The pharma outsourcing industry in China has experienced over 35% year on year growth in the past few years. Increasingly, the sophisticated service offer of multinational CROs/CMOs is being challenged by improving Chinese players importing Western expertise, experience and business models to this fast growth market. However, there are still wide variations in service quality and capability from domestic outsourcing providers and many pharma and biotechs in Western markets are still reluctant to transfer parts of the drug development process to China.
Their concerns largely stem from issues around intellectual property rights (IPR), copyright infringements and counterfeiting. At both a corporate and governmental level, this weakness has been recognized and several key changes have been made to Chinese patent law, while service providers have also sought to improve their IPR protection processes and service standards. Nonetheless, key differences in secure IPR protection standards and service capability remain among domestic players.
’Intellectual Property and Outsourcing in China’ is a new report published by Business Insights that explores the expanding pharma outsourcing market in China to discover how large pharma, small-sized pharma and biotech can most effectively utilize the country’s service offerings and capabilities. It examines the latest outsourcing trends and service provisions across all stages of the drug discovery process and profiles the leading domestic CRO/CMOs. This report provides an in-depth investigation of the changing IPR protection landscape in China and analyses the strategies which can minimize infringement risks. Case studies are used to illustrate the success of recent CRO/CMO partnerships with Western companies and key criteria for selecting suitable service providers are also identified.
Some key findings from this report...
- China is the world’s most attractive destination for Pharma outsourcing based on an analysis of patient pools, cost efficiency, regulatory conditions, available expertise and infrastructure.
- There were 694,153 patent applications in China in 2007, a CAGR of 22.5% on the number of applications in 2003 (308,487). At this rate, China will be the world’s largest patent-filing jurisdiction by 2012.
- China’s service capabilities are strong, with full-scale medicinal chemistry services currently available from 26 CROs. Services include structure-based rational drug design, structure-activityrelationship (SAR)-based activity/potency optimization, and the optimization of pharmacological properties for lead compounds.
- In the next 3 to 5 years, the service capabilities of many China-based service providers will develop quickly and change the IP risk profile. Currently, the domestic industry is highly proficient in large-scale manufacturing but relatively weak in preclinical and clinical drug development, and as providers’ capabilities increase the need for verification of effective IP protection protocols will intensify.
- The market will experience high growth of around 35% year on year to 2011. During this period, the industry will likely see investment in targeting, identification and validation capabilities.
Top reasons to order your copy today
- Understand how large pharma, small-sized pharma and biotech companies can benefit from the Chinese pharma market with this report’s analysis of the number of companies involved, levels of industry maturity, and existing/projected service offering capabilities.
- Assess the the risk factors associated with outsourcing decisions and measure the suitability of China-based CROs and CMOs with this report’s examination of each class of service provider and the key criteria for selecting the most appropriate company, including IPR protection protocols, service quality/capability, cost and geographic location.
- Understand how the IPR protection environment in China is evolving by evaluating the latest regulatory developments and patent application trends for domestic and multinational companies, in addition to this report’s market forecasts for outsourcing industry growth to 2015.
- Identify how IPR protection varies across each stage of the R&D process and use case studies of partnerships between Chinese CROs/CMOs and Western companies to measure the success of recent endeavours.
Key issues examined in this report...
- Variable service offerings. Many Chinese pharma companies that have API manufacturing skills only offer their services on a seasonal basis. They are not professional CMO providers, as their service offerings are largely dependent upon spare production capacity levels.
- Inflated service claims. Although many CROs/CMOs claim a broad service scope to attract business, their actual service skills are limited to only a couple of areas. Specifically, scientific staff often lacks sufficient experience, training and deliverability guidelines.
- Inconsistent IPR protection system. IPR protection is no longer a serious issue amongst top-tier service providers but may still be weak in lower tier domestic companies and those operating in rural areas.
- IPR infringement cases and counterfeit drugs: Drug counterfeiting is still a real problem and most IPR infringement cases are related to trademark/copyright violations. However, there have been no reported cases of infringement of a western pharma or biotech’s IPR by a Chinese company during their outsourcing collaborations.
Your questions answered...
- How does China compare to other outsourcing destinations?
- What services are offered by the CRO and CMO industry in China?
- What are the advantages of outsourcing different stages of the R&D process by large/small-sized pharma and biotech companies?
- What are the government’s development priorities for the industry?
- How has medical infrastructure supported region-specific growth in outsourcing and will this trend continue?
