October 26, 2005

China is aiming to become a leading player in the biotechnology sector by taking advantage of its low research costs, which are up to five times cheaper than in Europe or the US. China's pharmaceuticals industry has traditionally focused largely on generic drugs and traditional Chinese medicine.

The Chinese government is supporting the biotech industry with total state funding reaching US$325mn in 2004. There are already more than 20 biotech parks in the country, as well as 300 biotech companies focusing on human medicine. Currently, China has more than 150 experimental drugs in clinical trials, and a number of Chinese-produced biotech products have reached the domestic market, including an innovative gene therapy treatment.

The government's aim is to develop the local manufacturing sector as well as increase investment from foreign drugmakers. Due to lower wages and cheaper costs the basic price of developing a drug in China can be as little as EUR5mn (US$6.03mn). This compares to the average figure of US$800mn that multinationals claim it costs them to bring a drug to market.

However, concern over China's intellectual property (IP) provisions does serve to discourage foreign investment. IP protection is improving in the country but there are still problems about enforcement and inadequacies in the legal system. Until these issues are resolved, companies will be wary of conducting R&D in China, although some are getting around deficiencies in the law by negotiating individual IP deals with the government.