presents Accelerate Preclinical Development: Outsourcing to China

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presentsAccelerate Preclinical Development
Outsourcing to China

• Keting Chu, YiYou Chen
• May 4, 2005

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Event Logistics

• First Wednesday of each month
• 7pm wine food, 730pm workshop845pm
  networking
• Wilson Sonsini Goodrich Rosati (here)
• Cost, 20 cash, at the door (dont forget)
• Bulletin Boards
• Check email, get on the list _at_ bioe2e.org

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Darwinian Times

• Biotech needs a new company structure focused on
  its excellent innovation, using outsourcing to
  access downstream capabilities.
• Implications for startups

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Topics

• Why outsourcing
• Why China
• How to choose outsourcing partners
• Deal structures
• Risks in outsourcing
• Emerging CROs

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Current Pharmaceutical Industry

• Low productivity
• Increased number of targets and lead compounds in
  the pipeline
• Increased cost in RD
• Currently 1B per NME
• 2010 1.5 per NME
• 290K/FTE/Y
• Increased drug development timeline
• 1970s 11.6 years
• 2001 14.9 years
• Preasure to increase profitability
• 33/44 blockbuster drugs will be off patent
  protection by 2007
• Lack of new Blockbuster drugs
• Limited/reduced RD budget
• MA is not working

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Pharmaceutical RD Outsourcing

• Strategic outsourcing
• Flexibility
• React quickly to resource change
• Capital efficiency
• Shift significant fix capital investment into
  virable cost
• Future 40 in house, 60 outsourcing
• Focus on core competence

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Outsourcing of drug RD

• Drug development process
• Current CROs provide services cover the whole RD
  process

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Current Services

• Full range services for drug development
• Clinical services (phase I-IV) 20-40 outsourced
• Preclinical evaluations 15 outsourced
• Regulatory (INDNDA) 15 outdourced
• Others 9
• Future growth
• Preclinical evaluations highly profitable

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Outsourcing Destinations

• China
• India
• Russia
• Eastern Europe
• Latin America

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China as a major player in pharma outsourcing

• China will be a major player!
• Preclinical evaluations
• GMP manufacturing
• Clinical trial services
• Advantages
• Highly competent technically
• Abundant animal resources
• Cost effective operation

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China as a major player in pharma outsourcing

• Advantages
• Highly technically competent
• National education and training
• Large number of original Chinese students from
  1980s
• Both western and Chinese culture
• Experience and expertise from many years in US
  and EU pharma industry
• Abundant animal resources
• Low operating cost

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China as a major player in pharma outsourcing

• Advantages
• Highly technically competent
• Abundant animal resources
• Cost effective
• Support from Chinese government TAX
• Labor cost
• Currently 1/10 1/5 of the US

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China by the Numbers

• Per capita income reached 1,000 in 2003 from
  200 in 1980
• Recipient of 600B FDI since 1992
• Average value-added component in exports rose
  from 17 in 1992 to 40 in 2004
• China accounted for 1/3 of the global growth in
  the past 3 years
• Chinas share of global GDP, on a Purchasing
  Power Parity basis, rose from 5.5 in 1990 to
  12.7 in 2002

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Strong Research Base

• First-class research institutions
• Beijing Univ./Beijing Medical Univ.
• Qinghua Univ./ Peking Union Medical Univ.
• Fudan Univ.
• Shanghai Medical Univ.
• CAS, CAMS(NIH), CAPMS(CDC)
• More than 60,000 new medical graduates each year
  (not including other life-science related
  disciplines)
• About 200,000 research scientists in
  pharmaceutical research
• Extensive infrastructure to support advanced
  medical research, most top labs are equipped with
  state-of-the-art instruments

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Western Pharma Moving into China for Research
Talents

• Novartis deal with SIMM for novel drug leads from
  TCM
• Merck/TargeGen deal with Wuxi PharmaTech for
  compound synthesis and screening
• Mologen AG deal with Starvax to explore
  additional disease indications

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Implications for Smaller Biotech Companies

• Access to missing/additional RD capabilities,
  such as animal facility and trained personnel
• Lower cost to enable company to stretch the
  dollar
• Better resource management
• Increased operational flexibility

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Networked Biotech Company Model
Animal study
Protein expression
Core Innovation
Compound synthesis
outsourcing
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Where to find outsourcing partners in China

• Beijing
• Shanghai

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Beijing Strong Research CapacityState 863
Projects in Biotech Field
Tasks Amount
Concentrates the Most Advanced Medical Research
Institutes of China

• Chinese Academy of Science

• Academy of Military Medical Sciences
• Chinese Academy of Agriculture
• Chinese Academy of Preventive
• Medical Sciences (CDC)