- What is the strongest sector of China’s pharma outsourcing industry in terms of both number of companies and strength of their services?
- Who are the major Chinese players in contract research and in which areas do they specialize?
- Which multinational companies have projects outsourced to China?
- What actions are the government taking to strengthen IPR protection?
Executive summary 10
Pharmaceutical outsourcing in China 10
IPR protection in outsourcing to China 11
Incorporating IPR protection 12
Future developments in IPR protection 13
Chapter 1 The pharmaceutical outsourcing market in China 16
Summary 16
Introduction 17
Trends in Chinese outsourcing 18
Growth of the industry 18
The attractiveness of China 19
Fast domestic growth 21
Enhanced growth driven by international companies 22
The drug discovery process 24
Current outsourcing trends by stage 25
Outsourcing of lead discovery and optimization 25
Outsourcing preclinical research 26
Outsourcing clinical research 27
Current service capabilities 27
Early stage drug discovery 27
Pharmacological property studies and in vivo preclinical research 30
Clinical trials 30
Contract manufacturing 31
Major players in the contract research market 32
Companies outsourcing to China 35
Outsourcing by pharma and biotech companies 35
Direct involvement of Western companies in R&D in China 36
Key issues 39
Chapter 2 IPR protection in China 42
Summary 42
Introduction 43
Western perceptions of IPR protection in China 44
IPR protection by phase of development 46
Target identification and validation 47
Lead discovery/optimization 47
Drug development (including both preclinical and clinical trials) 48
Manufacturing 49
IPR protection in China 50
The development of IPR protection in China 50
Copyright theft in China today 54
Trends in patent filing 54
IPR infringement prosecutions 58
IPR infringement prosecution transparency 59
SFDA involvement 60
IPR protection in Chinese pharmaceutical outsourcing 61
Process involved in outsourcing to a Chinese CRO/CMO 61
IPR protection involved in the first step of outsourcing process 62
CRO/CMO protection of IPR 63
The current situation 63
Weaknesses in the Chinese IPR protection system 65
Brief case studies 65
In-licensing 66
Shanghai Sunway Biotech and Onyx Pharmaceuticals. 66
Hainan Noken Pharmaceuticals and Medivir AB 66
Simcere and GSK 66
Outsourcing 67
WuXi Pharmatech and AstraZeneca 67
Novartis 67
Promega and the Guangzhuo Institute of Biomedicine and Health 68
Cases of pharmaceutical IPR infringement in China 69
Togjitang Chinese Medicines Company and Yulongyadong
Pharmaceuticals 69
Pfizer vs 12 Chinese pharmaceutical companies 69
Pfizer and Lianhua Pharmaceuticals 69
Chapter 3 Incorporating IPR protection into outsourcing strategies 72
Introduction 73
Potential risks in outsourcing to China 73
Assessing project suitability for outsourcing 76
Determining requirements and objectives for outsourced projects 79
Choosing a service provider 81
Classification of Chinese service providers 81
Criteria for selecting the ideal service provider 84
Measures being undertaken to protect IP at the service provider 85
Service quality 85
Cost 86
Geographic location 86
CRO/CMO business model 87
Management 88
Making the final decision 88
Strategies to protect IPR 89
Partnership 89
Incorporation of milestones or royalties into the contract 90
Alternative strategies 91
Best practice for protecting IPR during the outsourcing process 91
Risks and rewards 93
Chapter 4 Future developments in IPR protection and their impact on outsourcing 98
Summary 98
Introduction 99
Drivers and resistors 100
Further improvements in service capability and quality 100
Further improvement in IPR protection 102
Negotiating the Chinese pharmaceutical market 103
Establishing a facility in China 104
Advantages 104
Disadvantages 104
Forming a joint venture 105
Advantages 105
Disadvantages 105
Establishing a partnership 105
Advantages 106
Disadvantages 106
Outsourcing 107
Advantages 107
Disadvantages 107
Future outlook 109
Significant improvements in IPR protection 109
Fast growth in pharmaceutical outsourcing 110
Improvements in service capability 111
Market forecast 111
Chapter 5 Appendix 116
Company data 116
Research methodology 122
Glossary 123
Index 126
List of Figures
Figure 1.1: Country Attractiveness Index for Clinical Trials 20
Figure 1.2: The drug discovery, development and manufacturing process 24
