China Planning Major Investment in Biotech R&D

China declared its strong financial support in R&D when Xu Guanhua, the Minister of Science and Technology, recently announced the Chinese science goals for 2020 at a national conference in Beijing. China’s R&D expenditures were already at a record high of $38.5 billion in 2006, and rising quickly at 22% over 2005.

As part of the rapidly expanding program to bring China technology R&D into a position of global leadership, 16 national-level projects will be launched, including several in biology and health. Ten new national laboratories will be built, two of them for drug development and protein engineering.

While China is still lagging other world powers in relation to the portion of its GDP allocated to scientific research and development, it is rapidly gaining ground. What makes China different than other countries, including the U.S., is that it has established very aggressive and broad programs to develop and commercialize its technology, and it is supporting those programs from the top down – from national government down to the local levels.

On a trip to Shanghai in late January to focus on biotech investment opportunities there, I witnessed the government’s strong commitment to commercialize its biotechnology in action. Nestled in the 12 square mile Hi-tech Park in the Pudong New Area of Shanghai (see China Generates New Opportunities for Biomedical Companies) are two rather nondescript buildings called the “Pharma Engine,” housing forty-five (yes, 45) start-up biotechs, all funded or supported by the government. Scattered elsewhere in the park are another 150 biotech startups.

While China’s incubator model is similar to incubators in the U.S. (although significantly larger), many of the companies already have revenue while others have drugs in early and mid-stage clinical development with China’s SFDA. The SFDA has a drug approval process that closely parallels the U.S. but trial results are not usually transferable to the U.S. – at least not yet.

China loves to say that it is “number one” at things and this time it truly is. Assuming a five-year program from incubation to independence, 200 startups will result in 40 new biotechs launched each year. It would take 20 or more U.S. incubators to accomplish the same thing, and I’m not sure there even are 20 biotech incubators in the U.S., yet China is doing this with one. And there are several similar parks and incubators in other parts of China.

China is also working hard to attract foreign investment, and that extends even more so to biotech. Nestled between the drab incubator buildings in Pudong is a striking, curved building with flags from many nations flying in front. This houses the “VC Plaza” and all government offices supporting biotechnology and pharma companies in the park. The VC Plaza currently houses close to 20 VC and investment firms with plans to expand to as many as 60. There are also several major law firms, investment banks, and VCs there including Perkins Coie and Burrill and Co. These firms receive government support in exchange for their intention to invest in the incubator companies.

On my visit there, I met with four officials of the park and incubator, and it was obvious they are incredibly excited about their jobs, and I understand why. The energy here is at an extreme high and can’t help but be contagious. So much so, that we now have plans to open a Shanghai bureau. (See www.centient.com/news.)

So stay tuned as our China coverage grows as China biotech grows – which is very rapidly.

Disclosure: none.