In China, a country that has encouraged conformity over individualism and frowned upon failure, innovation in pharmaceuticals has taken a back seat and generics continue to make up more than 97 percent of manufactured chemical drugs.
However, like so many parts of China today, the situation is changing.
The central government has newly laid plans to spur innovation, and China's pipeline of novel drugs is filling out. With the country's 11th Five Year Plan set forth in 2006, the central government outlined a long term development roadmap that fosters innovation as a way to transition from a manufacturing-based to innovation-based economy.
Since then, government funding for research and development has reached record highs. Coupled with a steady flow of talented returnee scientists and increasing numbers of university graduates, the country is building its innovative capabilities.
China's turbulent history has created an environment unfavorable for innovation.
The emptying of the universities that occurred during the Cultural Revolution deprived the nation of nearly a generation of would-be scientists, and the Open Door Policy of a decade later saw many of China's most talented scientists leave to study in the West.
The talent shortage has been combined with a lack of financing and poor intellectual property (IP) protection. Most domestic pharmaceutical companies are small in scale and have little capital for research and development - on average only 1 percent to 2 percent of annual sales are put into R&D in China, compared to 10 percent to 15 percent in developed countries.
Until China's first drug patent law was issued in 1993, it had no measures in place for IP protection for pharmaceutical and biotechnology drugs. The tide is slowly turning. Scientists, attracted by central government policies and a more competitive university and business landscape, are returning to spearhead many of the innovative development projects at home. Numerous small, state-owned pharmaceutical firms are forming larger enterprises better able to fund drug discovery and development, moves fueled by government initiatives encouraging consolidation.
The nation's IP protection measures are stronger than ever before, and domestic patent applications for inventions have nearly quadrupled over the past decade. (See Figure 1.)
According to a May 2007 study from the Economist Intelligence Unit, which analyzes and forecasts industry issues for more than 200 countries, China's innovation environment is expected to progress the fastest of 82 nations surveyed.
Over the past decades, the Chinese government has drastically increased funding and support for innovation. As part of China's 11th Five Year Plan, the central government pledged RMB6.6 billion (US$965 million) to support 30 innovative drugs for oncology, cardiovascular disease, diabetes and other diseases from 2009 to 2020.
Other national funds, such as the High Tech Research and Development Program and the National Basic Research Priorities Program, are funneling more than RMB4 million into science and technology development.
Economist Intelligence Unit statistics show that China's total annual R&D expenditures have grown by 20 percent annually over the last several years.
And though China currently invests only 1.3 percent of gross domestic product (GDP) into R&D, the central government has announced a target R&D investment of 2 percent of GDP in 2010 and 2.5 percent of GDP by 2020, which would put China in the range of the U.S. in terms of R&D spending.
Drug discovery and development in China is conducted primarily by institutes and universities, biotechnology companies and pharmaceutical companies.
Institutes and universities, with their vast (and nearly free) talent pools and ability to draw on government funding for early stage research (more than 90 percent of government funds go to institutes and universities), are the main bodies conducting early drug discovery work.
Most domestic pharmaceutical and biotech companies are deterred by the high risk and large amounts of capital required for early stage development of novel drugs. (That may change as M&A among pharma/biotech results in larger entities with greater funds for R&D and the culture becomes less risk adverse.)
Most institutes and universities, however, lack the capital and experience to carry out later-stage development work, such as clinical trials and commercialization, and thus often form partnerships with pharmaceutical and biotechnology firms to complete the drug development cycle.
Interestingly, the genesis of many of those companies was originally from within the walls of academia - Shanghai Target, for example, was founded by the Chinese Academy of Sciences, and Shanghai Fudan-Zhangjiang Bio-pharmaceutical was founded in part by Fudan University.
According to General Biologics Institute's Novel Pipeline, a database featuring innovative drugs developed and discovered by Chinese entities, of the 183 novel drug candidates currently in preclinical and clinical stages of development, 92 have been developed by 20 institutes and universities. (See Figure 2.)
Institutes and universities are developing 70 percent of the 124 novel drug candidates in preclinical stages of development, and pharmaceutical and biotechnology companies are developing 70 percent of the 59 candidates in clinical stages of development.
The top five novel drug developers are institutions or universities. The most prolific company is Shenzhen Chipscreen Biosciences, which receives a large portion of its R&D capital from the government's 10th Five Year Plan, 11th Five Year Plan, the 863 Program and local government.
The Innovation Landscape
Among the 183 drug candidates in GBI's Novel Pipeline, 121 are chemical agents, 50 are biological agents and 12 are derived from traditional Chinese medicines (TCMs).
Although TCM-derived candidates account for the smallest portion of the Novel Pipeline, 25 percent of the chemical or biological candidates are derived from natural products.
The majority of the drug candidates in the Novel Pipeline are in preclinical stages of development, accounting for 68 percent of the total drug candidates.
The field narrows with progressive downstream stages of development. The eight candidates in Phase III development are for application in immunology/allergy, infectious disease, oncology, digestive disease and musculoskeletal disease.
The therapeutic areas with the most candidates currently in development are cancer, infectious disease, cardiovascular disease and central nervous system (CNS) diseases, which together account for 70 percent of all the novel drug candidates in GBI's Novel Pipeline. (See Figure 5.)
That reflects not only the growing markets for those therapeutic areas in China, but also government-guided funding - cancer and cardiovascular disease are areas supported by the 11th Five Year Plan, and along with diabetes, were the focus of 17 of 44 projects receiving 973 Program funding.
What Does the Future Hold?
Innovation has been a largely neglected area of drug discovery research in China, where pharmaceutical companies have a long history of producing copies of drug products developed abroad. However, with recent government measures supporting innovative drugs and discouraging generics, innovation in pharmaceutical R&D is building. Government funds funneled into early stage development projects are bearing fruit, and the country's oncology, infectious disease and CNS pipelines are filling out. Patent applications are on the rise, and with stronger IP protection measures, increasing numbers of multinational companies are setting up R&D centers in or outsourcing R&D activities to China.
The country has made considerable progress over the recent past, and as the government continues to stimulate innovation and moves toward R&D investments on par with that of the U.S., the country may well make headway in its quest to move from imitation to innovation.
Editor's note: This article was researched and written by General Biologics, (www.gbipharma.com), which covers the biotech and pharmaceutical industries in China, and previously appeared in China Pharmaceutical & Biotechnology Monthly. For more information, including names of all novel and non-novel drug candidates, filing status and developer information, see these additional GBI materials: GBI Pipeline report and database (www.gbipharma.com/report.asp); GBI SOURCE (www.gbipharma.com/source_introduction.asp).