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​The pharma business

A better pill from China


Chinese pharma firms are starting to develop new drugs for the global


  1. WALK into the Shanghai laboratories of Chi-Med, a biotech firm, and
    you encounter the sort of shiny, cutting-edge facilities common
    in any major pharma company in America, Europe or Japan.
    Chi-Med(和黄药业)has just had positive results in a late-stage
    trial of its drug for colorectal cancer, which is called
    Fruquintinib. If the drug is approved both in China and in Western
    markets it could be the very first prescription drug to be designed
    and developed entirely in China that will be on a path to global

  2. Given China’s ageing population, higher incomes and rising demand
    for health care it is clear why innovation in drugs is a priority
    for the country. Its national market for drugs has grown rapidly in
    recent years to become the world’s second-largest. It could grow
    from $108bn in 2015 to around 167bn dollars by 2020, according to an
    estimate from America’s Department of Commerce. By comparison,
    America spends about $400bn a year on drugs.

  3. Chinese firms mainly sell cheap,** generic medicines** that earn
    only razor-thin margins. The pharma industry is extremely
    fragmented, with thousands of tiny manufacturers and distributors.
    That helps explain the limited amount of finance that is available
    for investment in new medicines. Most Chinese pharma firms devote
    less than 5% of sales to R&D, according to a report last year from
    the World Health Organisation (big global drug firms typically spend
    14%-18% of sales on R&D). And the bulk of that spending goes to
    research into generics.


  1. But things are changing quickly. The government is encouraging the
    industry to consolidate, chiefly by raising standards for the
    quality of new medicines. It is also improving the country’s
    regulatory infrastructure, which should make it more efficient, and
    faster, to develop drugs. The value of deals in the health-care
    sector has been increasing as a result. ChinaBio, a research firm,
    reckons that over $40bn of foreign and local money went into the
    life sciences in China in 2016. In the same year just three Chinese
    biotech firms—CStone, Innovent and Ascletis—together raised more
    than $500m of financing.

  2. Another boost is the arrival of talent from abroad, whether
    Chinese-born executives returning with a Western education or
    Westerners with experience of multinational pharmaceutical firms.
    Christian Hogg, the boss of Chi-Med—which was founded in 2000, has
    eight drugs in clinical development and listed on the NASDAQ stock
    exchange in 2016—used to work at Procter & Gamble, a global
    consumer-goods firm. Samantha Du, the firm’s very first scientific
    officer, was formerly an executive at Pfizer, an American pharma
    giant. Now known as the godmother of Chinese biopharma, she used to
    manage health-care investments for Sequoia Capital, a Silicon Valley
    venture-capital firm. In 2013 she helped found Zai Lab, which
    licenses late-stage drugs from Western pharma companies to
    develop and sell in China. Zai Lab also aims to develop innovative
    medicines in immuno-oncology.

  3. Another firm attracting attention is BeiGene, an oncology firm based
    in Beijing, which has four clinical-stage drug candidates and which
    raised $158m in an IPO last year. Chi-Med’s Fruquintinib may even be
    beaten in the race to approval in America and Japan by a cancer drug
    called Epidaza from Chipscreen Biosciences of Shenzhen. China
    approved it in 2015.

  4. It is too early to say whether these innovative firms will remain
    rarities. Only a few large ones have emerged, since the industry
    is resisting consolidation. But the size of the local market will
    itself help the industry grow. And developing a drug in China is far
    cheaper than it is in America or Europe. Given the outrage at the
    high cost of drugs in America, in particular, there is every
    for Chinese firms to develop medicines for the global