China: Latest Hotspot for Western Biotech, Pharma Firms

by Melanie McFarland

Asian countries such as India and Japan have gained notoriety for their talented scientists and innovative contributions to the life sciences. Now, a new contender is emerging as a potential industry leader. According to a report by Price Waterhouse Coopers, big pharmaceutical companies rated China as the best location for outsourcing in Asia. The country’s large population represents enormous market potential for Western firms whose domestic profits are coming to a standstill. Pharma companies are also drawn by China’s low production costs. The Wall Street Journal estimates that the total cost of a scientist in China is $30,000, compared to $250,000 in the U.S.

Cost isn’t the only factor attracting Western dollars to China. The country has a large, knowledgeable pool of scientific talent to draw from. John Olyer, founder of biotech startup Genta, cites the availability of skilled scientists as a major factor behind the decision to base his latest project in Beijing. In an interview with Chemical World, Olyer describes Chinese scientists as having “a real thirst for knowledge, and an incredibly humble, yet can-do approach to challenges. There is nothing that they cannot learn.”

Worldwide pharmaceutical firms looking to expand sales into emerging markets are contributing resources to China. Giants such as AstraZeneca (AZN), Novartis (NVS), and Abbott Laboratories (ABT) could lend credibility to a domestic industry that has been marred by drug contamination scandals. Most recently, the FDA cited two Chinese firms for deliberately shipping tainted heparin to the U.S.

The Chinese government appears to support the development of the nation’s life sciences industry. The State Council recently announced that China will spend $9.2 on new technology in the next two years in order to stimulate economic growth. Biotechnology is key among the industries the Chinese government plans to invest in, Reuters reports. The government has also approved several policies intended to encourage the growth of both small and large biotech firms.

Two Chinese firms working in the life sciences are Bodisen Biotech (BBC), a leading manufacturer of “green” fertilizer to improve agricultural yield, and China Medical Technologies (CMED), which has developed an ultrasound-guided ablation system for the noninvasive treatment of solid tumors. Sino-American Biomedical Services, based in Wisconsin, provides business solutions to help small- to mid-sized biomedical companies establish a market presence in China.

Comments

[CautiousInv...:]

There are a number of interesting twists on the broad story.
China is already busy manufacturing generics but there are records of infringements and poor quality control.

Longer-term, though, China is likley to be a key manufacturer of generics which are likley to play an important role in the expansion of US healthcare services, while controlling costs; it's only logical the companies the author mentions take advantage of these opportunity.

The other slant is the health delivery system within China, which is in its infancy but is about to be expanded. Few details have been released, but the Central Party recently announced that by 2020 a system will be in place to provide equitable and cost-effective to health care coverage to the entire population of 1.3 billion.

In my mind, this development offers a very interesting investment theme.

May 17 11:04 AM

[Sierra:]

China is very cheap and they provide the same services as other countries do; however, they do have a few shortcomings (poor quality, for one). But they're learning quickly so more or less they are going to do something about their quality control. Advantage for China, disadvantage for other countries. Who's going to make use of the scientists from other countries?

May 17 11:48 AM

[User 415357:]

This is a pure sell out ........Scientists do not cost 250k annually. I have been a headhunter for 30 yrs . and this is pure bunk . These CEO's get trained here , get their funding here , get their patents here and then sell out to a NATION of SLAVE LABOR, Poor Hygiene and are the worlds biggest copy artists in the world . For what ? For the almight YUAN.

Disgusts me totally

Ed Bertolas

May 17 01:59 PM

[gtmcduffy@g...:]

bloggingstocker.blogsp.../

May 17 06:09 PM

[Alan Young:]

The correct ticker for Bodisen is BBCZ.
Saying they are a "leading" firm in organic fertilizer is dubious; it has a market cap under $4 M, compared to CGA with $133 M.

May 18 07:50 AM

[PetrBuben:]

The end of western civilization, western nations. The culprit? Corrupted greed of out-of-control capitalism and corporations. ..Transfer money, knowhow, jobs, industries to China etc, just to make better profit for now! .. It's time for a regime change. Big time. ...If it isn't too late already. .......... The future lies with social responsible capitalist countries, where government foster it's population, healthcare, education, rule of law, and protect against aggression of colonial powers and their military blocks.

May 18 02:14 PM