Pharmaceuticals: Drug development with Chinese characteristics
Around the world over the past couple of years, the pharmaceuticals industry has been slashing jobs at a rapid rate, beset by expiring patents on important drugs and slowing growth in rich country markets.
The lost jobs have included sales representatives and back office staff, but also the once ring-fenced jobs in drug development, the lifeblood of the industry.
Against this somewhat grim backdrop, however, Shanghai has managed to cement its position as one of the drugs industry’s most important hubs for research and development.
Many of the industry’s premier companies, including Novartis, GlaxoSmithKline, Pfizer and AstraZeneca have opened new research facilities in the city and some of them are already looking to expand them.
Novartis, the Swiss group, said in November it planned to invest $1bn in its Shanghai laboratories, which would employ 1,000 people in five years’ time. Shanghai would become the third pillar in the company’s global R&D, alongside Basel and Boston.
Amid hype about corporate research moving to China and overinflated figures about how much real innovation is taking place in the country, the rapid emergence of pharmaceuticals research in Shanghai is a strong demonstration that the city can actually build a genuine corporate research base.
How has it managed to flourish while the industry as a whole is struggling?
The principal draws are the market and the pool of talented scientists.
While OECD healthcare markets are languishing and the industry is trying to come to terms with the impact of US healthcare reform, emerging markets are flourishing, none more so than China.
IMS, the consultancy, believes the country will see sales increase by 17 per cent this year.
Most companies are working on the assumption that China will be one of the three biggest markets in the industry in five years, alongside the US and Japan.
Although industry executives say there is no direct link between where research is conducted and sales in that country, there are plenty of subtle advantages to having labs in important markets – from currying favour with regulators to establishing links with the doctors and scientists who are leaders in their area.
AstraZeneca says that its research arm in Shanghai is mostly focused on trying to learn more about patients in China and the country’s medical needs.
When the company launched its Iressa drug for lung cancer seven years ago, it quickly found that Asian women who were non-smokers responded much more strongly than western patients. One of the genes that the drug targets appears to mutate much more frequently among Asian women, making the treatment more effective.
The initial focus of the facility has been to try to understand more about these differences, first in cancer and now in respiratory diseases.
“The Iressa case will not be an exception. It will happen again and again, so we are here to study the differences between patients in this part of the world,” says Zhang Xiaolin, head of AstraZeneca’s Shanghai research facility.
“All of this will have a profound effect on drug development and on the prospects for personalised medicine.”
The other driving force for drugs companies is the relatively untapped ranks of smart young Chinese scientists.
Novartis says this was the main reason for its decision significantly to expand its research arm in Shanghai. Six years ago, it moved the headquarters of its research operations from Basel to Cambridge, Massachusetts.
Daniel Vasella, chairman, says the experience in the US “taught us that you have to go where the talent is rather than getting the talent to come to you”.
The gap in the local talent pool is that, while there are plenty of excellent scientists, there are few people with extensive experience in drug development – an area that is still in its infancy in China.
That means that multinationals have needed to recruit a significant number of overseas Chinese from labs in the US and Europe to take leadership positions – something that nullifies much of the cost advantage there might be to conducting research in China.
At a time when the industry struggling elsewhere, there is no shortage of overseas Chinese scientists wanting to come back.
At first, it was quite hard work to lure back talented researchers, says Mr Zhang at AstraZeneca, but now there are no problems.
Because of the large number of drug research facilities established in Shanghai, there is also now a critical mass of suppliers of the instruments and chemicals that are vital for research.
There are some obstacles, however. Drug companies experience considerable problems shipping biological samples while the regulatory environment for early-stage clinical trials is also extremely complicated.