Old and new converge in Beijing, with the Summer Palace near a biotechnology park.
Building Biotechnology In Beijing
Beffi tting an organization that describes itself as a bridge, the Beijing Pharma and Biotech Center (BPBC) is a study in transitions. Driving to BPBC, the tall buildings and bustle that underscore Beijing’s status as a world capital slowly recede. Located in an office park that belongs to the Institute of Medicinal Plant Development, the center’s environment gives a suburban feel—with views of the countryside that Beijing’s expansion and modernization slowly encompass. “We’ve got a great garden in the summertime,” says Lei Ting, BPBC’s sprightly director, who sees the center’s role as shepherding a vital industry still in its infancy.
Most of the center’s 40 employees work in an airy open space. “Lofts are very popular these days,” said Li Beibei, who works in the events and investment promotion department. Ornamental vases line the walls. Display cases of traditional medicine like ginseng and Chinese bell- flower, along with a row of potted plants, cordon off the work station from the center’s waiting area. Calligraphy decorating the walls of one of the center’s meeting rooms states: “The more you ask, the more you know.” This being a China still growing comfortable with opening up to the outside world, however, the words are probably meant metaphorically.
Lei carefully describes the government background of the center, characterizing it as a “third party organization,” subordinate to the Beijing municipal science and technology commission. The organization is dedicated to promoting Beijing’s pharmaceutical and biotechnology industries. In other words, it’s the biotech industry’s seat in the Beijing government’s plan of promoting industry in China, and the government’s seat in Beijing’s fledgling biotech industry. Established in 1996, the center holds conferences and workshops, promotes partnerships and collaborations between Chinese and foreign companies, and provides information services for Beijing biotech companies.
The center is one of the newer buildings in the office park, which is dotted with squat brick structures, and older buildings made with a light tile that is ubiquitous in China’s smaller and more remote cities. The center is near the Summer Palace, the sprawl of imperial excess where China’s last female ruler, the Empress Dowager Cixi, spent Beijing’s hot months. Beijing, which first rose to prominence under Kublai Khan, grandson of Genghis, was the world’s largest city in the 18th century. During the preparation for the 2008 Beijing Olympics, foreign residents joked that the city’s official bird was the crane—as in long-armed construction equipment, not long-legged bird—because of their preponderance across the city’s skyline.
Outsourcing To Grow
The biotech industry, like Beijing and practically everything else in China, has developed rapidly since China began pursuing economic reforms in 1978. “The industry’s grown by an average of above 14 percent since 1978, and recently more than 20 percent, which has been all the more striking because it’s been the financial crisis,” said Zhang Zegong, BPBC’s vice-director, who spoke deferentially about his subject, and wore a comfortably broken-in Timberland shirt.
Lei sees biotech as an industry that plays to Beijing’s strengths. “The biotech industry, which is low polluting, needs a concentration of talent, and has a high-output value, suits Beijing,” Lei says. For instance, China’s two top universities, Tsinghua University and Peking University, are located in Beijing, about ten kilometers from BPBC. Beijing also has several science institutions, which contribute to biotech developments, notes Chen Guoqiang, professor of microbiology and biomaterials at Tsinghua University in Beijing. However, the city has perennial water shortage issues, land and human resources are expensive compared to other parts of the country, and it’s more difficult to access bulk chemicals here. Still, says Chen, “Beijing is a service center, almost like Boston,” for the biotech industry.
To foster the development of biotech service companies in China, BPBC co-founded the Alliance of Bio-Box Outsourcing (ABO). The alliance’s 34 member companies (including one American company) provide biological outsourcing, chemical synthesis, and formulation services. The alliance and the industry benefit from a steady stream of returnees, referred to in Chinese media circles as sea turtles, who go overseas for degrees or for work experience and then come back to China. Zhang estimates that over half the companies in ABO have senior management with long-term overseas experience. Lei views promoting Beijing as a biotech hub as his way of attracting students to return. “I think students coming back to Beijing and multinationals coming to China to develop” is the same idea, he says.
An example of a sea turtle is Julius Li, who runs Autek- Bio, an ABO company that focuses on developing technologies for manufacturing biological drugs. Li, the only person interviewed for this story who wore a suit, spent 14 years in the U.S., working at pharmaceutical companies like Roche, where he was a scientist. He graduated from business school at the University of Michigan in 2002 with the intention of founding a company, capitalizing on his experience working in both countries. “When you have two different areas or regions you probably have some arbitrage opportunities, either in space or time. If you are good in both sides, then your value to the people in both areas will be maximized,” he said.
ABO companies benefit from BPBC’s government connections. “The government’s strong, so you want to have a voice in it,” says Li. “The leaders [of the BPBC] are public servants. They are people in the government system who speak the same language, think alike. They share the same set of codes.”
