, and the best way is to leverage existing resources.” As a business formed by integrating three well-developed companies – the CRO DMS, an SMO, and a third medical device CRO company – GCP CMIC ClinPlus in-tends to leverage the strong foundations of its predecessors, formed by famous experts still leading their academic fields, or by former Chinese officials. “For instance,” Zhai says, “the medical device CRO company was previously affiliated to the Chinese Association of Medical Device Industry/CAMDI. In China, we sometimes say relationships are very important, and in addition to relationships, we are proud to have unique resources and expertise. We have a very strong senior management team, with many having worked in the pharmaceutical and/or CRO fields for 20 years or more, and many with overseas working experience.”

More Money, More MonkeyThis lack of ease is one of the reasons why specialization, rather than integration, is the name of many entrepreneurs’ games. Enters Professor Piu Chan, founder and president of Wincon. Professor

Chan grew the company out of his expertise and desire to conduct translational research, which he felt was a limiting environment in the US. In that environment he was a leading researcher before returning as early as 2000 to China as a spearhead “sea-turtle,” the af-fectionate term given to overseas returnees.

“China,” Dr. Chan says, “offers several advantages for conducting translational re-search: chief among these are the Chinese culture, large population and management infrastructure. For example, it is often

easier to integrate and utilize clinical resources because most of

the hospitals, universities and staffs are already supported by the government.” With this in mind, he returned to China with two colleagues, a neurosurgeon specializing in surgery on Parkinson’s disease, and a stem cell researcher, at a time when far fewer people were coming back. “Our main goal was to pursue translational research, with a dream of really developing something new for our patients.” This resulted in China’s first AAALAC (Associa-tion for Assessment and Accreditation of Laboratory Animal Care International) accreditation for facilities of non-human primates in 2006, and leading collaborations investigating stem cells, neuron growth factor and new drug alongside with scientists from the

Piu Chan, Founder & President of Wincon

“Crossing the river by feeling for stones.”– Deng Xiaoping, post-1978 China reformist,

on a learn-as-you-go approach to economic growth


Liu Rongyao, CEO of Zhongguancun Biomedical Garden

Zhongguancun Biomedical Garden facilities

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Parkinson Institute, Stanford, Wisconsin, and UCSF in the US, funded by the Kinet-ics Foundation of Andy Grove, the former Chairman of Intel.

Zhongguancun Biomedical Garden, on the other hand, has focused on attracting local innovative companies concerned with new drug discovery. The entity, which be-gan as a subsidiary to the Haidian sub-park of Zhongguancun Science and Technology Park, now counts all services and supports concentrated on the commercialization of new products, including drugs, diagnostics and medical devices. CEO Liu Rongyao says this focus has paid off: “Based on 8 years of joint efforts, among our members, there are two companies which have gone

public, one in China and the other in Sin-gapore. Two medical device companies have earned three registration certificates from the SFDA (The State Food and Drug Administration) and six members have suc-cessfully completed new drug clinical ap-provals from the SFDA.”

If You Can’t Beat ‘em…Dr. Wu Xiaobing, country manager for Pfizer China, the country’s #1 MNC, as-sesses the big picture of growth to come. “MNCs will certainly continue to bring innovative products to China, but China is a huge country and to change takes time. But ultimately it doesn’t matter whether growth comes from MNCs or locals. I dif-

ferentiate only between innovative prod-ucts and generics, regardless of the source, and if it benefits people, everything it will be accelerated.”

This is why many MNCs – including Pfizer, who signed a USD 500 million deal with Hisun to develop high-quality brand-ed generics – have embraced a local flavour to spice up local generics penetration.

Eric Baclet, president of Eli Lilly China, is presiding over a similar partnership. Ba-clet began his career with Lilly 25 years ago as a sales rep in France, and moved through management positions in France, Hungary, North Africa, and Belgium before heading back to the US where he eventually headed the launch of Cymbalta to a turnover of

While most college students are too busy studying to work, Dr. Zhao Tao, Chairman of Buchang Group, made time to take a different path. In his first year of medical school, where he trained in Western medicine, Dr. Zhao earned money by providing a photog-raphy service to his classmates. “By my third year, in 1987,” Dr. Zhao says, “I had opened a video gaming room, and made RMB 10,000 (USD 1,600) – an amount 20 times more than my RMB 500 (USD 80) annual expenses.”

But this was pocket change in the grand plan of his ambitions. When he graduated and began practicing in the cardiovascular department of a hospital, he learned Traditional Chi-nese Medicine (TCM) theory, and in 1992, attended an acupuncture con-ference in Singapore. There he cured a longtime-paralyzed elderly lady and gained a reputation as a miracle worker. “4,000 patients wanted my services,” Dr. Zhao says. “I was 27 years old, and I made USD 900,000 in three months, which I used to in-vest to create Buchang Group.”

USD 900,000 in three months might satisfy most 27 year olds – but not Dr. Zhao. Buchang Group’s first

and most successful drug, an extract from a plant to treat cardiovascular patients called Naoxintong, modified a 2,000 year old recipe and has so far treated over 50 million patients since its launch in 1994, and will reach sales of 3 billion RMB in 2013.

What’s the secret to Dr. Zhao’s success? The devil, as they say, is in the data. “Buchang Group has an unmatched sales and marketing pen-etration, reaching 100,000 hospitals and 200,000 retail sites, with 20,000

sales reps. Such a deep coverage has allowed us to become China’s most profitable private pharmaceuti-cal company.”

Within five years, Dr. Zhao expects Buchang Group to have five block-buster drugs on the market, and 20 products with over USD 100 million in sales – a feat now unimaginable to even top-ranked MNCs. But then again, no top-ranked MNC has Dr. Zhao as its chairman.

Buchang Group: By The Numbers

Dr. Zhao shakes hands with Xi Jinping, General Secretary of the Communist Party of China

15

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USD 5 billion globally before coming to China. In China, Lilly recently expanded a partnership with Novast by USD 20 million, which Baclet says is “about making our portfolio available to Chi-nese patients. It’s about innovation, and high-quality innovation – high-quality innovation do you need to repeat high-quality in-novation? is important in China. Novast is an important play to complement with branded, high-quality generics, the disease areas where Lilly has expertise. We aren’t going to be opportunistic with generics outside our field of expertise. Therefore, each brand we will develop with Novast will be either in Neuroscience, Oncology, or Diabetes.”

Some, like Sanofi, are still testing the waters. Despite a strong global generics presence with Zentiva in Europe, Kendrick in Mexico, Medley in Brazil, and Nichi-Iko in Japan, Sanofi has yet to make a big play in China. Jean-Luc Lowinski, senior vice presi-dent, Asia Region & vice president, Greater China Global Opera-tion, speaks to the predominance of generics in China: “First of all, Sanofi in China has faced this reality since day one – when

There is no shortage of up-and-coming bioparks in China – 51 at last count. How does a biopark make itself standout?

“The greatest question is about BioBAY’s po-sitioning,” says Yuwen Liu, chairperson & CEO of BioBAY, “because geographically we are very close to Shanghai, but we are not in downtown Shang-hai where there are many research institutes and universities. However, Suzhou as a location is still relatively convenient.” Ms. Liu compares BioBAY to Silicon Valley, a megacluster that takes a one or two hour drive from north to south, which she uses as a model. “Our long-term vision is to have a similar scale for the greater Shanghai region, including Suzhou, and maybe even Hangzhou or Wuxi. Among these, we need to find our unique positioning, and we hope we will be the headquar-ters for the most promising start-up innovator companies, covering drug discovery, medical devices, reagents, and materials sciences.”

