Q&A With Hui Cai on Biotech in the Asia Pacific Region: Sharing Risks and Building Sustainable Businesses

6/15/09Follow @bvbigelow

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the benefits from partnerships in China as expertise in biotechnology, drug discovery and development in the region is rapidly ramping up while costs remain significantly lower. There are differences in business processes, culture, relationship management, and concerns about ownership and control, et cetera. But things are also changing rapidly in China, including such areas as its pharmaceutical market, manpower cost, and resource availability. So U.S. biotechs risk missing out if they decide to wait until all their concerns are completely cleared out before moving to form partnerships in China.

X: Conversely, what are the Chinese concerns about forming alliances with American biotechs?

HC: They have some of the same concerns. As partnership models evolve from contract-based fee-for-services, to FTE (full-time equivalent), and to risk sharing of varying sophistication, they also have concerns about the sustainability of U.S. biotech business models—about reaping benefits of risk sharing yet to be realized. Most U.S. biotechs are built on a business plan with an exit strategy.

X: Why would a US drug developer want to conduct clinical trials in Asia?

HC: Conducting clinical trials in Asia is partly the result of challenges that U.S. drug developers are facing in their clinical trial research here, including higher costs, difficulties with patient recruitment, patient compliance, and other problems. Countries such as India and China have less costly medical professionals, and vast populations of interested naïve patients [Editor's note: A naïve patient has never before taken the drug being administered], much faster patient recruitment, and better patient compliance. Gaining access to these new markets also is another major motivation for conducting clinical trials in Asia.

X: Are U.S. life sciences companies finding investors in Asia? How do Asian investors view the U.S. environment for life science investments?

HC: Asian investors have been increasing their investments to access U.S. life sciences innovation, and to bring U.S. technologies, services, and businesses to Asia. Many of the companies and investors are exploring creative cross-border business models to leverage Asian funding and resources to lower development costs, reduce risks, and shorten the time to market. As to the U.S. environment, it’s still the breeding ground for innovation and talent. Certainly 2009 continues to be one of the most challenging times for life science investment due to the shuttered IPO window and the weakening acquisitions market. For investors in the early stage bioventure market, for example, acquisition by large and diversified pharmaceutical companies has become the only business model that leads to liquidity, and investment is shifting towards a pharma-centric “build-to-suit” model.

X: Is there a panel or event that you’re particularly interested in at this year’s Cal Asia conference?

HC: I plan to enjoy many of the panels and events. It’s a very nice program with both breadth and depth in covering key aspects for across-Pacific business success.

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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