Our Biotech/Pharma BOOM

1. Our Biotech/Pharma BOOM Dr H M Pang Senior consultant, HK UST Technology transfer June 2005, Shanghai,PRC

2. Booming statistics-West • 500 biotech companies employing >50K people, mostly established over the last 5 years • genetically engineered products launched • >150 in clinical stages, more in preclinical • Many INDs filed since 1999 of bio origin • Sales increased by ~30%, profit 20%

3. Biotech boom- China • Over 4 billion sales in 2004 • Companies listing • Biopharma generics • A few new drugs ?? • Drug spending increased 6 fold in 15 years • 5th ranking in 2010 • 2nd ranking in 2020 • …….. Lots of headache for now 

4. Biotech boom: Asia • Singapore’s massive investment getting results: MNC head quarters, R&D, export • Taiwan’s gradual strengthening of its bio tech on its strong pharma infra structure • Korea excellence in stem cell research • Hong Kong : direction unclear, good Unis.

6. Drivers of growth • Growing economy & healthcare expense • Huge and aging population • Internal market>>critical mass for drug • Maturing consumers • Hunger for new drugs • Cost advantages, + skilled work force • Returnees with excellent expertise,& drive Excellent universities • Post genomic applications • Regulatory, ethical and legal considerations: stem cell

7. Government commitment • Science parks and clusters • Clear priority and focus areas • Technology innovation, and incentives • Respect for IP ? ….improving  • Modernizing SFDA • Quality of science, talent pool • Industrial players, and mega players • Funding : govt, VC, and other industries

8. Industry sub sectors • Bio pharma: DDS, gene therapy, biochips, diagnostics • TCM, and functional food • Agro biotech and transgenic animals • Stem cells, tissue engineering, and cloning • Plant bio • Medical device and bio reagents

9. Focus areas • DDS / chemical drugs • Stem cell and clinical applications • Bio protein drugs: recombinant technology • Medical devices, and genetic screening • GMP upgrade • GLP/GCP upgrade • APIs

10. Achievements • Centre for r&D, pre/clinical studies (dog) • Contract r&D centre for MNC’s & small cos. • Creation of clusters and science parks • Stem cell banks and application • Approval of engineered human tissue • mAB facility • Export of biotech to India and Cuba • API and finish dosages for export

11. Cruel reality: the truth • Few really success stories • No world class players, small sales in global terms • Below standard products • Me-too products only • Lack significant VCs • No window in equity market • General depression of the pharma industry • FDA under pressure from consumers and industry • Virtual companies need short term success to justify survival, coming to China • Major failures of big companies:FE and 999

12. Success stories: ??? • Many biotech companies making losses • Few break even or small profit • No real players, no exciting news • No real export to sophisticated market • Why???????????????????????????? • Gross underestimation of the Drug Development cycle, not ready for World

13. Development hurdles • No real significant stars • Fierce competition, price wars, tenders • Formulary control ( Good time over , soon ) • IP issues still not clear • Poor healthcare infrastructure to justify investment and return, very few VCs • Short, cheap, and fast philosophy prevails • Lack ROBUSTNESS: quality and performance • Lack INNOVATION • Not SUSTAINABLE • Insignificance in world market sales • Social out cry for change in healthcare provision

14. Part 2: INNOVATION: new fishes The HK Science Park Biotech initiatives ( attempt )

15. HKSTP bio road map • Biomedical research output audit • SWOT analysis of criteria for • Cluster formation • Total technology management • Seasoned executives & entrepreneurs • Others: industry, regulatory, funding

16. Technology transfer: Biomedical research in HKSAR • Basic questions: • 1. Innovation/knowledge: tradable? • 2. Tech transfer: definition and skills? • 3. Commercialization capability? • 4. Future? Dr H M Pang, HKUST, March16,05

17. Value from Cluster Formation Knowledge Creation Technology Transfer Patents & Proof of Concept Business Planning Licences Testing Incubation/ Research Parks Universities & Research Institutions Venture Capital Public & Private Job Creation Funding Conception Formation Industry R & D Regulatory Environment Collaboration/ Partnerships Industry Maturity Growth Partnerships Clinical Trials M&A Activity Regulatory Economics Approval of Scale IPOs /gazelles Product Pipeline Labour Market Clusters & Networks Commercialisation

