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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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August 31, 2011

China's Pharma Ambitions: Hua Pharmaceuticals Responds

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Posted by Derek

I've had a detailed e-mail from John Choi, Chief Strategy and Business Office for Hua Medicine. That's the company that was featured in a bizarre-on-the-face-of-it quote from Chemical and Engineering News that I blogged on here the other day. That, you'll recall, was the one that seemed to suggest that Hua (with eight employees at the time of the article) was going to introduce "breakthrough drugs" within four years, which they'd manufacture and sell themselves. As many readers guessed, what this actually means is "other people's breakthrough drugs licensed in to China".

I'll let Choi tell his side of the story:

There was a lot of commentary generated from people that have not read the CEN article nor have any background to what we at Hua Medicine are doing, so I’d like to clarify and tell “our side of the story” as it were. I am a US trained MD-PhD (my PhD was at Harvard and MD at Cornell Medical), and was formerly a professional Venture Capitalists for the last 10 years in the US before joining Hua Medicine in China. So I am quite aware of the difficulties and timelines for drug development of biotech companies, having funded many of them. It typically takes 12-14 years (if successful) for a company starting pre-clinical work to get their products on the market, and the probability of succeeding in this according to Nature Reviews Drug Discovery is typically less than 10% from phase I to NDA approval. . .With that context, Hua is certainly not proposing that we can do all stages of pre-clinical work, getting through all phases of safety and efficacy clinical trials, and getting approval from the regulatory agencies, all in only 4 years from scratch with no previous work required! In fact, if you are familiar with China’s regulatory pathway, it typically takes LONGER to get regulatory approval in China than in the US or most other countries for that matter. In fact, unlike the US, for even internationally marketed products that have approvals in other countries, in China one must still go through at least a 30 patient Phase I/PK study and at least 100-patients-in-each-trial-arm Phase III clinical study for an imported drug to get approved (even though that drug may have been approved and marketed elsewhere such as the US for more than 10 years… It still doesn’t matter, if it is a compound never marketed before in China, the Chinese SFDA will require at least these minimum trials before approval).

What was taken out of context was that Hua Medicine intends to in-license patented drugs from the US and EU, and get them on the market and commercialized in the 4 year timeframe in China. This is about the average time it takes imported drugs (drugs that are approved and marketed in the US or EU but are coming newly into the Chinese market) to get approved by the SFDA in China. Typically it requires 10-16 months for Clinical Trial Approval (CTA) to be granted by SFDA which is the IND equivalent in the US (and allows a drug’s sponsor to begin trials in China), 2 years for completing the phase I and mandatory Phase III trials, and 12-16 months for an Imported Drug License (IDL) approval which is the equivalent of an NDA submission. Hence 4 years to get these imported drugs to market in China. As a matter of fact, Hua medicine is currently in the final stages of discussions for some of these marketed or later stage assets (for China licensing), and that was what was meant by the CEN article saying “the firm will launch breakthrough drugs in 4 years”. Hua is also backed by a premier set of US Venture capitalists with $50M in initial funding to pursue in-licensing of these marketed and late-stage assets (as you know, drug license rights do not come cheaply, after all), with more capital if needed to acquire more assets.

Well, that makes a lot more sense. I note that their founder (Li Chen) was the head of research at Roche's R&D center in China, so he presumably also knows what he's doing. Here's some of their investment backing, and here's their Board of Directors. I can still wonder a bit why any big outside companies would do these deals, since in many cases they've been making their own efforts in China (or have already signed up with other people trying to do this same sort of thing). But it would seem that the people at Hua have identified room to maneuver.

That said, the company may be getting more early publicity than it's ready for, if their web site is any indication. It would seem to have not been up for long, if the "Some news type here" line under the "News" heading is any indication. And that C&E News article may have been another example, since that part of it gave the impression that Hua was thinking about launching its own internal programs. (J. F. Tremblay, the author's article, was able to comment on that here.

Comments (17) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Anonymous on August 31, 2011 8:34 AM writes...

