Our Biotech/Pharma BOOM Dr H M Pang Senior consultant, HK UST Technology transfer June 2005, Shanghai,PRC

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Our Biotech/Pharma BOOM Dr H M Pang Senior consultant, HK UST Technology transfer June 2005, Shanghai,PRC Slide 2 Booming statistics-West 500 biotech companies employing >50K people, mostly established over the last 5 years genetically engineered products launched >150 in clinical stages, more in preclinical Many INDs filed since 1999 of bio origin Sales increased by ~30%, profit 20% Slide 3 Biotech boom- China Over 4 billion sales in 2004 Companies listing Biopharma generics A few new drugs ?? Drug spending increased 6 fold in 15 years 5th ranking in 2010 2nd ranking in 2020 .. Lots of headache for now Slide 4 Biotech boom: Asia Singapores massive investment getting results: MNC head quarters, R&D, export Taiwans gradual strengthening of its bio tech on its strong pharma infra structure Korea excellence in stem cell research Hong Kong : direction unclear, good Unis. Slide 5 IPOs with significant R&D in HK 000020 IPOs with significant R&D in China 001441 Slide 6 Drivers of growth Growing economy & healthcare expense Huge and aging population Internal market>>critical mass for drug Maturing consumers Hunger for new drugs Cost advantages, + skilled work force Returnees with excellent expertise,& drive Excellent universities Post genomic applications Regulatory, ethical and legal considerations: stem cell Slide 7 Government commitment Science parks and clusters Clear priority and focus areas Technology innovation, and incentives Respect for IP ? .improving Modernizing SFDA Quality of science, talent pool Industrial players, and mega players Funding : govt, VC, and other industries Slide 8 Industry sub sectors Bio pharma: DDS, gene therapy, biochips, diagnostics TCM, and functional food Agro biotech and transgenic animals Stem cells, tissue engineering, and cloning Plant bio Medical device and bio reagents Slide 9 Focus areas DDS / chemical drugs Stem cell and clinical applications Bio protein drugs: recombinant technology Medical devices, and genetic screening GMP upgrade GLP/GCP upgrade APIs Slide 10 Achievements Centre for r&D, pre/clinical studies (dog) Contract r&D centre for MNCs & small cos. Creation of clusters and science parks Stem cell banks and application Approval of engineered human tissue mAB facility Export of biotech to India and Cuba API and finish dosages for export Slide 11 Cruel reality: the truth Few really success stories No world class players, small sales in global terms Below standard products Me-too products only Lack significant VCs No window in equity market General depression of the pharma industry FDA under pressure from consumers and industry Virtual companies need short term success to justify survival, coming to China Major failures of big companies:FE and 999 Slide 12 Success stories: ??? Many biotech companies making losses Few break even or small profit No real players, no exciting news No real export to sophisticated market Why???????????????????????????? Gross underestimation of the Drug Development cycle, not ready for World Slide 13 Development hurdles No real significant stars Fierce competition, price wars, tenders Formulary control ( Good time over, soon ) IP issues still not clear Poor healthcare infrastructure to justify investment and return, very few VCs Short, cheap, and fast philosophy prevails Lack ROBUSTNESS: quality and performance Lack INNOVATION Not SUSTAINABLE Insignificance in world market sales Social out cry for change in healthcare provision Slide 14 Part 2: INNOVATION: new fishes The HK Science Park Biotech initiatives ( attempt ) Slide 15 HKSTP bio road map Biomedical research output audit SWOT analysis of criteria for Cluster formation Total technology management Seasoned executives & entrepreneurs Others: industry, regulatory, funding Slide 16 Technology transfer: Biomedical research in HKSAR Basic questions: 1. Innovation/knowledge: tradable? 2. Tech transfer: definition and skills? 3. Commercialization capability? 