Can China win big in vaccine race with biotech bet

The news that Chinese regulators have given the go-ahead for clinical trials of three Covid-19 vaccines developed in the country is the culmination of months of efforts by a combination of start-ups, government-sponsored companies and research institutes.

The three companies receiving the approvals are CanSino Biologics, Sinovac Biotech, and the Wuhan Institute of Biological Products, the state news agency has said.

Approval for trials, however, is still a long step from a safe and effective vaccine. And although China’s pharmaceutical industry has matured a great deal in recent years, it is still on the whole a lot better at incremental innovation than major breakthroughs.

“The number one question is when does China produce best in class or first in class,” said Judith Li of Shanghai-based Lilly Asian Ventures, which was spun off from drugmaker Eli Lilly almost 10 years ago and has since invested more than $2.3bn in 90 industry start-ups. “China is still catching up.”

Along with the likes of semiconductors, 5G and nanotechnology, biotech is a strategic priority for the government, as set out in its “Made in China 2025” 10-year-plan to encourage self-sufficiency in high-tech industries. Both central and local governments have made vast sums of money available to promising start-ups and their founders.

China is the second largest pharma market in the world after the US, with $137bn of total spending a year. That number is expected to rise substantially as the country expands its social safety net and increases the number of drugs that qualify for reimbursement.

At $3.8bn, local demand for vaccines is less than a quarter of the $16bn in the US and a tiny fraction of worldwide use at $43.8bn, but that too is expected to increase dramatically.

Entrepreneurs and their investors say it is also only a matter of time before China becomes a leader at original research. This optimism stems partly from a national will to create homegrown “champions” but also has much to do with the vast amounts of patient data that can be mined and the availability of funding from both the government and private sources.

“We still have no Jack Ma [the founder of tech behemoth Alibaba] in biotech,” said Lefei Sun, who is in charge of the Chinese biotech stakes owned by investment firm General Atlantic. “But in 10 years, biotech in China will be comparable to what technology in general is today.”

Ms Li, whose firm has backed Hong Kong-listed CanSino, is confident the company has world-class skills.

Working with a military research institute, it has previously developed and won approval for a vaccine to treat Ebola. The risk from that virus has since receded, so orders delivered by CanSino have been used instead to build a national stockpile in case the threat returns.

China is also finding it easier to attract back citizens who had left to pursue careers overseas. “The US is mature,” said Ms Li. “Any contribution you make there is like building a small house in a big city. It is so much more important to build in China.”

Wang Xiaodong is a case in point. He was one of the first of his generation to study in the US after the Cultural Revolution and received his PhD in Biochemistry from the University of Texas Southwestern Medical Center. He then taught in the US for years, and became a member of the National Science Foundation. He was also among the earliest returnees to China.

He is now the director of the National Institute of Biological Sciences in Beijing, a government-funded initiative, is a co-founder of BeiGene, which is listed on Nasdaq and the Hong Kong Stock Exchange, and is an investor and board member of Clover, a biotech business founded by his protégé, Liang Peng.

Mr Liang himself did his PhD and postdoctoral studies in the US, taught at Vanderbilt, and returned to China shortly after his mentor to establish Clover, which is also in the race to develop a vaccine.

Both men are part of the rapidly evolving biotech ecosystem in China. Indeed most start-up founders in the industry studied and worked in the US, eventually returning to the mainland to become entrepreneurial role models and angel investors, and introducing practices they first encountered in the West.

Progress can be measured by the fact that the likes of CanSino and Clover are being taken seriously by the multinationals.

Clover recently completed a $43m capital raising and has a partnership with GSK, which supplies it with ingredients to make the vaccine it is developing — which is still at the pre-clinical trial stage — more effective. It also has a research partnership with Nasdaq-listed and California-based Dynavax Technologies, another company that is developing Covid-19 vaccines.

From outside China in particular, there are questions, however, about certain parts of the industry. Ready funding generally attracts those seeking to get rich quick as well as the idealists, while attitudes to patients and data have brought an undercurrent of concern that processes are not always as robust as they should be in safeguarding the interests of people taking part in trials, and that results are not always what they seem.

“The fake data is almost systemic,” said Lu Shan, a professor at the University of Massachusetts. “There is so much focus on quick financial returns. When scientists become interested in the financial incentives, they become businessmen and have less impact. They move too quickly.”

In part, this is the nature of the game. Biotech is a high-reward calling that also involves high risks. Speed is essential — there is a much smaller pay-off for the product that reaches market in second place. That is especially the case with developing vaccines for viruses. Not only because dozens of rivals are all working feverishly to be the first, but because viruses have a way of mutating, which means that today’s successful formula may work for only a limited time.

For now though, the biggest challenge for Chinese researchers is to combine their skills with the complementary strengths of the west to try to find a way out of the pandemic. “Science is global,” Mr Sun says. “It shouldn’t be about nations.”

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