Thanks for the clarification Derek. I would add, Hua Medicine is also in-licensing earlier stage Pre-clinical, Phase I/II assets in addition to our later-stage assets (Phase III/Marketed). Hence, we are trying to develop a robust pipeline and have spent the last 9 months going through literally hundreds of potential in-licensing opportunities (at all stages), having rejected 99% of them. This is typical of most VC investment ratio's as well (screening 1000 business plans, and funding 3-4 companies in a year). As you also know, biopharma partnering can be a very slow "dance" between partners, so it has taken this long to negotiate acquiring assets we are happy with. You are most correct about "more publicity than we are ready for," as this attention has produced a surprising ride as we are only just now coming "out of the gates" with these new programs.

Sincerely,

J. Choi

Permalink to Comment

2. Ellen Clark, Clark Executive Search on August 31, 2011 8:42 AM writes...

Fascinating couple of posts. I think Dr Choi did a fine job explaining his side of the story. What surprised me was that in China it takes an additional 4 years to get an already approved drug licensed. Yet they have such loose standards that toxins are in their baby formula or toothpastes etc. I'm just saying....

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3. Former Biogen Dude on August 31, 2011 8:50 AM writes...

Ya know--it's not like the Chinese government planned on spiking melamine in dog food, lead in paint, etc. That was done by individual Chinese companies trying to increase their profit margins while being cheaper than everyone else. China has the same regulatory nightmare that the rest of the world does (and maybe more)--you can't physically test each and every product that goes on the market. The western world's tort system has done a pretty good job of regulating product purity through threat of massive lawsuits, but it still happens occasionally. China's system of a bullet in the back of the head may serve the same purpose but only time will tell.

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4. David Formerly Known as a Chemist on August 31, 2011 9:13 AM writes...

That was a nice explanation from J. Choi. I have a much better understanding of his company now, and what he intends to do. It sounds exciting.

I always wonder, though, why does everyone who trained at Harvard always feel compelled to point that out?

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5. NodrugsNoJobs on August 31, 2011 9:25 AM writes...

Thanks for posting Dr Choi's clarification, Derek, and thanks to Dr. Choi for doing a good job of clarifying what Hua Medicine is doing. I now know more than I did about the Chinese drug approval process. Good luck to you Dr. Choi!

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6. A Nonny Mouse on August 31, 2011 10:32 AM writes...

As I mentioned in the previous post, this is already being done/managed by someone I know here in the UK. The difference, though, is that they have a lot of Chinese government investment in the business rather than VC- less need to hype!

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7. MoMo on August 31, 2011 10:39 AM writes...

To Ellen Clark-Professional Searcher-

We have our own stealth toxins in the food supply, BPA, yellow #5 and a plethora or others, so the Chinese have'nt cornered the market on poisoning us.

There are always 2 sides to the story and let's give Hua a chance to succeed without bashing them as we are all brothers in science.

But that doesnt absolve the ACS and C and E news from biased and fragmented journalism, which is how this all got started.

They are a monopoly that needs investigated by Congress then summarily dismantled.

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8. CMCguy on August 31, 2011 11:08 AM writes...

While it may be rooted in the scientifically sound rationale need to demonstrate potential different efficacy/side effect profile in Chinese population there is likely a control and protectionist component to the SFDA clinical requirements for approval (note China is not alone in applying both such factors to force population specific studies). In the past SFDA blatantly only really seriously regulated medicines for in-country supply and products designated for external/global markets was buyer beware/not our responsible enforcement. That attitude supposedly is changing as have recently joined global GMP initiatives however may be more a case of the bad reputation potentially driving to other sources.

Worse than quality concerns the IP/black market issues in China were uncontrolled as know many Western drugs could be bought on the streets before had gotten approved. What will such "generic" competition do to introductions of new drugs?

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9. SnowPeak on August 31, 2011 11:17 AM writes...

As far as I know, Hua Medicine and Beigene are using similar strategy. It's very likely going to work.

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10. Alpine on August 31, 2011 12:11 PM writes...

@4 said "I always wonder, though, why does everyone who trained at Harvard always feel compelled to point that out?"

Because you can't work in (or with) venture capital without an Ivy degree. It's a small universe of people. And then there are cults of people nested within that cult.