4. Future? Dr H M Pang, HKUST, March16,05 Slide 17 Value from Cluster Formation ConceptionFormation Growth Maturity Knowledge Creation Technology Transfer Commercialisation Clusters & Networks Industry R & D Public & Private Funding Universities & Research Institutions Patents & Licences Proof of Concept Testing Incubation/ Research Parks Venture Capital Clinical Trials Collaboration/ Partnerships Regulatory Approval Business Planning Job Creation IPOs/gazelles Labour Market Product Pipeline Economics of Scale Regulatory Environment M&A Activity Industry Partnerships Slide 18 Biomedical Science Strength Slide 19 Hong Kong and Mainland China BEI Beijing University FUD Fudan University, Shanghai GUZ Guangzhou University MMG First Military Medical College, Guangzhou PEK Peking Union Medical College SHA Shantou University SJT Shanghai Jiao Tong University SYS Sun Yat Sen University, Guangzhou THB Tsing Hua University, Beijing ZSG Zhongshan University, Guangzhou Slide 20 Hong Kong and Mainland China Slide 21 Basic Conditions for a Biotech Cluster Upstream Midstream Downstream Slide 22 Summary of Analysis General conditions for high-tech Biomedical research University trained resources Attitudes to commercialisation Human resources abroad Technology transfer Biotech industry and business exec. Private venture capital for biotech Slide 23 Recommendations Organize a cluster Introduce TTM Proper funding : pre seed fund Cooperation between Industry & Research Regional cooperation Further exploit CEPA, and clinical trial Stimulate research Draw up road map for implementation Slide 24 Recommendation 2 Improve Total Technology Management Slide 25 Technology transfer Answers to questions: 1. Innovation/knowledge: yes. Tradable? 2. Tech transfer: to be re-modeled. 3. Commercialization: can be done! 4. Future: lets TALK Dr H M Pang, HKUST, March16,05 Slide 26 Part 3: commercialization Find the fish Catch the fish, irrespective of size Grow that fish: live, multiply, and more Return in the shortest time, cost; quick $$ Lack long term vision, diligence, and often ethics and professionalism Result= poor robustness, quality and performance Slide 27 Elements of the Product Development Process Slide 28 Total Tech Management:TTM Complex, lengthy process Resource/talent intensive, integrated skills Need pharma industry expertise IP and legal management Regulatory and clinical component Market intelligence / post marketing skills Supply and logistics management Financial skills Critical mass Slide 29 The 2nd pharma revolution New products, technology and services New market, customers, payment terms New sales and marketing approaches New team and culture Entry into new horizon, with good players Go international Sustainable model Slide 30 New challenges Survival, M&A, consolidation Formulary, Rx, and price control IP and regulatory: who stole my cream Product and technology Core competency Focus sustainability Dancing with capital, to finance upgrade Slide 31 New business models Integrated company or core strength Work with universities and institutions Work with virtual co, contract out research Collaboration with the west, virtual cos. Collaboration with the West, medium size MNCs Develop new drugs, at huge cost / risks Slide 32 Cases : a Zhangjiang co. Set up 1996 HK Gem board 2002 One diagnostic launched, contract selling Quality issue, broke contract Robustness??? Money being spent, no real revenue Huge pipe line hype Lack real execution plan Slide 33 Case 2: a TCM company, HK Run by famous professor from Canada Gem listing in HK 2001 Lack operational and business acumen Unreal forecast, lack execution experience Picked gingko for formulation improvement Burnt out and sold in 2004 Slide 34 Case 3: a local medium pharma 800M Yuan sales Vision to become top 5 in 10 years International involvement, courted with Many international companies from India and Europe Product introduction slow, Alliance never realized Failed to capture chances from capital market Lack clear mid term strategy, team and culture Fire fight in current hostile market Uncertainty with future, lack sense of urgency / fear Just received substantial investment for growth Towards a potential world class company Slide 35 Case 4: stem cell in South A few cases as basis for business plan No clear strategy, direction, IP, team and financial models. Doing everything. Obtained some finance, but insufficient for the expected burnt rate Sustainability? Slide 36 Case 5: biochip diagnostics Multi genetic assay for cancer Well received by investors, and supported by insurance companies Company run by non business professionals, and scientist engage in more than one company Short term apparent success Issues: robustness, validation and marketing Slide 37 Key success factors Product: quality, robustness, IP Market: user friendly, entry barrier Team: integrated skills, international Finance: good start up, and profit/loss Strategic investors Execution: timely, and correctly Sustainable business model Slide 38 Sustainable company Not too dependent on Allah ( GOD ) Ready to face competition Continuous favorable performance ( no blip) Not affected by cycles Good pipeline portfolio Not dependent on one Hero, holistic & governance Evergreen, stable, long term team, execution capability Anticipation and Management of change International link Tomorrow driven Slide 39 Thank you mingpang@ust.hk