• Chinese Academy of Medical
• Sciences (NIH)

• Chinese TCM Institute

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Beijing 4 Top Rankings in Biomedical Research

16 State Key Labs in Life Science Field
Medical Engineering Research Center
55 High Level Life Science Research Institute
State Key Medical Subjects
Quoted from Research Report of Chinese Biomedical
Industry
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Beijing Most Biomedical Experts

30 Academicians of CAS live in Beijing
50 Academicians of CAE live in Beijing
Beijing Other cities
Beijing Other cities
Quoted from Research Report of Chinese Biomedical
Industry
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High Quality Hospitals In Beijing
Medical Related Administrations
Beijing most A-level hospitals in China

• State Food and Drugs Administration
• Ministry of Health
• State TCM Administration
• Medical Department of State Trade
• Administration
• Medical Insurance Department of Ministry of
  Labor and Social Insurances
• Price Department of State Planning Commission
• Ministry of Science and Technology

Quoted from Research report of Chinese Biomedical
Industry
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Who to Deal with
Institutions
Companies

• Strong legal accountability
• and oversight
• Better communication
• Adherence to timeline
• Better QA document tracking

• Established labs
• Extensive intra-
• Institutional resources
• Lower cost

Pros

• Less established
• Higher cost
• Lack of extensive internal
• resource

• Lack of accountability
• Poor legal capability
• oversight
• Lack of QA procedures
• Lack of interest alignment
• Difficult to communicate

Cons
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Types of Service in China
Pre-clinical
Clinical

• Gene cloning/expression
• Ab generation
• Animal modeling
• In vivo POP experiment
• Tox
• PK/PD
• Tissue IHC
• Compound synthesis
• In vitro assay development

• PI selection
• Site selection
• Patient recruitment
• Trial design/monitor
• Data analysis
• Registration

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Chinese Service Providers
Pre-clinical
Clinical
Biology
Chemistry
AGTC Biochinan Bio3 CelgenPharm IgCon NewsummitBio
Northland Shanghai Genomics Starvax Tengen
Biomed
Crimson Pharma Lead Discovery Medicilon SIMM Wuxi
Pharmatech
AAI B-CRO Excel PharmaStudies Nutriechem Kendlewit
s Quintiles Venture Pharma
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Practice Tips for outsource to China

• Find the right partners
• Experienced management team
• High data quality
• Emphasis on confidentiality
• Smooth logistics
• Start slow and stay calm
• Look for a few good managers
• Maintain effective communication
• Relationship matters

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Typical Challenges

• Un-realistic expectationseither too high or too
  low
• Difficulty in communicationlost in translation?
• Transparency issues tell us the good the bad
  news when they happen, not 3 months later
• Misaligned interest understand the needs from
  both sides and drive a mutually beneficial
  agreement

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Deal Structures

• Fee-for-service
• TargeGen/Wuxi Pharmatech
• JJ/Shanghai Genomics
• Risk-sharing agreements
• Mologen/Starvax

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Risks of Offshore Outsourcing

• Loss of IP
• Loss of project control
• Loss of in-house expertise
• Lack of interest alignment
• Perception of low quality

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Starvax

• Founded in 2003 by
• US-educated entrepreneurs with over
• 40 years of combined experience in research,
  business, and law

• Provides services in animal modeling (including
  non-human primate), POP in vivo efficacy study,
  preliminary in vivo PK/PD, and human cancer
  tissue IHC

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Modes of Collaboration

• Simple pay-as-you-go agreement
• Clearly defined project with minimal input from
  the sponsor
• Starvax responsible for study design and
  execution
• Modular approach
• Project Lacks clearly defined end-point, i.e.
  research oriented projects
• Dedicated project team directly controlled by
  sponsor
• Starvax responsible for HR management, and
  quality/legal compliance
• Co-development approach
• Risk sharing in the project
• Each party covers part of the project cost
• Starvax entitled to certain rights if project
  becomes successful

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Where We Are
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Bio3 Services

• Pharmacokinetics (PK)
• Toxicology
• Animal species Rodents, Canines and Primates
• Immunohistochemical (IHC) staining of Human
  Tissue Array
• Assistance in regulatory submissions

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Global Organization
US-certified Toxicologists (US)
Data Analysis (US)
Primate Facility (Guangxi, China)
SPF Rodent Facility (Shanghai, China)
GLP Lab (Shanghai, China)
QA and Operation Monitoring
Customer
BioCubed Headquarter, Bio3 Collaborative Platform
(US)
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See you again next 1stWednesday _at_ WSGR