So far, so good. With over 550 companies in the park, Ms. Liu refers to the local government’s strategy of “walking on two legs.” One leg is still the high-quality manufacturing companies, both MNCs and domestics, which already have the ca-pability of launching products and making sales and contributing to the economy with industrial output and tax revenue. Many, including Eli Lilly and Becton Dickinson, are expanding capacity. Baxter recently set up an R&D centre and J&J opened an innovation centre.

“The other leg, which is innovative compa-nies,” Ms. Liu continues, “may have many years to survive and grow before they really contribute

to the local economy.” While they grow, BioBAY wants to nurture them in a com-

fortable environment, accommodating to the fact that most startups are relatively cost-sensitive, and may like a less fast-paced location that retains the amenities of the big city. “While it may be easier to find people in Shanghai, companies often prefer a more tranquil kind of environ-ment that still has easy access to abundant resources. In

a sense, Suzhou has all the benefits of being near Shang-hai, without the drawbacks.”

Summing up BioBAY’s offering to those smaller com-panies it has so successfully courted, Ms. Liu says, “Startup companies simply don’t have full teams for lo-gistics, sourcing, or QA/QC departments, so if we can provide services with economies of scale, we can re-ally assist them.” And she wryly adds: “Of course, other parks can offer similar services – but I would emphasize that the devil is in the details, and the quality of the execution!”

Critical Mass, Critical Competition

Yuwen Liu, CEO of Suzhou Industrial Park Biotech Development

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Special SponSored Section


china report

we launched Plavix, there was already a ge-neric in the market!” However, despite the presence of generics, Sanofi’s brands have flourished, with Plavix the most success-ful drug in the Rx market in China, and Amaryl which continues to gain market share over generics. “Globally, we’re not unfamiliar with the situation where there are generics,” Lowinski continues. “Hav-ing said that, even though Sanofi is now number three in the market, we’re not cov-ering as many of the Chinese population as

we would like to.” Lowinski wants to play a bigger role in China in generics. “There’s lots of moves in the industry, we’re look-ing at them and studying what makes sense for us, and it’s definitely part of the market where we think we should also be there, the way we are in other countries.”

Swing Your PartnerAndras Gizur, chief representative of Gede-on Richter in China, whose expertise in the country dates back almost 20 years, has a

realistic assessment of the sometimes rosy views of the market from outside. “Every-body thinks China is big,” Gizur says, “and it’s therefore very easy to make a success-ful business – but that’s not true, because it’s very complicated, everybody’s here, and the competition includes all the big MNCs plus the local companies, which are good and getting better.” One way around it is partnering, a longtime necessity for Gedeon Richter, a company which counts 90% of its sales originating from outside its native Hungary. Enter GRmidas, the new OTC company, which will enable Gedeon Rich-ter to be one of the only players at its level to offer full service for both Rx and OTC lines.

“In the last 10 or 15 years, Gedeon Richter focused on Rx, which was the strong point because of our long term experience and the fact that most of our products are Rx. However, our strongest therapeutic area consists of gynaecologi-cal products which account for some 35-

From left: Wu Xiaobing, Country Manager for Pfizer China; Eric Blaclet, President of Eli Lilly China; Jean Luc Lowinski, Senior Vice President Asia for Sanofi; Andras Gizur, Chief Representative of Gedeon Richter in China

Bejing HQF4 Building D, Beijing·International Plaza,No. A18 Zhongguancun South Street, Haidian District, Beijing 100081 ChinaTel: +8610 5129 8908 BD +8610 6871 6958 or +86 189 1110 1061 / Fax: +8610 6845 1878

Shanghai OfficeF55, No. 333 Finance Square, Jiujiang Road, Huangpu District, Shanghai 200001 ChinaTel: +8621 6360 0298 BD +86 189 1110 1062 or +86 189 1110 1063 / Fax: +8621 6122 0398

EuropeBishops Square Business Park Al10 9NA Hatfirled, Hertfordshire UKTel: +44 777 587 7911 / Fax: +44 1727830087

The United States343 Steel Hopper Way, Garner NC 27529 USATel: +1 991 661 9641 / Cell: +1 908 319 1229 or +1 908 319 2697 www.gcp-clinplus.com

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SOLUTIONSfor healthcare providertraining and access to medicines

Providing innovative

www.lillymdr-tb.com

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china report

we launched Plavix, there was already a ge-neric in the market!” However, despite the presence of generics, Sanofi’s brands have flourished, with Plavix the most success-ful drug in the Rx market in China, and Amaryl which continues to gain market share over generics. “Globally, we’re not unfamiliar with the situation where there are generics,” Lowinski continues. “Hav-ing said that, even though Sanofi is now number three in the market, we’re not cov-ering as many of the Chinese population as

we would like to.” Lowinski wants to play a bigger role in China in generics. “There’s lots of moves in the industry, we’re look-ing at them and studying what makes sense for us, and it’s definitely part of the market where we think we should also be there, the way we are in other countries.”

Swing Your PartnerAndras Gizur, chief representative of Gede-on Richter in China, whose expertise in the country dates back almost 20 years, has a

realistic assessment of the sometimes rosy views of the market from outside. “Every-body thinks China is big,” Gizur says, “and it’s therefore very easy to make a success-ful business – but that’s not true, because it’s very complicated, everybody’s here, and the competition includes all the big MNCs plus the local companies, which are good and getting better.” One way around it is partnering, a longtime necessity for Gedeon Richter, a company which counts 90% of its sales originating from outside its native Hungary. Enter GRmidas, the new OTC company, which will enable Gedeon Rich-ter to be one of the only players at its level to offer full service for both Rx and OTC lines.

“In the last 10 or 15 years, Gedeon Richter focused on Rx, which was the strong point because of our long term experience and the fact that most of our products are Rx. However, our strongest therapeutic area consists of gynaecologi-cal products which account for some 35-

From left: Wu Xiaobing, Country Manager for Pfizer China; Eric Blaclet, President of Eli Lilly China; Jean Luc Lowinski, Senior Vice President Asia for Sanofi; Andras Gizur, Chief Representative of Gedeon Richter in China

Bejing HQF4 Building D, Beijing·International Plaza,No. A18 Zhongguancun South Street, Haidian District, Beijing 100081 ChinaTel: +8610 5129 8908 BD +8610 6871 6958 or +86 189 1110 1061 / Fax: +8610 6845 1878

Shanghai OfficeF55, No. 333 Finance Square, Jiujiang Road, Huangpu District, Shanghai 200001 ChinaTel: +8621 6360 0298 BD +86 189 1110 1062 or +86 189 1110 1063 / Fax: +8621 6122 0398

EuropeBishops Square Business Park Al10 9NA Hatfirled, Hertfordshire UKTel: +44 777 587 7911 / Fax: +44 1727830087

The United States343 Steel Hopper Way, Garner NC 27529 USATel: +1 991 661 9641 / Cell: +1 908 319 1229 or +1 908 319 2697 www.gcp-clinplus.com

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SOLUTIONSfor healthcare providertraining and access to medicines

Providing innovative

www.lillymdr-tb.com

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37% of global sales – and in China, these products are mainly OTC. This focus on OTC was one of the main reasons we established the new JV GRmidas Phar-maceuticals, and we have also opened a new business line to

further develop primarily the gynaecologi-cal and women’s healthcare business line as well,” which currently includes Postinor, the emergency contraceptive known in the US as Plan B. “Earlier we were not pres-ent with this portfolio in China, but it’s an area we want to develop in the coming years,” Gizur says. “Every step is difficult, but we’re on the right track.”

Investment company Vivo Ventures spe-cializes in therapeutic products in clinical development in the US and China, and is a

different kind of partner al-together. Managing Partner James Zhao gives the ex-ample of Kanghui, a former Vivo investment recently acquired by Medtronic for USD 816 million, of how his firm can help local com-panies innovate and accrete significant value.

