partneringNEWS recently spoke with Dan Zhang, CEO of Fountain Medical Development, a CRO based mainly in China, but also with offices in the US, Taiwan, Hong Kong and South Korea. With China being the second largest healthcare market in the world, Zhang talks about the incentives for global companies to do business in China, and the ways in which FMD facilitates that.
partneringNEWS (pN): Tell us about Fountain Medical Development. You are a contract research organization based in Tianjin, China, is that right?
Dan Zhang, CEO, Foundation Medical Development
Dan Zhang (DZ): Yes, we have many offices, and Tianjun is one of the earliest ones. Currently we have about 400 employees. In China, we have offices in Beijing, Tianjin, Nanjing, Shanghai, Guangzhou, and Chengdu. We also have offices in Seoul, South Korea, in Taiwan, Hong Kong, and we also have a team of close to 70 people in the US in the Philadelphia area. And of course we have a BD person on the East and West coasts. So that’s our overall operations in China, East Asia and in the US.
pN: Fountain Medical works with an array of international clients. Tell me basically what your services are.
DZ: We are a clinical CRO. We offer services for clinical studies from Phase I through Phase IV, and also support regulatory operations in China, and NDA support in Hong Kong, Taiwan, South Korea, Southeast Asia and the US. We offer data management processing services, pharma economics, pharma vigilance, etc. So everything related to trials, we do.
pN: How many US clients would you say you have?
DZ: We have a total of 112 international clients, and I would say 60% come from the US and 40% come from Europe. We also have 55 domestic clients.
pN: China is now the world’s second largest healthcare market and is on track to be the largest by the year 2020. China has a growing population, and a growing demand for medicines. Tell me about the life sciences industry in China, and how it is working toward meeting this growing demand.
DZ: There is a private effort and also a public effort. I’ll talk from the government perspective, how they influence the market. Starting from the 11th 5-year plan, to the current 12th 5-year plan, and into the next 13th 5-year plan, the government began to pour money into the biotech/healthcare sector. In the 11th 5-year plan, the central government poured in USD 6.5 billion in R&D in biotech pharmaceutical developments. In the current 12th 5-year plan, it’s close to USD 12 billion just from the central government. There are also matching funds from the local governments which are at least a 1-to-1 matching plan. The government is now doing the planning for the next five years. I have no inside information to say for sure, but I would guess that the momentum will still be there. Purely because demand for better medicines, demand for quality of life, and also demand for the aging population, the demographic change, the sheer population size, and the growing middle class, all these are contributing to a non-satisfiable demand for better things. Medicine is definitely one of the hottest areas government has to invest in. For that purpose, the investment by government is a necessary and increasingly critical component in reshaping China, and ensuring that the ‘made in China’ productivity is also created in China in biotech sectors. And not only in biotech but also for medical devices, a similar thing. That’s the public effort.
Privately I would say the activity is even stronger, in part because of the leverage of the government. One dollar invested by the government will induce more than one dollar from the private sector. We see tremendous growth of VCs in China, especially in the biotech sector, and also, growth in non-traditional investors. There is money to be made from real estate, and even for the infrastructure builders. Those two sectors also desire to invest in the biotech sector—they want to live longer, too. This perspective has become universally predominant. It is for that exact reason that we think in the next 5–10 years down the road you will see innovative products being approved in China, either simultaneously with the global markets, or first being done domestically in China for specific needs like Hepatitis B, drug resistant tuberculosis, and certain types of cancer like gastrointestinal cancer and liver cancer.
pN: So you’re saying that the biotechs that are based in China will come out with these innovations, themselves, or that they’ll partner with international companies, or both?
DZ: Both. We have seen two phenomena. One is international clients, international global players, began to cut deals with domestic players. For example, BMS partnering with Simcere, the Roche-Ascletis deal, and Merck Serono with BeiGene, to name a few. That has become popular now, to work with global giants. Another phenomenon is taking place domestically with the returnees. They bring new technology, a new know-how, and quality management systems to China. They become innovators, also. In my company portfolio, we are doing 44 innovative drug development protocols right now, and half are with multinationals, half are with returnees.
pN: If you had to sum up what the incentive is for companies to do business in China, what would you say?
DZ: China markets will inevitably continue to grow. Maybe in double digits, perhaps the lower end double digits, but still much faster than the global average. So it’s just a matter of time until China becomes number one. Right now people say China is number two, soon to become the number one largest pharmaceutical healthcare market. With that, all the global companies, even smaller ones, have to think about where their future licenses come from. They have to do something in this market. That’s the economic incentive. On the other hand, there are other incentives such as the cost for scientists. I think China still has the advantage over the US and Europe. Which means even now, companies can’t think about China indications alone. For global drug development, it pays to set up something in China where the cost is low and where you could kill two birds with one stone. The data support and regulatory requirements in China support European and US filings.
pN: What is one of the biggest hurdles right now in creating cross-border collaborations, and what is being done to minimize this barrier?
