While 2018 was a big year for Chinese R&D on the whole, the sector hit the headlines for the wrong reasons.
Most notoriously, researcher Jiankui He caused a furor in November after revealing he had edited the genes of human embryos to provide protection against HIV infection, apparently without proper disclosure or regulatory oversight, prompting an international backlash.
There’s little doubt that revelation has damaged China’s scientific reputation, but this was also tarnished during the year by revelations of intellectual property thefts involving GlaxoSmithKline and Genentech, and has done little for the country’s standing as a location for biotech R&D that has been tainted in the past by faulty research, falsification of data and ethical breaches.
“This is a reputational issue which will probably blight the Chinese industry for years to come, whether the actual situation improves or not,” said Helen Chen of LEK Consulting, who told FierceBiotech that it is particularly disappointing given that “many companies are now actively considering China as part of their global clinical programs, as they have difficulty enrolling patients in sufficient numbers at sufficient speed in their home markets.”
It shouldn’t however be overlooked that there has also been plenty for China’s biotech to shout about this year, including a lot of cash flowing into Chinese and Chinese-U.S. biotechs as well as plenty of news flow from clinical pipelines.
A big factor was the emergence of Hong Kong’s HKEX as a hot spot for biotech IPOs, thanks to new rules that allowed prerevenue companies to list for the first time. Ascletis, BeiGene, Hua Medicine and Innovent were among the first biotechs to take that route, and it has been estimated that around 100 others are lining up to follow.
HKEX move has “certainly increased the visibility of Chinese biopharmas to the outside world, and also to financial investors,” said Chen, who thinks this has also caused some western firms to consider their China strategy, both for fundraising and commercialization. There is a counterweight, however, in the form of the U.S.’s Committee on Foreign Investment (CFIUS) initiative that is scrutinizing Chinese investment in U.S. biotechs.
“This has already impacted Chinese investment in US biotechs,” noted Chen. “For example, Momenta’s biosimilar spin out was reported to have a lot of Chinese buyer interest, but all pulled out due to potential CFIUS considerations.”
One area in which China is making big gains is in the regulatory environment, which will help China consolidate on this in 2019 and beyond, suggested a recent report from McKinsey.
National Medical Products Administration (NMPA) reforms have been happening at a rapid pace, with escalating numbers of drug applications with priority review in the face of increased public engagement on medicines access. The latter was triggered in part by a hugely successful movie called Dying to Survive—a comedy about illegally importing leukemia drugs—which raised $200 million in its opening weekend and brought the issue of access to a wide audience.
Faster review of applications for clinical trials is also helping: With the latest amendment to the NMPA’s review process, applications are approved if the agency does not respond within 60 working days of filing.
McKinsey also noted that while China investments have poured into U.S. biotechs, trade tensions might create headwinds going forward.
Talent tug of war
Another sign of China’s development can be seen in the migration of talent, particularly multinational pharma companies bleeding top China-based executives to the country’s emerging biotech leaders, said McKinsey.
Prominent examples are the defections of China R&D heads at Eli Lilly, Sanofi and Janssen respectively to Innovent, C-Stone and I-Mab Biopharma. However, a poll of company of senior executives from multinationals in China also found they feel China still lacks high-quality talent to support “sustainable” biopharma innovation. The industry is experiencing a significant talent shortage that is expected to persist for the next 2-3 years, said McKinsey.
The survey suggested that accelerated review and approval, an improved reimbursement for innovative therapies, rising healthcare investment and stronger R&D capabilities are all helping to build the sector, but there are still gaps—sometimes significant—compared to the U.S. The novelty of innovative assets is also still lagging, for example, but with the local innovative pipeline growing overall and more Chinese companies in in-licensing programs, there are clear signs that the “innovation ecosystem” is improving.
The changing environment stems in part from “the decade-plus investments and encouragement of biotech by the Chinese government, companies and investors finally bearing some fruit,” according to Chen.
There are some areas where China is threatening to overtake the west in biotech R&D and lose its reputation as a "fast-follower." The first human trials of CRISPR gene-editing took place there, for example, and some observers believe the country is becoming a powerhouse when it comes to applying artificial intelligence to healthcare.
Chen thinks the fast-follower approach will still be around for a long time to come. “Being a fast-follower is a viable and, some would suggest, better strategy,” she points out. “This is the ‘first-in-class’ versus the ‘best-in-class’ debate that Western pharmas have had for decades."