“By the end of 2008, Kanghui had two products in the pipeline in trauma and spinal. Right now, they have three, and the third, a joint product, was brought in by Vivo after our investment. This joint technology comes from a company Vivo is very familiar with, based in Sacramento [California]. One of the reasons why Kan-ghui invited Vivo to come onboard is that, while they were not short of cash, they lacked technology. Chinese people are very smart – and they are rightfully well-known

for their ability to copycat products very soon – but technology like the one Vivo in-troduced to Kanghui represents a fine art of technology and manufacturing to duplicate the natural mobility of the joint.”

Zhao is clear about the value Vivo pro-vided as a partner: “Were it not for Vivo, it would have taken Kanghui five to seven years to build up such a capability in-house and bring the final product to a commercial

“With time and patience, the mulberry leaf be-comes a silk gown.”

– Didier Dargent, on a Chinese proverb important to the Servier affiliate

“How can we pick the right horse?” – the English translation of Vivo Ventures’

investment approach, according to James Zhao


Q. David Yang, CEO of MicroConstants China

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stage. But Vivo introduced both companies to establish an OEM opportunity for Kanghui, which is now the official OEM sup-plier worldwide. With this third product line in joints, Kanghui can call itself a true orthopaedic company, and a total solution orthopaedic provider. Without Vivo, this would not have hap-pened, and this demonstrates in a very clearcut way how what we do is different.”

InsIde the ChInese MIndFor a last look at the sector, two of its shin-ing stars explain the mindsets behind their approach, and give a brief slice of advice for future collaborators and competitors.

Fosun Pharma is the pharmaceutical subsidiary of the multi-billion dollar indus-trial conglomerate, whose interests run as diverse as steel and real estate. As an inte-grated company with operations from API to finished products, distribution, medical devices, and retail, the group is famous in China for its entrepreneurial spirit, and the slogan of “Cultivation, Teamwork, Perfor-mance and Contribution to the Society”.

Qiyu Chen, the company’s chairman, admits this success is not always trans-latable. “It is hard to explain this to for-

eigners,” Chen says, “because it is one of [China’s] core cultural values. In ancient times, scholars who have strong ambition abided by these values. For Fosun, I think we should put our eyes on stability, self-discipline and environmental protection. We should make a difference and contrib-ute to the whole society. The result of our contribution should be measured by some statistics, but we should always bear in mind that we should be grateful to the so-ciety however big our contribution is and however the business scale is.”

Some humble values, echoed by an-other industry leader, Dr. Henry Sun, the president of Tasly Pharmaceuticals, China’s TCM leader – and if upcoming phase III FDA trials of its flagship angina drug are successful, possibly the world’s. “For for-eign companies to penetrate the China market, it’s the same as Chinese companies

going global: you have to have local experience,” Dr. Sun says. He extols the common view of partnerships and long-term relations, and how one might choose Tasly as a jumping off point. “Tasly, with almost 10,000 employees in China, is well-equipped to help out,” he says, with benefits accruing not only to potential Western

partners, but to bring better medicine and more options to Chinese patients. “And that’s good for everybody,” Dr. Sun notes. In this vein. He concludes by predicting that TCM, some day, will become a vehicle for cultural understanding and exchange. “When people more and more know your product, they will be interested to know your culture and background. As I have described here today, TCM history can be related in an engaging story. Such cultural exchange will bring people tighter together, and bring more peace to the world,” Dr. Sun concludes.

From left: James Zhao, Managing Partner, Vivo Ventures; Qiyu Chen, Chairman of Fosun Pharma; Henry Sun, President of Tasly Pharmaceuticals

Erratum: in our Singapore report pub-lished in January, it should have read that Keat Chuan Yeoh is the Managing Director of the Singapore Economic Development Board

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20 Interview with: Dr. Wu Xiaobing - Country Manager, Pfizer China

INTERVIEW WITH:

Dr. Wu Xiaobing - Country Manager, Pfizer China

Focus Reports: It seems like there’s a lot to be happy about here: Pfizer is ranked number 1 multinational R&D-based biopharmaceu-tical company in China, where you also have two world-class R&D centers in Shanghai and Wuhan, business operations in over 200 cities and eight state-of-the-art plants in Dalian, Suzhou and Wuxi. Moreover, while emerging market growth was strong last year, the figures were led by the Chinese affil-iate. There’s a lot of good news – but what’s unique about Pfizer in China?DR. WU XIAOBING: You’re right in those statis-tics, and I may also add Pfizer is top in growth rate amongst the top 10 – in the first half of 2012 the exceeding 30%! What’s unique is, first of all, our people – very, very good people, the best in the industry. We have a diversified leadership team, with Americans, Europeans, and local Chinese, with a global view and strategic vision, which they combine with local insight and networking connections that work very well together.Secondly, we are strong not only operationally, but as individuals, in the front end and on supporting functions to build the company’s competency.

Pfizer’s vision in China is to be an essen-tial part of the healthcare system, and we are able to do that because, as you said, we’re the number one R&D-based company in China, which allows us many necessary competencies, skills, and resources. One example of how Pfizer China is essential, and strategically supports the initiatives China really needs, is the major project begun in 2012 named “Bending the Curve”

– the cardiovascular curve, that is. Cardio-vascular incidents, like stroke and heart attack, are increasing sharply in China for various reasons, while in Western countries it’s declining. Therefore, Pfizer China has worked with the Chinese MOH and doctor’s associations and together, we said, “How can we work together to bend the curve, and reach a turning point ” The program covers a full range, including disease awareness, education, patient screening, diagnosis, treatment, and compliance. The govern-ment was very happy with this initiative. Pfizer China Cardiovascular & Metabolism Business Unit just held a general conference in Nanjing, and the passion was remarkable. This is not just a program that is a sales tar-get that we will achieve next year and forget about it – it’s something that will be worked on over the next decade. It’s something that makes people really feel we really work for this country, and you can imagine how pas-sionate people are on this project. It’s very unique. I am also happy to welcome other companies, my good friends, who have been happy to join Pfizer China’s project and bend the curve together. And this is just one example.

FR: Pfizer recently inked a landmark deal with Hisun, a Joint Venture to develop high-quality branded generics. What was the selection process behind this partnership, given the nearly 5,000 domestic companies in China to choose from?DR. WU XIAOBING: Before the Hisun deal, we screened through and talked with hundreds

Dr. Wu Xiaobing - Country Manager, PFIZER CHINA

21

of companies. Pfizer identified Hisun as not only excellent in quality, but as having the same vision, and that’s very important. This partnership is far beyond just commercial interests. We want to make big moves to change the landscape. If you would have experienced the negotiation, you would have very much enjoy it. People in general are so excited and there is deep respect and appreciation on both sides. Hisun very much appreciates Pfizer’s production know-how and quality assurance, commercial capability and global view. And Pfizer appre-ciates Hisun for their high quality and new facilities and the capability of their people. And Mr. Bai Hua, Hisun’s CEO, is a high-level, ethical, and straightforward example of the very best of Chinese businessmen. This combination makes us very confident, and it helps that the Chinese government is very appreciative and supportive as well.

FR: In the long-run, one of the macroeco-nomic transitions is from “Made in China” to “Created in China.” In our 2009 report we interviewed a number of law firms special-izing in IP, who advised their clients against bringing core research to China. In 2012, does this stigma remain, and how far have we come in this regard?DR. WU XIAOBING: It’s improving, and there has been a lot of progress, but my view is that some hesitation remains. Many com-panies have already brought significant research assets to China, but definitely not to the degree they may have elsewhere. Another factor we must realize is that the R&D capability in China is building up very fast. If you compare today to 10 years ago it’s day and night. 10 years ago, if you wanted to do your research you had to do it yourself. But today, there are many CRO companies, which means that you can get

toxicology tests, synthesis, clinical trials, etc. all done to very high international stan-dards. In Shanghai, at the National Labora-tory for Antibody Research, you really feel as if you were in Silicon Valley, with the best-trained people and equipment. Many people are unaware of this, however.