DZ: People always say regulatory hurdles are the biggest, because they create such a long delay for R&D—that’s a fact. I don’t see an immediate solution. However, we do see two signs of progress. One is that China is revising its drug registration law. That’s a golden opportunity to reshape the law from generic-based approval to innovative product-based approval. We do see speedy review for innovative products. This goes back to 2009, the green channel approach; they called it a special review process. The special review process was enacted July 7, 2009, which means for the innovative products, off indications, or unmet medical needs in China, the government promised a speedy review for IND and NDA. That has already occurred. That is one good sign. The second good sign is the personnel increase of the Center for Drug Evaluation (CDE) in China. Recently we saw the advertisement by the CDE to recruit reviewers. That’s a very good sign because when you have more manpower, you can promise a speedy handling of applications. So those are the two. I do see a very positive sign to reduce or at least to shorten the review time, and to lower the barrier to entry for clinical trials. That’s the first thing.
And the second thing people talk about is personnel. Even if you can run operations, where are you going to hire the personnel, the managers, the technical people in China who are familiar with new drug development? Over the many years since global companies entered the market, we have developed training programs to train Chinese employees to learn the global companies’ way of doing business. In addition, we also see returnees and the experienced Chinese-speaking folks from Taiwan, from Hong Kong and Singapore, come to China to do business. More experienced people are being trekked to China. China also enacted a talents recruitment program, globally. There is one famous program called ‘One Thousand Talents Recruitment Program’ which has attracted about 1,000 senior people so far from the US or Europe, either academics, or from business settings, purely for biotech alone.
pN: What is the incentive?
DZ: For these people who come back to China, the government provides funding for research, and provides initial capital for the business operations. That’s an aggressive plan, an effective plan, to really fill the gap of human talent. For money on the one hand and talent on the other, I do see promising signs for China to be positioned as the next potential innovators in the biotech pharmaceutical field.
pN: What advice do you have for companies who are interested in having a presence in China, but are unsure of the first steps?
DZ: There are several ways to think about it. First get out your first product to test the water by using a CRO like us. Because if you’ve got one product, there’s no need for you to set up the whole operation—it’s very costly. While you are doing the first product in China by using the local CROs, you will learn. You could insist on co-monitoring, co-managing; that’s a way for your people to learn. While you’re doing your first product, you can assess the markets to see if you should introduce a second product that you want to do by yourself, or find a local partner with your distribution channel, with your previous approval records. So partner with them for the second product. It’s up to you if you want to bring your whole portfolio to China. In that case, it pays for you to set up your own team. And for outsourcing certain non-critical partners to third parties or CROs.
pN: Fountain Medical has been participating in ChinaBio® Partnering Forum for several years now. How has involvement with this event benefited your company?
DZ: ChinaBio® Partnering Forum has benefited us in several ways. First, it gives us a chance to really interact with global clients, and also with those clients who may not be able to know China in the first place. And those are the clients that sometimes, as a CRO, we cannot target by ourselves. And EBD has such a thick rolodex, that’s really helpful. And secondly, we also learn and directly benefit from the feedback from the participants, so we can know what they’re looking for, what kind of questions they have in their minds, and what are the hurdles in the psychological parts that we have to resolve. And how we can mentor, educate and communicate with them on a continuing basis. The program has one session on that every year. It gives us a chance to have repeated interaction with clients. So far in my mind, it is the best program we have ever had for my company.
pN: What is your partnering strategy at ChinaBio® Partnering Forum other than just speaking?
DZ: We have several ways to help our clients. First, direct information exchange, to give the most up-to-date information about what is happening in China. Secondly, we set our email system so that once the client begins to engage our service, we begin to update them on a monthly basis about what’s going on in China from a regulatory perspective. So we always give them updated information to help them make informed decisions. And for relationship building, as well. And thirdly, we offer full services in China. Which means they can choose and pick, and we charge local fees with global quality. That’s a critical part. We are a local player, we do not have so many layers for global management systems. That’s how we can offer savings. Last but not least, we are willing to participate on a risk-sharing basis to really help those innovative start-ups, especially to VC-backed operations. We can help them to really put their money on the most critical aspect, and to make their success rate higher in China markets. I would say one last word. China is a country where, if you look back 30 or 40 years ago at the population, you wouldn’t have considered China. Now everybody thinks about China. It’s up to our clients—you—to take quick action and not wait anymore. Start from small stakes, touch the market. After all, this is going to be the largest pharmaceutical market, so it pays for you to do something about it.
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