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

Xconomy San Diego — 

As cross-pacific partnerships multiply among life science companies in California and Asia, San Diego biotech companies are increasingly interested in learning how to do business in China, India, and other countries. At least 250 representatives of the international life science community are expected to gather for CalAsia, a two-day conference that begins today at the downtown San Diego Marriott Hotel & Marina.

This is the first year the event has been hosted by Biocom, San Diego’s life sciences industry association. Those attending include established pharmaceutical companies, startups, investors, and researchers, as well as individuals and delegations from China, Singapore, Korea, Australia, India, and other countries in the Asian Pacific region. Workshops and plenary sessions include an overview of opportunities and challenges for the biopharmaceutical industry in key markets, licensing deals with Asian partners, raising money in Asia, and evolving intellectual property rights in China and India,

In a preview of the event, I asked Dr. Hui Cai to answer some questions about doing business in Asia. She is president and CEO of Inflexion BioPartners, which provides international management and consulting services in the life sciences, and she has been involved in international sourcing of drug candidates, cross-Pacific operations, strategic planning, and strategic partnerships. She also serves as chairwoman of the board at the Sino-American Biomedical and Pharmaceutical Professionals Association, although she notes these are her personal comments.

Xconomy: What does it mean that the FDA has opened an office in China?

Hui Cai: Setting offices in China reflects the shift in the FDA’s prevention-focused approach to ensure quality at the point of manufacture and that U.S.-bound goods are safe before they are exported. It also plays a positive role in facilitating better communications, and in sharing information and best practices with Chinese regulatory authorities and manufacturers. In reality, good cooperation is key to maintaining a mutually beneficial practice, and it’s important to ensure intentions remain true to sharing best practices, rather than imposing standards unilaterally.

X: What are the chief concerns today for U.S. biotechs that want to form partnerships in Asia, and especially China?

HC: Many U.S. biotechs are reaping 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.