18. Biomedical Science Strength

19. Hong Kong and Mainland China BEIBeijing University FUDFudan University, Shanghai GUZGuangzhou University MMGFirst Military Medical College, Guangzhou PEKPeking Union Medical College SHAShantou University SJTShanghai Jiao Tong University SYS Sun Yat Sen University, Guangzhou THBTsing Hua University, Beijing ZSGZhongshan University, Guangzhou

20. Hong Kong and Mainland China

21. Basic Conditions for a Biotech Cluster Upstream Midstream Downstream

22. Summary of Analysis

23. Recommendations • Organize a cluster • Introduce TTM • Proper funding : pre seed fund • Cooperation between Industry & Research • Regional cooperation • Further exploit CEPA, and clinical trial • Stimulate research • Draw up road map for implementation

24. Recommendation 2Improve Total Technology Management

25. Technology transfer • Answers to questions: • 1. Innovation/knowledge: yes. Tradable? • 2. Tech transfer: to be re-modeled. • 3. Commercialization: can be done! • 4. Future: lets TALK……… • Dr H M Pang , HKUST, March16,05

26. Part 3: commercialization • Find the fish • Catch the fish, irrespective of size • Grow that fish: live, multiply, and more • Return in the shortest time, cost; quick $$ • Lack long term vision, diligence, and often ethics and professionalism • Result= poor robustness, quality and performance

27. Elements of the Product Development Process

28. Total Tech Management:TTM • Complex, lengthy process • Resource/talent intensive, integrated skills • Need pharma industry expertise • IP and legal management • Regulatory and clinical component • Market intelligence / post marketing skills • Supply and logistics management • Financial skills • Critical mass

29. The 2nd pharma revolution • New products, technology and services • New market, customers, payment terms • New sales and marketing approaches • New team and culture • Entry into new horizon, with good players • Go international • Sustainable model

30. New challenges • Survival, M&A, consolidation • Formulary, Rx, and price control • IP and regulatory: who stole my cream • Product and technology • Core competency • Focus • sustainability • Dancing with capital, to finance upgrade

31. New business models • Integrated company or core strength • Work with universities and institutions • Work with virtual co, contract out research • Collaboration with the west, virtual cos. • Collaboration with the West, medium size • MNCs • Develop new drugs, at huge cost / risks

32. Cases : a Zhangjiang co. • Set up 1996 • HK Gem board 2002 • One diagnostic launched, contract selling • Quality issue, broke contract • Robustness??? • Money being spent, no real revenue • Huge pipe line hype • Lack real execution plan

33. Case 2: a TCM company, HK • Run by famous professor from Canada • Gem listing in HK 2001 • Lack operational and business acumen • Unreal forecast, lack execution experience • Picked gingko for formulation improvement • Burnt out and sold in 2004

34. Case 3: a local medium pharma • 800M Yuan sales • Vision to become top 5 in 10 years • International involvement, courted with • Many international companies from India and Europe • Product introduction slow, • Alliance never realized • Failed to capture chances from capital market • Lack clear mid term strategy, team and culture • Fire fight in current hostile market • Uncertainty with future, lack sense of urgency / fear • Just received substantial investment for growth • Towards a potential ‘world class’ company

35. Case 4: stem cell in South • A few cases as basis for business plan • No clear strategy, direction, IP, team and financial models. Doing everything. • Obtained some finance , but insufficient for the expected burnt rate • Sustainability?

36. Case 5: biochip diagnostics • Multi genetic assay for cancer • Well received by investors, and supported by insurance companies • Company run by non business professionals, and scientist engage in more than one company • Short term apparent success • Issues: robustness, validation and marketing

37. Key success factors • Product: quality, robustness, IP • Market: user friendly, entry barrier • Team: integrated skills, international • Finance: good start up, and profit/loss • Strategic investors • Execution: timely, and correctly • Sustainable business model

38. Sustainable company • Not too dependent on Allah ( GOD ) • Ready to face competition • Continuous favorable performance ( no blip) • Not affected by cycles • Good pipeline portfolio • Not dependent on one Hero, holistic & governance • Evergreen, stable, long term team , execution capability • Anticipation and Management of change • International link • Tomorrow driven

39. Thank you mingpang@ust.hk