We see the split in market share between MNCs and locals at 25/75, and many in the industry say it’s not likely to change.

FR: I agree! Is a shift, to increase the reach of MNCs, a desirable outcome?DR. WU XIAOBING: MNCs will certainly con-tinue to bring innovative products to China, but China is a huge country and to change takes time. There’s definitely desire. But ultimately it doesn’t matter whether growth comes from MNCs or locals. I differentiate only between innovative products and generics, regardless of the source, and if it benefits people, everything it will be accel-erated. The simple facts remain that generic products, regardless the source, must be made with high quality, at a reasonable price, with a high safety profile, etc.

I’m a Vice-Chair of RDPAC; I don’t only sit there. I’m also on the boards of three local companies association, including CPEA and Pharmaceutical Brand of ACFIC. I have a lot of interaction with local compa-nies; I listen to them and share experience. I think this is also something I personally benefit from, and thereby Pfizer as a whole, because we really understand what other people are really thinking and doing. n

I differentiate only between innovative products and generics, regardless of the source...

22 Interview with: Eric Baclet, President of Eli Lilly China

INTERVIEW WITH:

Eric Baclet, President of Eli Lilly China

Emerging markets have become a priority focus for most Big Pharma; how important is China in the Lilly portfolio?Strategically, China has become pivotal. Lilly is not different from other companies in this regard. Indeed, who today would not have China as a pivotal pillar of their strat-egy? Lilly put China in the center of its strat-egy around 2008, when David Ricks, my pre-decessor, was charged with starting the strategy called “Build to Lead” which moved China from just one country among many where Lilly operated, to one strategic market that would definitely be part of the future. Today, to give you a sense of how important China is for Lilly, in 2011, the 150 top exec-utives, who usually meet in Indianapolis - it has been this way for as long as I’ve been in the group - met for the first time outside the US. They came to Shanghai, which gave me the chance to accommodate the logistics for 150 of my colleagues!

On the plus side, you saved 12 hours of jetlag!Absolutely! And this was a very important symbol which showed the significance of China to the company. In fact, next week will mark Lilly’s CEO John Lechleiter second trip to China this year. And of the top mem-bers of the executive committee, all of them have visited China in the last six months. This gives an idea of the importance, but the point here is that China is really critical, and if we look at the way we’re operating, we’re an innovative company, and the engine and the centre of our company is innovation. R&D is critical, and whereas in the past China was not necessarily part of the clini-

cal development plans, today there is no business unit that would not put China, or put a Chinese part, in the clinical develop-ment plan, which is a big and significant shift in the organization. Another demon-stration of how central China is to the cor-porate strategy is that China is the only place besides the US - even Japan cannot claim this - where we have the entire value chain. This goes from R&D, with the Lilly China Diabetes Research Centre, and clini-cal development established in the last three years under the leadership of Kerry Blanchard here, and obviously the commer-cial organization, that we have expanded in the last three years from 800 to more than 2,500, and our manufacturing footprint. We’ve put another site on the ground in the last two years, which was inaugurated last year, and will start full operations hopefully in January 2013. We also have a third site on the go, that will probably break ground in early 2013. Overall, Lilly counts 4,000

Eric Baclet, PRESIDENT OF ELI LILLY CHINA

Eric Baclet of Eli Lilly with Mathilde Paquet of Focus Reports

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people on the ground, on China soil, across the value chain. Obviously, you don’t put the whole value chain in one place if you don’t believe the place deserves it, and is big enough - and the future is bright enough - to allocate that type of investment.

When we met David Ricks in 2009, he spoke about China in terms of cities, and how he considered that there is not one China, but a market more akin to four Europes. A moment ago you spoke of the fundamental shift in the strategic orientation of Lilly toward China; how at present does Lilly do things differ-ently here than in other markets?The reason Lilly has put its footprint in such a comprehensive manner in China was because of the market size, we could justify treating it as a single entity of 1.3 billion people, where to address a significant unmet medical need required domestic invest-ments. For instance, when you open manu-facturing facilities in France, you know it will not only serve the French market, because that is not enough to justify a man-ufacturing facility. The beauty of China is that it does justify, and it’s the same situa-tion for research centres. Though for each one of these particular pieces of the chain, there is at some point a goal to export from China, we are not yet there, but that’s okay, because the domestic potential alone is enough for an entire footprint or value chain in China.

Going back to what David mentioned, that China is not homogeneous - this is clearly the case, and I begin every business plan by showing two pictures: the flamboy-ant Shanghai, next to the very poor Qinghai, a Western province, and the difference is shocking. Everybody looking at China from outside looks from a Shanghai perspective. But there’s one thing which is clear, and

that’s that Shanghai is probably where everything will converge at one point. When we started Build to Lead, we cast the net broadly, in anticipation that the Healthcare Reform Plan would catch up with us. If we were to have implemented Build to Lead only based on where the business was, our footprint would have been much narrower, and probably our footprint would have been one fourth of the one we have today, had we not anticipated expansion and development. But this is not what we’ve done, and it shows how confident we are in this marketplace moving forward, in casting the net much more broadly than the business would have dictated in 2009 - and we’re doing the same today.

Today, business is still concentrated very much in the big cities. However, when you segment the business in different layers, you see the big cities are slowing down, and the second and third tier cities are accelerating. Everybody understands that, mathemati-cally, fast growth off a low base is something you need to be careful of, and it’s not because you have 100 or 180% growth in a Tier 3 city segment that you should not be careful as well. You have to model China, cut it into tiers, treat each separately and look at their individual dynamics, and start to establish an infrastructure to serve that particular segment. You have to be careful not to put the same infrastructure in each of those seg-ments, because you need to be cognizant of maintaining a sustainable and profitable business in order to survive. n

Strategically, China has become pivotal. Lilly is not different from other companies in this regard. Indeed, who today would not have China as a pivotal pillar of their strategy?

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INTERVIEW WITH:

Jean-Luc Lowinski - Senior Vice President, Asia Region & Vice President, Greater China Global Operations, Sanofi

Focus Reports: Among Big Pharma, Sanofi has a track record of placing a lot of faith in emerging markets - with local produc-tion, a large product portfolio, and decades of experience. As the largest and fastest-growing emerging market, what is the stra-tegic importance of China to Sanofi? And, vice versa, where does Sanofi provide the most benefit to China?JEAN-LUC LOWINSKI: As you note, emerging markets are very important to Sanofi. Since our CEO Chris Viehbacher came on board at the end of 2008, there has been a strategy around what we call our seven growth platforms: diabetes solutions, human vaccines, innovative drugs, con-sumer healthcare, emerging markets, ani-mal health and rare diseases. These were identified in order to address the patent cliff. Because Sanofi had been so successful with a number of products, the patent cliff was very big for us. Today, emerging mar-kets represent over 30% of our turnover, and China is making an increasing com-petition, representing 7% of this 30% in 2009, and now up to 12%. You see this growth in the figures, but more impor-tantly, you see it in our strategy. One of the reasons for Sanofi's success in China is the expansion of our coverage and our net-work, across different parts. It's our com-mercial network - obviously, as we have

over 4,000 sales reps through 11 regions. It's also through our industrial network of six factories. As a matter of fact, we are actually relocating and expanding three of these six factories, two in Hangzhou, and one in Nanchang for animal health. Lastly is our R&D network. While we don't have a brick-and-mortar R&D centre as such, with scientists behind closed walls, we count over 30 co-operations in China. In sum, the strategic importance of China is evident through the fact of our very deep commercial coverage, very strong investment in industrial affairs, and the strong partnerships in terms of R&D.