Their primary purpose is to create a process of development, then rape as much money out of that process as possible. These are the 'made' guys to put it in Mafia terms. The actual final product is almost meaningless. It's a structured form of looting, a confidence game where the bad guys claim to be worthy of other people's money by virtue of a degree (and all the associations it implies).

These people take the term 'creative destruction' at its word. I've watched dozens of companies created, then slowly bled of resources by the VC and their executive henchmen.

Then, the same people get to repeat this process over and over again. It's pump-bleed and dump.

I'd suggest that any aspiring entrepreneurs stay away from the Ivy click. It's designed to burn you.

Permalink to Comment

11. Alpine on August 31, 2011 12:13 PM writes...

@4 said "I always wonder, though, why does everyone who trained at Harvard always feel compelled to point that out?"

Because you can't work in (or with) venture capital without an Ivy degree. It's a small universe of people. And then there are cults of people nested within that cult.

Their primary purpose is to create a process of development, then rape as much money out of that process as possible. These are the 'made' guys to put it in Mafia terms. The actual final product is almost meaningless. It's a structured form of looting, a confidence game where the bad guys claim to be worthy of other people's money by virtue of a degree (and all the associations it implies).

These people take the term 'creative destruction' at its word. I've watched dozens of companies created, then slowly bled of resources by the VC and their executive henchmen.

Then, the same people get to repeat this process over and over again. It's pump-bleed and dump.

I'd suggest that any aspiring entrepreneurs stay away from the Ivy click. It's designed to burn you.

Permalink to Comment

12. simpl on August 31, 2011 12:47 PM writes...


It makes sense to reduce risk and ensure a sure cut of a product's sales. As the barriers to any business understanding are high in China - in today's news the top British supermarket can't get it right - an up-and-running partner with a sales force for hire would be a big help, for any mid-size company, or for co-marketing. The aim might be to become an equivalent in this sector to a big Japanese Pharma company. Agreed, though, the top-10 companies are mostly competitors with such an approach.

Permalink to Comment

13. Anonymous on August 31, 2011 3:31 PM writes...

Are there any/many startups in China that don't have Western-trained scientists at their helm? Just curious.

Permalink to Comment

14. hn on August 31, 2011 5:24 PM writes...

A Chinese collaborator told me that after the scandals of the previous years (culminating in the execution of the Chinese FDA head for corruption), the Chinese govt. has now swung to the opposite extreme, with regulations even more meticulous and oppressive than the US.

Permalink to Comment

15. Sisyphus on August 31, 2011 7:13 PM writes...

Why pay royalties when stealing can be more profitable? Long live capitalism.

Permalink to Comment

16. Moiety on September 1, 2011 3:02 AM writes...

It could be a good way to do business however. I mean how many specialty compounds would they need to keep say 10 people going. Not many I expect. Further I suspect that if they are only going to gets drugs up and running, they could be used as a further optimisation step after the drug has received FDA approval. In essence they might be able to play with the process more and for cheaper than the company.

Permalink to Comment

17. Stephen Porter on September 1, 2011 6:01 AM writes...

BeiGene and Hua Medicine are two different animals all together. BeiGene has massive funding for infrastructure ans is is hiring like crazy with a FTE count going to 2-300 hundred by year end with capital infusion by Merck and other big players coming in. Hua Medicine model is a Virtual model and to be applauded when there is a huge excess of outsourcing capacity in preclinical and clinical services who needs to build large infrastructure.
Time frame for approvals in PRC is extended for CTA and NDA because they have 234 reviewers at SFDA and and US FDA has in excess of 2000. SFDA is extremely cautious and still internally corrupt. This last March, jailed another prominent director. SFDA reforms are coming and being pushed heavily by MNC Pharma who have invested billions in infrastructure to gain access to worlds fastest growing market in Pharmaceuticals. HUAs biggest problem will be the Domestic Pharma are going to squeeze them out like all outside western players from other industries; Seimens, Boston Scientific, Mitsubishi, Cisco, Best Buy, Google etc. PRC Government picks the winners and losers.


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