Figure 1.3: Distribution of CROs/CMOs by technical area 29
Figure 2.4: IP risk levels at each stage 46
Figure 2.5: Milestones in the development of China’s IPR protection system 51
Figure 2.6: Patent applications in China (total applications), 2000-2008 56
Figure 2.7: Development of patent applications filed by domestic companies and foreign companies (total applications), 2000-2008 57
Figure 2.8: Lawsuit cases in China involving IPR infringement (total infringements), 2004-200759
Figure 2.9: Outsourcing to a Chinese CRO/CMO 61
Figure 3.10: Potential risks in outsourcing 74
Figure 3.11: Criteria for classification of Chinese service providers 81
Figure 3.12: Risks and rewards in outsourcing 94
Figure 4.13: The Chinese outsourcing industry size ($bn), 2007-2015 113
List of Tables
Table 1.1: Profile of Suzhou BioBay Industrial Park 22
Table 1.2: Major multinational CROs in China 22
Table 1.3: Distribution of CROs/CMOs by technical area 28
Table 1.4: Major Chinese players in contract research 33
Table 1.5: Major multinational CROs in China and their activities 34
Table 1.6: Multinational companies with projects outsourced to China 37
Table 1.7: Generic manufacturers with activities in China 38
Table 1.8: Venture capital firms with Chinese activities 38
Table 2.9: Government educational program 52
Table 2.10: Government actions to strengthen IPR protection 53
Table 2.11: Patent applications in China (total applications), 2000-2008 56
Table 2.12: Development of patent applications filed by domestic companies (total applications), 2000-2008 57
Table 2.13: Development of patent applications filed by foreign companies (total applications), 2000-2008 58
Table 2.14: IPR infringement cases in China 59
Table 3.15: Checklists for self-assessment of IPR risk tolerance level 79
Table 3.16: Criteria for selecting the ideal service provider 84
Table 4.17: Chinese outsourcing industry, 2007-2015 112
Table 5.18: Company Profile of WuXi PharmaTech 116
Table 5.19: Company Profile of ChemPartner 117
Table 5.20: Company profile of Shanghai Sunway Biotech Co. 118
Table 5.21: Company profile of BioDuro 119
Table 5.22: Company profile of Chemizon 119
Table 5.23: Company Profile of Radiant Pharma & Tech 120
Table 5.24: Company Profile of Jiangsu Zhongdan 120
Table 5.25: Company profile of Sundia Meditech 121
Table 5.26: Company profile of HD Biosciences 121
Pharmaceutical outsourcing in China 10
IPR protection in outsourcing to China 11
Incorporating IPR protection 12
Future developments in IPR protection 13
Chapter 1 The pharmaceutical outsourcing market in China 16
Summary 16
Introduction 17
Trends in Chinese outsourcing 18
Growth of the industry 18
The attractiveness of China 19
Fast domestic growth 21
Enhanced growth driven by international companies 22
The drug discovery process 24
Current outsourcing trends by stage 25
Outsourcing of lead discovery and optimization 25
Outsourcing preclinical research 26
Outsourcing clinical research 27
Current service capabilities 27
Early stage drug discovery 27
Pharmacological property studies and in vivo preclinical research 30
Clinical trials 30
Contract manufacturing 31
Major players in the contract research market 32
Companies outsourcing to China 35
Outsourcing by pharma and biotech companies 35
Direct involvement of Western companies in R&D in China 36
Key issues 39
Chapter 2 IPR protection in China 42
Summary 42
Introduction 43
Western perceptions of IPR protection in China 44
IPR protection by phase of development 46
Target identification and validation 47
Lead discovery/optimization 47
Drug development (including both preclinical and clinical trials) 48
Manufacturing 49
IPR protection in China 50
The development of IPR protection in China 50
Copyright theft in China today 54
Trends in patent filing 54
IPR infringement prosecutions 58
IPR infringement prosecution transparency 59
SFDA involvement 60
IPR protection in Chinese pharmaceutical outsourcing 61
Process involved in outsourcing to a Chinese CRO/CMO 61
IPR protection involved in the first step of outsourcing process 62
CRO/CMO protection of IPR 63
The current situation 63
Weaknesses in the Chinese IPR protection system 65
Brief case studies 65
In-licensing 66
Shanghai Sunway Biotech and Onyx Pharmaceuticals. 66
Hainan Noken Pharmaceuticals and Medivir AB 66
Simcere and GSK 66
Outsourcing 67
WuXi Pharmatech and AstraZeneca 67
Novartis 67