FR: Many of your counterparts have spoken about the unique operational and strategic challenges China poses to their organiza-tions. How does Sanofi adapt itself to com-pete in China, and how must the company work differently here than elsewhere in the world?JEAN-LUC LOWINSKI: One of the biggest dif-ferences in China compared to other mar-kets where Sanofi operates is the vastness of the country. It's a very broad country, so you can't run things here the same as in France or Germany, and one of the things Sanofi is doing in China is adapting our business to this size. In this regard, we've taken the word from headquarters

Jean-Luc Lowinski - Senior Vice President, ASIA REGION & VICE PRESIDENT, GREATER CHINA GLOBAL OPERATIONS, SANOFI

Jean-Luc Lowinski - Senior Vice President, Asia Region & Vice President, Greater China Global Operations, Sanofi

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and developed our own 11 growth plat-forms, extending from Jinan to Beijing, to Urumqi and Chengdu and Guangzhou. We are putting more and more local resources into these growth platforms to make sure we're not only running one business, but that we can really be close to the market.

Another difference which is important in China - and this is probably where the market has changed the most since I first saw it in 2002 - is the very strong drive from the government to grow health cov-erage. They're very active in growing infra-structure, with over 2,000 hospitals being built in the counties, and health insurance coverage has exceeded 95%, which means almost every Chinese has some form of health insurance coverage. This has really driven demand and accessibility of health-care in China. For an MNC like Sanofi, it's important to be attuned and aligned with what the government is aiming to achieve, and this is another area where we are very active in efforts outside of the big cities, especially into the counties. In parallel to the government building those 2,000 county-level hospitals, Sanofi is also build-ing its PCBU (Primary Care Business Unit) which was created last year and is now active in nine provinces and expanding. The goal is to enter county hospitals and work together with healthcare profession-als, to not only expand access to medicine, but also help with the soft factors behind. Building a hospital is important, but at the same time there need to be doctors and nurses, and they need to be trained. This is where Sanofi can actually help with very encompassing programs, with training to assist hospitals, doctors, and nurses, to ensure that we don't only sell drugs, but raise awareness and knowledge of disease management.

FR: Sanofi has completed some very high-profile acquisitions in China in recent years. What have been the keys to success, and how do you intend to leverage the new additions to the business?JEAN-LUC LOWINSKI: The biggest acquisition Sanofi has made in China is Sunstone. It was a strategic move not only because it scaled up our presence in consumer health-care but also because it brought us access to the Tier 3 and Tier 4 markets, the so-called emerging markets within China, where Sunstone had established strong distribution networks. Of course, we saw tremendous value in Sunstone's flagship brand Haowawa (Good Baby), which is a leading pediatric cough and cold brand in China. This is where the CHC business is quite different from the Rx business. The beauty of CHC is that once you have a brand, it can last almost forever; some brands can endure more than 100 years. As a growth platform, it's a very nice com-plementarity to an Rx business. The chal-lenge is that because the brands can last very long, they can also take a long time to build. Also, when you acquire a com-pany, you take a new culture on board. Add to this the synergies in the back office, and integration within business units, which will obviously take some time to smooth out. However, we're confident that with the Sanofi knowledge and the strength of the Haowawa brand, we will build a sus-tainable business. n

Today, emerging markets represent over 30% of our turnover, and China is making an increasing competition, representing 7% of this 30% in 2009, and now up to 12%. You see this growth in the figures, but more importantly, you see it in our strategy.

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INTERVIEW WITH:

Eric Zwisler - President, Cardinal Health China

Focus Reports: We last met with you as the head of Zuellig in 2009. Obviously, a lot has changed since then; from both a sector and corporate point of view, what have been the most important changes since our last report?ERIC ZWISLER: As you will probably hear from other people, the most significant changes here are a result of healthcare reform, so I won’t go into that. But the healthcare reform as it relates to distribution has been about continuing to drive scope and scale of the large players, and in many ways using the development of the distribution channel as an instrument of implementing govern-ment healthcare policy. One of the major parts of that policy is being able to reach lower tier markets and cities with an expanding list of essential products.

As a major change, that’s by far the most important, and there are many sub-changes which have occurred as a result of that: acquisitions, certain large companies form-ing national platforms, access to govern-ment supported and sponsored funds to grow the business, and at the same time development of and investment in enhanced logistics capabilities.

From a corporate perspective, Cardinal Health acquired Zuellig Pharma’s China businessat the end of 2010. That acquisition was completed and driven by the need to platform Zuellig Pharma’s China business for rapid expansion and investment. And Cardinal Health had the interest and the capability to participate in the China mar-ket and to meet those investment require-

ments under the strategic vision and longer-term view of the market here.

FR: You had founded Zuellig China back in 1993. Have there been any strategic changes since the acquisition, and how is the trajec-tory nearly two years out?ERIC ZWISLER: Part of the changes have been around speed, execution, and investment levels, and our continued drive to have direct access to end customers, hospitals, and retail pharmacies. As a result, the speed of acquisitions to support that has increased substantially. We’ve completed a number of acquisitions, and we will continue to acquire companies.

Last year Cardinal Health in China inaugu-rated its CHC division. How important is your focus on retail, and what does it mean strategically?ERIC ZWISLER: CHC is about taking non-pre-scription products, both OTC and health-care, and working together with retail phar-macies to try to develop that channel. Retail pharmacies are relatively simple operations focused on prescription pharmaceuticals. They don’t look anything like a front-of-store/back-of-store operation we see in the US or Europe and some parts of Asia. The strategic move here is to work with and develop that channel, and to use it to offer additional profitability from non-prescrip-tion pharmaceutical business. The channel is currently quite underdeveloped, it won’t be a case of slam dunk overnight success. Cardinal Health is committed to CHC, it’s

Eric Zwisler - President, CARDINAL HEALTH CHINA

Interview with: Eric Zwisler - President, Cardinal Health China

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an important channel, and we believe in it for the medium to long term as the health-care reforms continue to be implemented in China. It’s commonly said that as the profit-ability for the dispensing of products is reduced or becomes zero at the hospital, that there will be a movement of dispensing away from the hospital at some point. I’m not say-ing it’s going to go binary, on and off, but we believe that in the longer term, that move-ment and the retail pharmacy participation and development will be increasingly impor-tant. Therefore, it’s important to have a well-developed knowledge and participation in the retail pharmacy channel, and Cardinal Health believes we can do that through con-sumer healthcare products.

How this changes in the future, and how dispensing patterns change, is all open right now. There are many different factors, including patient preference and security of supply chain, as retail pharma-cies are one of the primary entry points for fake products, and because of the sheer number of registered pharmacies, amount-ing to some 400,000 now, it remains rela-tively hard to manage and control them. Patients themselves may not want to have products dispensed by retail pharmacies, as a general rule. It’s not clear how the development will go.

FR: If we compare the distribution break-down in the USA, Japan, and China, we see some startling figures. In the USA, there are 70 players, and the top 3 account for 96% market share. In Japan, there are 130 play-ers, and the top 3 control 70%, but in China, there are 13,000 players and the top 3 con-trol just 21%. In the USA, one third of all industry volume passes through the Cardinal Health supply chain at some point. Is this the vision for China as well?

ERIC ZWISLER: The China market will con-tinue to consolidate, which is pretty obvi-ous, and the consolidation which has occurred so far is primarily financial. Looking at the big three, there’s not a lot of operational consolidation. At Cardinal in the US, we basically have one country, one centre, one headquarters, and we run things as one. In Chinese, we call it “Yi Ti Hua”, to run things as one company which covers the country. In China, things are different. Operational consolidation is the next step to really use scale to drive busi-ness and profitability, and everybody knows that. So you have to be careful when you look at the numbers, because they will suggest the market is more con-solidated than in fact it is.

