Pharmaceutical companies based in China are increasingly eyeing the international market, especially for new drug developments in the biological field. China has changed its domestic market policy and issues including regulation, manufacturing and approval systems have evolved, while the country has also joined the ICH (International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use). Chinese companies benefit from considerable government support if they invest in external markets and all of these factors have encouraged Chinese pharmaceutical organizations to turn their sights to opportunities throughout the US and Europe.
The local market in China is already enormous. The country has passed both Japan and Europe and is now the second-largest global market for pharma, behind only the US. Its growth is showing a CAGR (compound annual rate) of just over 12% and its value is expected to reach $300.9 billion by 2025, according to GlobalData estimates. As the domestic market deprioritizes traditional generic drugs and moves to more innovative therapies, it will be an important part of the commercial plan to capitalize on the global opportunities offered by these more-targeted therapies.
But for organizations keen to make the most of the opportunities, there are practical considerations. For example, should they establish proprietary operations in their target markets? Should they acquire local companies? Should they partner with in-situ sales representatives? How can they speed up local compliance in new markets, especially given the stringent and diverse provisions seen in the EU? And if they do set up a base in Europe, where should that be? The UK used to be the favorite destination, but it is no longer an EU member. A
Surge in Development
There is tangible and growing interest in China’s pharmaceutical market. China’s pharma regulator, the NMPA, approved 48 new drugs in 2020, 20 of which were domestic. This suggests there is substantial demand for new drugs in China as well as burgeoning new drug development.
Pharma companies across the globe are showing great interest in the sizeable Chinese market, as the pioneers continue to generate results locally. As well as joining the ICH, China has also undertaken other regulatory moves, such as adopting a marketing authorization system very like that used in Europe and boosting pharmacovigilance (PV) activity. All these factors reduce the time to market for drugs coming from abroad. If Chinese patients are able to gain access to drugs in sync with a product’s global launch, rather than considerably later, the prospect of faster ROI makes the market newly attractive to pharma companies based outside China. Out-licensing regional rights to local partners is an increasingly a popular choice.
Maximizing Potential, Minimizing Risk
Although there are considerable opportunities to break new ground, both sides also face practical challenges as they seek to maximize their potential in new markets, while minimizing their exposure to risk.
Most commonly, companies engage the services of a CRO, which may be global or local, in order to bridge the gaps in their knowledge of local regulations, local market dynamics and the resources available on the ground. Historically China and the US have fairly seamless CRO relationships because scientists have moved between the two jurisdictions. Having the dominant language be English and one regulatory authority being the FDA, also eases matters, along with the US’s favorable environment for biotech innovation.
EU Strategies After Brexit
Since Britain left the EU, however, Europe has been more of a challenge for Chinese pharma companies seeking European expansion. The UK was once seen as the natural base for European expansion because of its language and the pro-collaboration culture encouraged by government, but it no longer offers the same springboard to the Continent. Strategies for European expansion have therefore had to adapt. Germany is now becoming a popular EU base for Chinese pharma organizations, partly due to its transparent and comprehensible regulatory system, and well-recognized reputation in China. Spain’s cost-effective and flexible approach makes it another popular option.
Although the European Medicines Agency harmonizes requirements across the EU, each European market has its own interpretation of the rules and set its own local requirements, meaning that companies from overseas have to navigate a diverse set of parameters. In addition, Europe, with its 27 EU member states and affiliates uses numerous languages and has a diverse cultural make-up.
Pharma companies from China entering Europe for the first time need to find optimum ways to manage requirements and registrations across the different European territories and get it right on time and within budget. Here is where appropriate on-the-ground support from a CRO can prove decisive. The EU has the most advanced quality and safety standards in the world, so from a pharmacovigilance and general regulatory/quality compliance point of view, this is an important market to get right. If a company can develop systems and processes that meet European standards, it is well placed to achieve accelerated compliance in any other markets it chooses to enter.
