Why Big Pharma Is Targeting China's Deadliest Diseases
By Preetika Rana
SHANGHAI – Big Pharma is investing billions of dollars to tackle deadly diseases prevalent in China, developing new drugs to combat a lineup of top killers that differ from those in the West.
Swiss drugmaker Novartis AG is testing a molecule to combat a rare head and neck cancer widespread in southern China. American rival Johnson & Johnson is creating innovative drugs to tackle lung cancer and hepatitis B, endemic in China. And France's Sanofi SA is researching a new way to treat liver cancer -- one of the most common forms of cancer here -- despite early setbacks.
The move is a switch from a decades-old strategy of selling existing drugs to China's billion-plus people, and is aimed at gaining a stronger foothold in the world's second-largest drug market which has long eluded Western companies.
Lung, liver and stomach cancers are among China's top killers, according to the World Health Organization, accounting for more than a million deaths every year. Those diseases kill hundreds of thousands of people in countries like Japan and South Korea too, offering an opportunity for drugmakers to sell China-tailored treatments in neighboring markets. Alzheimer's and other forms of dementia are among the top causes of deaths in the U.S. in comparison.
But large unmet needs aren't alone driving companies to discover new therapies here. Regulatory hurdles have made it tough for foreign firms to quickly launch their newest treatments in China, largely because they are discovered overseas.
Recent corruption scandals have made it harder for companies to market older drugs that are approved for sale here. A Chinese court slapped a nearly-$500 million fine on GlaxoSmithKline PLC in 2014 after it found the U.K.-based company's local unit guilty of bribing doctors. Novartis last year agreed to pay $25 million to settle a Securities and Exchange Commission Investigation into bribery allegations in China.
Western firms found China's lucrative market slipping away, and in recent years many began moving from bringing existing drugs to discovering new cures here.
J&J in 2012 opened a discovery lab in Shanghai, and is now working on new medicines for lung cancer, blood cancers and hepatitis B. Hepatitis C is more common in the U.S. The lab is planning to test its first breakthrough on patients over the next year, and expects the compound to emerge from its lung cancer or hepatitis B programs.
Novartis injected $1 billion between 2009 and 2014 to convert an existing Shanghai facility into a new discovery center. In October, it began testing its first China discovery -- a molecule to treat nasopharyngeal cancer -- on Chinese, Korean and Taiwanese patients.
En Li, Novartis' research head in China, said the company will soon test another compound, to treat liver fibrosis. His team of 600 scientists are running at least a dozen other projects aimed at finding new treatments for diseases such as lung and stomach cancer.
Until a few years ago, China lacked the manpower needed for drug discovery, a process that involves searching for compounds with medicinal potential. But a government program encouraged thousands of Western-trained Chinese scientists to return over the past decade, encouraging Big Pharma to deepen research.
Like drug production -- Western firms have long contracted Chinese factories to manufacture their drugs inexpensively -- the cost of drug discovery is cheaper in China, too, meaning companies will increasingly use labs here to advance their global pipeline, according to Vikram Kapur, who leads Bain & Co.'s health-care practice in Asia.
J&J and Novartis say their discoveries, while targeted at China's needs, will also be tested on patients in the West so they could be sold there if needed. Lung cancer, for example, is widespread in the U.S. and the U.K.
Not every project will produce a new discovery. Sanofi was preparing to test a new molecule to treat liver cancer some three years ago, but the program was shelved before it could be tried on patients, said Alex Zhang, who oversees the company's research activities in China.
The process of testing discoveries on people -- called drug development -- is also risky, with projects more likely to fail than succeed. Roughly one out of every 10 discoveries tested in the U.S. between 2006 and 2015 eventually made it to market, according to trade body Biotechnology Innovation Organization.
Instead of developing new molecules in its own lab, Sanofi is striking partnerships with academia in China. Mr. Zhang said the company is running roughly 10 projects with Chinese universities, focused on finding treatments for liver cancer, hepatitis B and diabetes. The collaborations are still in early stages, and he doesn't expect to see results before two years. The U.K.'s AstraZeneca PLC has also joined with universities in China, and is creating new drugs for stomach cancer and chronic kidney disease, among others.
Drugs that meet large clinical demand stand a better chance at being reimbursed by the government, making otherwise costly medicines more affordable for patients. They are also harder for doctors to ignore.
Local upstarts aren't far behind. Hutchison China MediTech Ltd., which counts Hong Kong billionaire Li Ka-shing among its backers, has sought approval for its first drug in China -- a compound to fight colorectal cancer. Additional tests are planned for the same drug to work on patients with lung and stomach cancer.
"What's important -- whether it's Big Pharma or companies like ours -- is that drugs are now specifically being designed for Chinese patients," said Chi-Med's Chief Executive Christian Hogg. "Patients are absolutely going to be the winners in this."