Cardinal’s vision in China is to be a sig-nificant player here, to be significant in product areas and markets where we can compete, and to be relevant and significant and have a volume-based competitive advantage. What that means is that there are areas in the market, like essential drugs, and other high-volume, low-value products, which is getting a boost from healthcare policy support, but as a foreign company, we’re not going to compete, or compete as effectively, in these areas for quite some time. We will continue, as the market devel-ops, to participate in that part of the busi-ness where we have competitive advantage. For example, our local distribution compa-nies have a large generics business to deal directly with hospitals, and will continue to develop that segment. One of Cardinal Health’s strengths is in running its system as one company, with common practices, platforms, and management. Starting that way, with that kind of oneness in the mar-ket, will be, over the long-term, an advan-tage as we develop. n

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INTERVIEW WITH:

Jonathan Zhu - General Manager, Celgene China

Focus Reports: We’ve met a number of manag-ers in China who talk about how different China is from other affiliates, both strategi-cally and operationally. How does the Cel-gene reality differ in China?JONATHAN ZHU: Celgene’s hematology portfo-lio on a global level is very strong and unique; however, our focus is not only on how to treat patients and patient groups, but also truly caring about patients and ensuring drug safety. In China, Celgene has a fantas-tic opportunity to launch Revlimid in the near future - in mid-2012 - and we look for-ward to making our therapies finally avail-able in the market with the world’s biggest population. Our late arrival in China is due to Celgene’s internationalization strategy. As my peers have mentioned to you in other Celgene Asia Pacific affiliates, Celgene’s glo-balization process started in the US and Europe, and has very quickly come to emerg-ing markets around the world since the pro-cess began to move outwards from the US in 2005.

In terms of product portfolio, Revlimid will be the first commercial milestone for Celgene, and will give multiple myeloma patients - who number approximately 200,000 Chinese, with an overall incidence of 1.5 per 100,000 population - a life-saving therapeutic intervention. Following Rev-limid, we plan to launch Vidaza and Pomalid-omide, all targeting the hematology treat-ment field, including MDS, newly-diagnosed multiple myeloma, and other refractory or otherwise difficult-to-treat diseases.

FR: How is Celgene’s approach to issues in the difficult-to-navigate fields you mention, of pricing, reimbursement, and bidding?JONATHAN ZHU: I have spoken on several occa-sions with senior officials from the CDE, SFDA, and the NDRC, and I am deeply impressed that senior officials and admin-istrators are very open and smart, in order to better understand the current situation in front of local manufacturers, and to pro-vide good solutions and progress from an access perspective. From a regulatory per-spective on new drug approval in China, the current situation is that it takes a long time from the first day you apply for CTA until you receive marketing authorization. Right now, I believe there are many interactions and discussions between RDPAC and MNCs and senior officials, which have already reached to the upper levels of the topics the government will focus on. Under the aus-pices of the 12th Five Year Plan, top admin-

Jonathan Zhu - General Manager, CELGENE CHINA

Interview with: Jonathan Zhu - General Manager, Celgene China

Jonathan Zhu with Mathilde Paquet of Focus Reports

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istrators will consider how to shorten the approval process for new drugs, as well as streamline the hospital bidding process, which from is now individually organized on a provincial level. In the next few years we can expect the central government to shape change in a way to maximize effi-ciency and productivity.

FR: In the short-term, we have the eagerly anticipated Revlimid launch. What are your expectations, and how will you ensure its success?JONATHAN ZHU: So far, we have had several firm positive milestones in recent months. The CDE has already officially begun to review the data of MM21, the local clinical trial, as of September 25th. At the same time, they’ve already provided us the oppor-tunity to share knowledge from Celgene’s mature risk management programs. There-fore, we can expect that at the end of Novem-ber 2012, China CDE will close the data review and approve the local clinical trial data for submission to the SFDA, and we are confident to have NDA approval by mid-Feb-ruary. We therefore plan commercial launch in June or July 2012. Until then, we have other big initiatives to collaborate with stakeholders, and the preparation for edu-cational programs targeting hematologists and key pharmacists, as well as discussing and negotiating with China charity organi-zations, including one very famous organi-zation in Beijing, to see how we can best help low-affordability multiple myeloma patients. Our goal is to launch certain access programs together with our commercial launch, and set up the infrastructure and the database of the risk management plat-form in China from day one, to ensure not a single severe toxicity incident occurs.

As you can see, most of what I have described is not about how to achieve quick

peak sales. We’re all considering the patients’ health by using toxicity and safety profiles, and helping the low-affordability patients to use Revlimid. We are very excited to pre-pare those activities and initiatives at this stage.

FR: The term “Talent War” is on everyone’s lips - how does Celgene address the issue?JONATHAN ZHU: Our statistics for turnover rate in the last 12 months are very, very low. In fact, it may be the case that such a low turnover rate is not the most desirable out-come for our long-term development, because it would simply not reflect the real-ity of the market. If the market average is over 20%, then 2% is not good either. Last year we had 7-8% - but the question also arises of how to analyze these figures. Do we want to maintain this figure, or increase or decrease? How do we retain the figure within a smaller, newer company? My phi-losophy is that I’m not necessarily recruiting “the best” - simply because it’s so hard to define. One must take into account all the human qualities, inclusive of competence and knowledge, personality and experience. It’s very difficult to define. I’m going to recruit the appropriate talent and labor, which fit in very well for the long-term - peo-ple who speak a common language and share common values, and they will adopt the cor-porate values and compliance in turn. The result is a group that works together as an effective and productive team. n

In China, Celgene has a fantastic opportunity to launch Revlimid in the near future – in mid-2012 – and we look forward to making our therapies finally available in the market with the world’s biggest population.

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INTERVIEW WITH:

Yuwen Liu - Chairperson & CEO, BioBAY

Focus Reports: We last met in 2009, and since that time much has changed at BioBAY! Could you bring us through some of the most interesting milestones over the past three years?YUWEN LIU: Certainly! The first milestone is that we have achieved the critical mass which we were hoping to build since day one. Currently, we are home to 296 compa-nies - more than half of which are still in the R&D stage and are pre-revenue - but we have patience. And the growth rate and development speed of companies, not mat-ter at what stage, is very exciting. We have also seen a big growth in the number of talents and people, with over 5,000 scien-tists, more than half of which are in the R&D community. As you are aware, Suzhou doesn’t have top-notch universities, and until recently we didn’t have top-notch research institutes and the like, so to attract such a volume of talent to work in Suzhou is already an achievement. Although startup companies may look like shaky career opportunities, the critical mass is here and more and more talents are coming, because they think that even if something happens to their company, next door there will be another opportunity! There is a positive feedback loop because of the clustering of companies. In the early years, it was tough, because recruiting com-panies is relatively easier than recruiting people, who are reluctant to move to a capricious isolated startup. But people have voted with their feet where they’re going, and the sheer amount of talent here far exceeds my personal expectations. Overall,

the great increase in the number of compa-nies and the number of people are two exciting components of this first milestone of which I am very proud.

The second milestone is that among the quantity, we now see the quality of the links. For example, antibody or large mol-ecule drugs are hot spots in the global Life Science sector, but China doesn’t generally have the infrastructure for them; however, we see very interesting collaborative dis-cussions and projects happening in the Bio-BAY. One company called Nano-Micro is developing nanoparticles, and acting as a supplier to a company manufacturing puri-fication instruments called Sepax. Sepax, in turn, is supplying several prototypes to Adagene and Innovent, two very interest-ing drug discovery companies in Suzhou. At this stage, such relationships represent not just shopping decisions, but co-devel-opment activities, because with no ready product yet, the users want to have a cus-tomized product supply, and the companies are working together on the prototype. Potentially in the future these products will be in the market, and there will be purchas-ing decisions happening as well. This is just one example of how BioBAY is nurturing a nascent value chain. Another interesting example is GENEWIZ, a company started by two Chinese-origin, US-citizen scien-tists from New Jersey. GENEWIZ is a sequencing and biological synthesis com-pany, and is a supplier to many drug dis-covery companies, especially the larger molecule drug discovery companies here. For instance, Adagene and Innovent are

Yuwen Liu - Chairperson & CEO, BIOBAY

Interview with: Yuwen Liu - Chairperson & CEO, BioBAY

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both using GENEWIZ’s service. We’re see-ing some very exciting links between these companies in the industrial community here, and we’re very happy to see that there’s a clustering effect.