Potential for Existing Medications
Expanding into new territories also offers companies opportunities for their existing stable of drug offerings. For manufacturers from China, external markets such as Europe don’t just offer the chance to blaze a trail with innovative drugs or vaccines: they also open up new market potential for oncology, immunology and other leading therapies, not to mention affordable generics and active pharmaceutical ingredients (APIs), of which China is a major producer, accounting for around 40% of APIs worldwide. The goal here might be to apply or adapt an existing product for sale in the EU. This might mean relocating manufacturing operations, which demonstrates a commitment to European quality and safety standards, or forming a local sales partnership with an established EU brand.
In the same way, European pharma companies can now look to China as an additional market for their own established products – particularly those that are considered high value in China. Once again, before developing the opportunity it will be crucial for firms to understand the market potential, how regulations are evolving, and the different organizational structures and criteria on which local decision-making is based.
Collaboration: Growing Apace
Collaborative models are proving an increasingly popular means for pharma companies to build brand profile, gain local population trust and accelerate market access in new regions – and this works in both directions.
Pfizer is just one multinational that has already established a joint venture with a Chinese company to co-develop new products and ease penetration into the local market. Conversely, Chinese pharma firms are also taking the acquisition route to enter into Europe, and also to expedite local license approval. Some are acquiring small or mid-sized companies, or European manufacturing facilities and there have also been cases where Chinese pharma companies have chosen to invest in European biotechs in order to stay ahead of the competition back in China.
The Right Kind of Help
As collaboration increases, the route to finding the right kind of independent help isn’t always clear-cut. Global CROs sometimes charge significant fees - particularly to help smooth collaboration opportunities - but precise local insight and experience may be lacking.
One issue is that few large CROs have specialist capabilities that are as strong in China as in other regions. This includes not only support for the language and cultural understanding, but also really appreciating the more subtle issues that facilitate a symbiotic working relationship, such as knowing that companies in China have a preference for using the WeChat platform as a business communications channel.
Paying high fees for generic help is something that pharma companies must avoid. If they want to optimize opportunities and contain risk, they need reliable, timely intelligence and insights, and a partner with meaningful regional and in-country experience.
Strategy Exceeds Speed
As interest in cross-border collaboration increases, it will be crucial to have both a global perspective and deep, specific understanding of both Chinese pharma and external markets alike. Finally, but crucially, here is where patience can pay off more than speed. Only if relationships are carefully constructed, and opportunities considered from every angle, will pharma companies be able to extract maximum value from their external market ventures.
References
- “4+7” Drug procurement reform in China, China National Health Development Research Center, March/July 2019: https://www.cgdev.org/sites/default/files/CGD-procurement- background-china-case.pdf
- Major Changes in the Newly Revised Drug Administration Law, China Law Insight, August 2019: https://www.chinalawinsight.com/2019/08/articles/healthcare/major-changes-in- the-newly-revised-drug-administration-law/
- Latest patent reforms to further bolster innovative pharma research in China, GlobalData, June 2021: https://www.globaldata.com/latest-patent-reforms-bolster-innovative-pharma- research-china-says-globaldata/
- Pfizer and LianBio Announce Strategic Collaboration to Expand Development of Novel Therapeutics in Greater China, Business Wire, November 2020: https://www.businesswire. com/news/home/20201119005290/en/Pfizer-and-LianBio-Announce-Strategic- Collaboration-to-Expand-Development-of-Novel-Therapeutics-in-Greater-China
- Chinese pharma firm to acquire Swiss production facility (Bristol Myers Squibb selling Swiss medicine production facilities to Chinese company WuXi STA), February 2021: https://www.swissinfo.ch/eng/chinese-pharma-firm-to-acquire-swiss-production- facility/46338654
- Vivoryon Therapeutics and Simcere Announce Strategic Regional Licensing Partnership to Develop and Commercialize N3pE Amyloid-targeting Medicines to Treat Alzheimer’s Disease in Greater China, Vivoryon Therapeutics, June 2021: https://www.vivoryon.com/ vivoryon-therapeutics-and-simcere-announce-strategic-regional-licensing-partnership- to-develop-and-commercialize-n3pe-amyloid-targeting-medicines-to-treat-alzheimers- disease-in-greater-china/
About the Author
Sy Chyi Yeoh is Director of Business Development at global regulatory and pharmacovigilance service provider ELC Group, part of global life science consultancy PLG (Product Life Group). Email: [email protected], www.elc-group.com
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