Vaccine Innovation
The center focuses on helping Beijing biotech companies expand, both domestically and overseas. For example, BPBC brought a group of companies to Egypt in order to collectively bargain on drug sales, and Lei used his municipal status to arrange meetings with the health ministry. Evidence of overseas interests also appear in the center’s break room, which is decorated with African knick-knacks, including small giraffe statues. Lei has made several trips to sub-Saharan Africa to represent the center. Beijing companies have also sold anti-malarials to Africa, the most successful example being artemisinin, a compound isolated from sweet wormwood that Lei calls “one out of the one-and-a-half drugs that people said China had invented.”
Beijing still lags behind the biotech capitals of Europe and the U.S. in terms of research and reputation. This creates challenges for Chinese companies. For example, Sinovac Biotech, a vaccine manufacturer that works with BPBC, has exported a hepatitis vaccine to India and a flu vaccine to Mexico, among other places. Nevertheless, Helen Yang, Sinovac’s manager of international business development, says in a phone interview that people in other countries often link the poor quality of some Chinese products to all of them, including vaccines. Consequently, says Yang, some countries insist on more complicated registration processes for vaccines from China as compared with ones from U.S. or European companies.
BPBC and affliates, while working to improve Beijing’s lackluster reputation, are also taking creative approaches to success. For instance, Li’s AutekBio provides contract manufacturing outsourcing. Because of a conscious business decision, this company doesn’t create or develop its own products. “No one will trust an outsourcing company in this country who produces their own product, because of the fear that they’ll steal it,” said Li.
Moreover, Lei points out that helping Beijing biotech companies expand into Africa gives them a training opportunity to compete with their Western counterparts on foreign turf.
In the meantime, Beijing companies seek other competitive advantages. Le Sun, who runs AbMax Biotechnology, an outsourcing organization and member of ABO that focuses on antibody development for American firms and research institutions, argues that his company competes on speed and quality, as opposed to price. “Our price is not much cheaper than in the U.S. because we don’t want to be viewed as low quality,” said Le. Moreover, he praised ABO for building a team of small players in a fragmented industry that still lacks dominant players. “The main benefit is that we have people at different stages of drug development, who have their own specialty, their own research and work together,” he said. “If everyone tries to do the work P zer’s trying to do, there’d be no chance.”
As an example of ABO’s impact, it plays a role in the national vaccine market in part because of its fast response to the enterovirus 71—hand, foot and mouth disease— outbreak in 2008. “We adapted the American corporate way of signing an agreement, determining how we’re going to share the intellectual property and returns, as opposed to the old Chinese way where we don’t worry about the money but in the end the money causes a problem,” said Le. It’s more cost effective, he says, because “it doesn’t have everyone building their step 1, step 2, step 3.” In addition, as an infectious disease, it’s difficult getting access to the pathogen, “but the one who has access to it is not necessarily the one that has the best technology to develop a diagnostic against it, and the one who has the diagnostic kit might not have the distribution channel for products. By working together, all problems are solved.”
Connecting With Capital
While stressing that Beijing still lacks a high concentration of top international scientists, Le notes that the best and brightest from other Chinese cities come to Beijing. “There’s more cultural things here,” said Le. “Beijing has a lot to offer to you and your family here.” Upon first arriving, he worked on developing a new antibody drug for cancer, but found the “funding is not here, the VC is not here, and the funding to support drug development is not here.”
Domestic VC funding for Chinese biotechnology companies is scarce. Often in the West, after a university discovers a drug or a product with potential, a small biotech company will develop it, and then a large company licenses and takes over the expensive parts. “In the past, a scientist in China could read a paper and make a generic drug, and a drug company would do a small clinic trial and launch it. It was very easy to make a generic drug and cost little,” said Le. But for a totally new drug, it takes 10 years or more and maybe $1 billion or more. A small company can’t afford that time or investment. As “Big companies have a higher tolerance for risk,” Zhang explains. “Pfizer invests more in R&D in one year than China’s entire biotech industry.”
BPBC helps small companies connect with VCs as part of its general mission to serve as a platform for information about biotech, both for Chinese companies and for multinationals looking to expand into Beijing. “I understand China better than those law firms they hire,” Lei boasts, amid countless cups of tea. “If you want to hire someone, I can tell you clearly where the human resources you’re looking for are. If you need government support, I can clearly tell you what resources the government has.” Lei also advises the government in the biotech area. “I have tens of people, a team of specialists,” he says. BPBC is a conduit, whose “power is information, in research, in service.”
“ABO is really about collaboration,” says Le. “In the States we’re used to the lonely hero. We can’t do everything by ourselves so we have to work together.” Li also emphasizes the need for teamwork in Beijing, saying, “I personally don’t believe we’re coming up with a magic drug, or innovation, any time soon. The value chain is so huge, so long, but if we do it link by link, we will get there.”