The third milestone is the construction of what we call a technology platform, for which we’re working alongside Qiagen reg-istering a JV company for companion diag-nostics and translational medicine. The motivation behind this is not only to develop some products to be sold in the market, but because companion diagnos-tics is a trend, and BioBAY is home to more than 60 drug discovery companies, and we can expect many of them to need some form of companion diagnostics to go with their future products. Therefore, we expect to see the synergies from investing in an area of collaborations between drug discov-ery companies and companion diagnostics and translational medicine companies. According to what many of our companies tell us, they don’t have the money or resources of global MNCs like Sanofi to fund an internal companion diagnostics unit, so they have to rely on outside part-ners. Even though traditionally BioBAY is a real estate company, focused on building facilities and renting them out, we are very excited about making this landmark shift, which makes our offering even more attrac-tive.

FR: Now that BioBAYhas reached a critical mass, the function you provide is funda-mentally different; but what is it about the BioBAY that separates you from the other 51 bioparks in China, such as Taizhou China Medical City, Zhangjiang Hi-Tech park in Shanghai, or Zhonguancun in Beijing?YUWEN LIU: The greatest question is about BioBAY’s positioning, because geographi-cally we are very close to Shanghai, but we

are not in downtown Shanghai where there are many research institutes and universi-ties. However, Suzhou as a location is still relatively convenient. If you look at Silicon Valley, it’s a megacluster that takes a one or two hour drive from north to south. Our long-term vision is to have a similar scale for the greater Shanghai region, including Suzhou, and maybe even Hangzhou or Wuxi. Among these, we need to find our unique positioning, and we hope we will be the headquarters for the most promising startup innovator companies, covering drug discovery, medical devices, reagents, and materials sciences.

BioBAY’s slogan is, “Innovation Comes Home,” and we hope to be home to innova-tive projects, people, and companies. What do they need from us? First of all, they need a very reliable housekeeper, and the fur-nishings, reagent equipment sourcing, export and import assistance - everything for the company’s daily operation. Startup companies simply don’t have full teams for logistics, sourcing, or QA/QC departments, so if we can provide services with econo-mies of scale, we can really assist them, and they don’t have to worry about it.

Of course, other parks can offer similar services - but I would emphasize that the devil is in the details, and the quality of the execution!

BioBAY helps scientists build communi-cation channels through communication and collaboration platforms. We host salons, workshops, trainings, and monthly gatherings, so they get to know each other and are exposed to VCs or PEs who come to find potential investment opportunities. That’s our angle - openness, information sharing, and collaboration. At BioBAY, our service is this: we do what we promise, and we deliver. There’s no secret weapon - we just have to execute every day! n

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INTERVIEW WITH:

Dr. Bill Guo - Chairman and Founder, Venturepharm Group

Focus Reports: Venturepharm is the most diversified company we’ve seen, throughout many verticals, taking a full-service plus model from venture capital, merchant bank-ing, CRO, CMO, CSO, compound partnering to royalty sharing. That’s quite broad; what exactly is Venturepharm?DR. BILL GUO: The company is centred around our flagship CRO/CMO/CSO, and our posi-tioning is similar to IBM, in that we offer both services and products. Lately, we have raised over USD $100 million from the world leader Private equate firm CVC and world most respected healthcare VC Exess woodland. Clients and investors are very appreciative of our growth, and right now we count 4,000 employees, 900 of which are in R&D, and we have built up the larg-est engine in terms of R&D. Ventureph-arma has maintained its position as the number one company in terms of new drug development in the past 11 years, in filing and new drug approval in China. It’s very important for pharmaceuticals to grow in this country in a durable and sustainable way. Like an iPhone, you must introduce new products to the country. Ventureph-arm’s strategy is focused on “me-better” and first-to-market drugs, meaning new proprietary technology. First-to-market means you’re the first mover and you take some advantage. However, although we do sell products to third parties, we also keep products for our own commercial arm to sell. It’s quite interesting; Venturepharm has the largest R&D engine, with a fully-integrated CRO arm from discovery to reg-

istration, something that no other com-pany in this country – not WuXi, not FMD – can claim. The end result is that we have maintained the leading position for 11 years in China. Venturepharm is also an innovative company, and we have devel-oped a new commercial model, called VDM, which is a model that has been awarded as one of the best commercial models in the country. In fact, Venturepharm has inno-vated many new business models. Ven-turepharm’s R&D arm, for example, has re-invented a new R&D and commercial model – and that’s the franchise sales model.

Usually, a franchise model is based around stores. But in Venturepharm’s it’s based around every territory. For example, in Beijing, 10-20% of hospitals are targeted by our own sales and marketing team, and the remainder are penetrated through a franchise strategy.

FR: What are the most important milestones and achievements you’d like to highlight to the international community since we last met you in 2009?DR. BILL GUO: Since that time, as I mentioned Venturepharm has maintained its leading position in terms of new drug filings in China and raised over $100 million from private equity financing, in addition to building new R&D facilities in Tianjin and Guangzhou – and we are about to open another, which we will call our “New Inno-vation Centre” in Jinan, where the Deputy Mayor of Jinan will soon come to sign the

Dr. Bill Guo - Chairman and Founder, VENTUREPHARM GROUP

Interview with: Dr. Bill Guo - Chairman and Founder, Venturepharm Group

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agreement.Venturepharm’s vision to create the most admired enterprise in the country.

How close are you to achieving this goal?DR. BILL GUO: We are on our way, and on the right track, and approaching very fast. Ven-turepharm has created a model to re-invent and bring affordable, reliable drugs to this country. We come with a strong moral pur-pose, and create a Venturepharm family, with the best working place for our employ-ees which means the best salaries and most enjoyable jobs. Venturepharm also wants to be admired for creating exceptional shareholder value. Our pharma (product) company is expected to go IPO in the next 1-3years and will be looking for USD $5 bil-lion market capitalization; that brings the best return to shareholders. With respect to patients, to improve the quality of life is always our mission. Again, it’s not just about making money, but about a strong moral purpose to help patients and improve their quality of life. What does this approach imply about Venturepharma’s view on collaboration?

Venturepharma’s strategy is to grow through partnership, and we have partnered with many MNCs, such as J&J, Novartis, Wyeth, GSK, and Ranbaxy, among many others. Right now, we can do everything from help MNCs to get new drugs registered in China to API and formulation business and development. Now we can even help MNCs commercially, to build up a very strong commercial machine (arm). The devel-opment of this capability is one very signifi-cant milestone. We have also created a new model on post-marketing surveillance and outcome research, and in this way we can help KOLs in hospitals to recognize the advantages of each drug and product.

FR: Despite such partnerships and successful

investments and market positioning, what are Venturepharm’s biggest challenges?

Venturepharm’s challenges come from two parts. The company’s growing very fast, and has a strong pipeline, and there are always concerns about whether our talent pipeline can match our growth. It’s always tough to hire the right employee. We just got a VP from J&J China, and a Regional Head of Novartis China to join our sales and mar-keting team. And whether they can adapt themselves to Venture’s culture and high-growth environment is also a challenge!The second challenge is ensuring the quality of the product. Venturepharm is so fast-grow-ing, and right now we have seven manufac-turing facilities and we have third-party partners also producing products, and we must ensure that they continue to deliver high quality with zero compromises. In China, it’s not just your own manufacturing, it’s a matter of the whole supply chain man-agement; it’s not just yours but it’s the whole line! You need QA and QC people to manage your whole system.

