News

Bay Area Biotech Takes Role In Chinese Plan

SAN FRANCISCO, CA - February 6, 2009

The biotech sector is playing a key role in China's quest to move from a manufacturing-based economy to an innovation-based economy. And that's good news for the biotech-heavy Bay Area.

With its large population of Chinese immigrants, decades-old ties to the region and its proximity to Shanghai and Bejing, Bay Area companies, investors and universities are working to position themselves as strategic partners in the new China, one outlined in the country's latest five-year plan.

"The five-year plan has delineated an emphasis in strengthening China's innovation infrastructure and capacity. That's attractive for companies," said Ginny Fang, director of ChinaSF, an office of San Francisco's Economic Development Department that aids partnerships between San Franciscan and Chinese companies.

Guo-Liang Yu, president and CEO of Burlingame-based Epitomics Inc. said the Bay Area's biotech ties to China have accelerated in recent years.

"There's quite a lot of U.S.-trained, Chinese-born scientists who are now seeking opportunities in China to start their own companies, as well as the demand from the global pharmaceutical companies and large biotech companies who are looking for something that is innovative (there)," Yu said.

The Chinese government has said it wants innovative industries to make up 60 percent of its economy by 2020, instead of 30 percent today. And the biotech sector is one of five key industries China has identified as driving that transition.

One strategy to move the innovation needle is to attract American companies to set up research and development labs in China. With so many cities and provinces competing for these kinds of firms, the incentives can be lucrative, said Yu.

Epitomics, which develops new antibody platforms, has a 120-employee research and development lab in Shanghai, where the company has been able to keep costs low and work more efficiently.

Because of that, said Yu, the company has grown at 40 percent a year and satisfied its venture capital investors.

"If we had no operation in China, what we would have accomplished so far is nearly impossible," said Yu. "It's a huge difference in helping the company grow. And it makes a huge difference in the initial stage of surviving as a biotech company."

While government intervention in China-based companies has sometimes been criticized as too "big brother," Yu said he's appreciated the interest that Wenyou Gu, vice mayor of Hangzhou, has shown his Shanghai subsidiary. When Epitomics' China subsidiary was looking to expand, the vice mayor helped the company look for office space. When rolling blackouts threatened to ruin research at his lab, the vice mayor wrote him a check for $15,000 to buy a generator. When contractors were holding up expansion by dragging their feet on laying pipe, the vice mayor made a call. Workers showed up that afternoon.

"In a way, there's competition going on where each place wants to attract talent and companies and gives incentives," Yu said. "Anything started is a lot easier in China than here."

Yu said the current recession could mean even more Bay Area biotechs will look for opportunities in China, which is pumping money into the sector as part of its economic stimulus.

"This might be an opportunity for Bay Area companies to go there and say 'Look, we could help you utilize your funding to advance something cutting-edge and advance products that are good for everybody,'" Yu said.

The strengthening of Chinese-Bay Area ties in biotech can be seen in the membership of BayHelix, an exclusive group of Chinese and Chinese-American life sciences business leaders that started in the Bay Area in 2001. The group's founders were educated in the Bay Area and created the group near the Bay Area's large biotech cluster, which includes research universities like UCSF and Stanford, venture capital firms that fund new discoveries and some of the largest pharmaceutical companies like Genetech and Gilead Sciences Inc. The invitation-only group boasts a membership of more than 300, a third of that in the Bay Area.

Many China-based biotech firms are run by Bay Area-educated Chinese who returned to China to start companies — a group the Chinese refer to as 'sea turtles,' since sea turtles travel long distances but return home to reproduce. Some biotech sea turtles have made successful businesses out of running clinical research organizations — CROs — that run trials for pharmaceutical, biotech and medical device companies, said Jimmy Zhang, senior vice president of business development at Burlingame-based biotech consultancy Synergenics and a founding member of BayHelix.

"The cost of doing preclinical animal studies is much more expensive here," Zhang said. "Outsourcing (in China) becomes much more efficient now when you have so many companies operating under the western standard."

The CRO industry is still relatively small, estimated to account for less than 1 percent of total clinical trial outsourcing. And Yu warns that biotech outsourcing, already showing signs of consolidations due to saturation in China, is a "short-term solution" to transitioning China to an innovation economy.

"At the end of the day it's still the innovation — the driving force is new drugs," he said.

http://www.bizjournals.com/sanfrancisco/