Promega and the Guangzhuo Institute of Biomedicine and Health 68
Cases of pharmaceutical IPR infringement in China 69
Togjitang Chinese Medicines Company and Yulongyadong
Pharmaceuticals 69
Pfizer vs 12 Chinese pharmaceutical companies 69
Pfizer and Lianhua Pharmaceuticals 69
Chapter 3 Incorporating IPR protection into outsourcing strategies 72
Introduction 73
Potential risks in outsourcing to China 73
Assessing project suitability for outsourcing 76
Determining requirements and objectives for outsourced projects 79
Choosing a service provider 81
Classification of Chinese service providers 81
Criteria for selecting the ideal service provider 84
Measures being undertaken to protect IP at the service provider 85
Service quality 85
Cost 86
Geographic location 86
CRO/CMO business model 87
Management 88
Making the final decision 88
Strategies to protect IPR 89
Partnership 89
Incorporation of milestones or royalties into the contract 90
Alternative strategies 91
Best practice for protecting IPR during the outsourcing process 91
Risks and rewards 93
Chapter 4 Future developments in IPR protection and their impact on outsourcing 98
Summary 98
Introduction 99
Drivers and resistors 100
Further improvements in service capability and quality 100
Further improvement in IPR protection 102
Negotiating the Chinese pharmaceutical market 103
Establishing a facility in China 104
Advantages 104
Disadvantages 104
Forming a joint venture 105
Advantages 105
Disadvantages 105
Establishing a partnership 105
Advantages 106
Disadvantages 106
Outsourcing 107
Advantages 107
Disadvantages 107
Future outlook 109
Significant improvements in IPR protection 109
Fast growth in pharmaceutical outsourcing 110
Improvements in service capability 111
Market forecast 111
Chapter 5 Appendix 116
Company data 116
Research methodology 122
Glossary 123
Index 126
List of Figures
Figure 1.1: Country Attractiveness Index for Clinical Trials 20
Figure 1.2: The drug discovery, development and manufacturing process 24
Figure 1.3: Distribution of CROs/CMOs by technical area 29
Figure 2.4: IP risk levels at each stage 46
Figure 2.5: Milestones in the development of China’s IPR protection system 51
Figure 2.6: Patent applications in China (total applications), 2000-2008 56
Figure 2.7: Development of patent applications filed by domestic companies and foreign companies (total applications), 2000-2008 57
Figure 2.8: Lawsuit cases in China involving IPR infringement (total infringements), 2004-200759
Figure 2.9: Outsourcing to a Chinese CRO/CMO 61
Figure 3.10: Potential risks in outsourcing 74
Figure 3.11: Criteria for classification of Chinese service providers 81
Figure 3.12: Risks and rewards in outsourcing 94
Figure 4.13: The Chinese outsourcing industry size ($bn), 2007-2015 113
List of Tables
Table 1.1: Profile of Suzhou BioBay Industrial Park 22
Table 1.2: Major multinational CROs in China 22
Table 1.3: Distribution of CROs/CMOs by technical area 28
Table 1.4: Major Chinese players in contract research 33
Table 1.5: Major multinational CROs in China and their activities 34
Table 1.6: Multinational companies with projects outsourced to China 37
Table 1.7: Generic manufacturers with activities in China 38
Table 1.8: Venture capital firms with Chinese activities 38
Table 2.9: Government educational program 52
Table 2.10: Government actions to strengthen IPR protection 53
Table 2.11: Patent applications in China (total applications), 2000-2008 56
Table 2.12: Development of patent applications filed by domestic companies (total applications), 2000-2008 57
Table 2.13: Development of patent applications filed by foreign companies (total applications), 2000-2008 58
Table 2.14: IPR infringement cases in China 59
Table 3.15: Checklists for self-assessment of IPR risk tolerance level 79
Table 3.16: Criteria for selecting the ideal service provider 84
Table 4.17: Chinese outsourcing industry, 2007-2015 112
Table 5.18: Company Profile of WuXi PharmaTech 116
Table 5.19: Company Profile of ChemPartner 117
Table 5.20: Company profile of Shanghai Sunway Biotech Co. 118
Table 5.21: Company profile of BioDuro 119
Table 5.22: Company profile of Chemizon 119
Table 5.23: Company Profile of Radiant Pharma & Tech 120
Table 5.24: Company Profile of Jiangsu Zhongdan 120
Table 5.25: Company profile of Sundia Meditech 121
Table 5.26: Company profile of HD Biosciences 121
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