FR: If we came back here in five years, what would you hope we would find here at Ven-turepharm?DR. BILL GUO: I would hope our employees still view us as the best working environment, because when the company grows, they grow. Their salaries grow very fast, as does their talent and management skill and hap-piness. Venturepharm is not just trying to make lots of money, but to bring happiness and satisfaction to every employee. We believe our investors will say that’s one of the best investments in the country. We believe a lot of patients will be happy when we can provide many affordable, high qual-ity products to them. China is not like the West; still, in the countryside, many people can’t afford high quality drugs.. n

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INTERVIEW WITH:

Dr. Ge Li - Chairman & CEO, WuXi AppTec

Focus Reports: In a recent speech you gave at a Shanghai PharmAsia conference, you ended with the aphorism made famous by Steve Jobs: “Stay hungry. Stay foolish.” As the dominant and iconic player of the indus-try, with the front seat and biggest client list, how is WuXi still staying hungry and foolish? DR. GE LI: WuXi positions itself as only knowing what we know. There’s a lot of things we can improve, but we begin with a belief in several things. We religiously believe in an open-access platform, which will bring in innovation to materialize and capitalize on knowledge and experience, and we believe people will pay for quality. There’s a lot of debate as to whether the Chinese will be able to pay for a lot of high-price drugs, but as long as they are high-quality, I believe they will. We also believe that the Chinese population deserves the same treatment as the population of devel-oped countries. We’re say we’re still hungry because there are many things we don’t know, and because I always take the view of an open access platform to bring global innovation to China.

WuXi is a China-based global company with US operations and China operations, and sometimes people think China has everything because we’re growing very fast, but it’s not true. There are many capa-bilities still missing. But the government, research institutes, and academicians are very focused on bringing innovations, but there’s still a lot of innovation in China left to be brought. We only know what we know,

so it’s better to stay hungry, and there’s a lot of smart people out there, so we had better stay foolish!

One of the premises of outsourcing research is to get smaller, nimbler companies to spe-cialize outside the traditional Big Pharma internal R&D. How does WuXi stay com-petitive as it grows, especially against smaller, nimbler competitors who can afford to specialize in a given niche?DR. GE LI: The key element is understanding what clients want, and to address the key problems with a timeline. In the last 12 years of WuXi’s history, we never knew anything our client didn’t know. In reality, who has the most completed integrated capabilities in the industry? Big Pharma! There’s no doubt about it. Our clients such as Pfizer, Merck, and GSK, they have every-thing. In a sense, the industry is penalized by the huge success it experienced in the 1980s and 1990s, and built a closed system. All of a sudden, the closed system believes

Dr. Ge Li - Chairman & CEO, WUXI APPTEC

Interview with: Dr. Ge Li - Chairman & CEO, WuXi AppTec

We religiously believe in an open-access platform, which will bring in innovation to materialize and capitalize on knowledge and experience

35

it’s the only way. Interestingly enough, any knowledge and experienced-based industry benefits when people take advantage of an open-access platform. When we talk about the iPhone, there’s nothing wrong with Apple developing its own maps, but you can’t offer an inferior product to the cus-tomer, because they won’t buy it! It’s the same in the CRO industry. We need to take advantage of the knowledge and experience accumulated in the industry to lift up and meet the needs and patients. Patient needs are actually the goal of the industry. For WuXi, as long as we actively address our customers’ needs and keep an entrepre-neurial spirit, and we’ll be OK.

FR: Regarding that entrepreneurial spirit, we know that you’ve established a corporate venture fund and risk-sharing deals. How do you balance getting a cut f rom “homeruns” and maximizing upside poten-tial, while minimizing potential client con-flicts?DR. GE LI: WuXi is built to address customer needs, and we built a fully integrated plat-form to do so; the venture fund is not just about making money. WuXi wants to invest under three scenarios. The first is in a sce-nario of technology and capability enhance-ment. If we see some interesting technol-ogy and capabilities, historically the last 12 years we’ve built it by ourselves, but we realize that there’s always smart people out there, and always people who don’t want to join WuXi - let’s face it! I’m not bold enough to say I can bring all the best people to WuXi, because it’s simply not true. There’s always people out there who want to start their own business, they have their distinct knowledge and experience, so if we can find them and later on bring technology and capability with a WuXi platform, isn’t that

nice? If we can continue to do so, we can become the largest platform of technology and capabilities to serve our clients. That’s the number one scenario.

The second is to attract great minds -the people with knowledge and experience that need the capital to unlock it. If we can fund them and get them to use WuXi’s platform to become successful, then we can draw more people to our platform, and more peo-ple to build success. Success brings success.

The third is the China opportunity, because WuXi knows China, and we can help entrepreneurs expedite their pro-cesses. For instance, company registration, if you aren’t familiar with China and do it yourself, it takes six months, whereas if WuXi helps, it takes one month. And that’s actually very important, because time is money.

And these are the points behind why we started the venture fund, which is all about having more energy to go into China’s Life Science industry ecosystem, to bring more innovations to China, and help people to capitalize their knowledge and experience. With this open access platform, I want to show that the barriers to drug discovery and development can be greatly reduced.

I believe people will pay for quality. It’s not a matter whether people can afford it or not. If people can afford bet-ter houses, better cars, better clothes, better restaurants to have dinner, why not better medicine? n

If people can afford better houses, better cars, better clothes, better restaurants to have dinner, why not better medicine?

36

Company indexBecton Dickinson ............................... 16

BioBay ................................10, 16, 30, 31

BioVeda China Fund (BVCF) ............ 8, 9

Buchang .......................................... 9, 14

Celgene ..........................8, 12, 13, 28, 29

Cell Signaling Technology ................... 7

Chipscreen Biosciences ..................... 10

CPEA ............................................2, 7, 21

Eli Lilly ......................... 14, 16, 17, 22, 23

Fosun .................................................. 19

Gedeon Richter .................................. 17

GCP CMIC Clin-Plus ................11, 13, 17

Hutchison ........................................... 10

IMS Health China ................ 6, 7, 8, 9, 19

Kanghui ........................................ 18, 19

Kleiner Perkins Caufield & Byers China .......................................... 8

Medicilon .........................................9, 11

Medtronic ........................................... 18

MicroConstants China ..................11, 18

Ministry of Health .............................. 20

Monitor Group ..................................... 6

Pfizer .................. 8, 12, 14, 17, 20, 21, 34

RDPAC .................................... 6, 7, 21, 28

Sanofi ................... 8, 9, 16, 17, 24, 25, 31

Servier ............................................ 9, 18

ShangPharma .................................... 10

Tasly .................................................... 19

Vivo Ventures ............................... 18, 19

Wincon ................................................ 13

WuXi .......... 10, 12, 16, 20, 31, 32, 34, 35

Zhangjiang Hi-Tech Park ................ 5, 31

Zhejiang BetaPharma ........................ 10

Zhongguancun Biomedical Garden .......................................... 13, 14

37

PAST REPORTS

http://issuu.com/focusreports/docs/australia_pharma/1

http://issuu.com/focusreports/docs/singapore_pharma

http://issuu.com/focusreports/docs/czech_pharma/1

http://issuu.com/focusreports/docs/mexico_pharmaceuticals_august_2012

http://issuu.com/focusreports/docs/mexico_pharmaceuticals_august_2012

http://issuu.com/focusreports/docs/thailand_pharma_report_june_2012

http://issuu.com/focusreports/docs/pharmaceuticals_south_africa_report_2012

http://issuu.com/focusreports/docs/pe1211_country_uk_-_december_2011

http://issuu.com/focusreports/docs/phex_russia_2011UK

pharmaceuticals china report 2013

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