Many biopharmaceutical companies are considering partnering with contract manufacturing organizations (CMOs) in China to take advantage of lower costs and access to the growing Chinese market. However, companies must carefully consider key cultural issues when selecting a CMO in China. China's pharmaceutical industry is large and growing rapidly as the country shifts to higher value products. While most Chinese drug exports are active pharmaceutical ingredients, finished drug products will likely enter other markets as well. Partnering with a CMO could provide biotech companies an entry into China, but they must also consider how much biotech may share in the general expansion given its short history in China. Cultural due diligence is important when selecting a Chinese CMO partner.

1. Partnering with a CMO in China
Key Cultural Considerations
by Shawn X. Li and Scott M. Wheelwright
Reprinted with permission from BioProcess International 6(10) (November 2008)
M
any biopharmaceutical
companies are evaluating
the option of working with
contract manufacturing
organizations (CMOs) in China.
There are probably as many reasons
for following that strategy as there are
companies doing the evaluating.
However, regardless of the strategic
plan behind pursuit of a CMO in
China, there are key issues each
company must consider as part of its
due diligence before selecting one.
Through a fast growing economy
and government supported transition
from low-margin to high-margin The business center of Shanghai vladimir fofanov (www.sxc.hu)
products, China is quickly expanding
its pharmaceutical opportunities. study by BioPlan Associates reports lower labor costs, and increased
There are 700 Chinese drug makers that approximately half of the Chinese market access (4).
and 3,000 Chinese medical device GMP pharmaceutical production Many American and European
companies registered with the FDA to capacity (representing a capital value pharmaceutical companies have
market their products in the United of $25 billion in pharmaceutical considered working with a CMO in
State or sell them for further manufacturing assets) is standing idle China to grasp opportunities that
manufacturing. Drug imports from and seeking clients (3). offer lower production expenses and
China to the United States have more Recently the Chinese state-owned provide a foothold in the growing
than quadrupled in the past five years, English-language television station Chinese and Asian markets. Daniel
and they exceeded $400 million in CCTV-9, which targets a western Vasella of Novartis has been quoted as
2007 according to the International audience, produced an exceptional stating the Chinese pharma market
Trade Administration (part of the US five-part documentary on the will reach US $25 billion by the year
Department of Commerce) (1). pharmaceutical industry in China. 2010. That market, according to Greg
Although most Chinese drug The series included interviews with Scott, principal analyst of ChinaBio,
products are APIs, it is only a matter executives of top international is growing at 20% annually (4).
of time before additional finished drug pharmaceutical companies, including However, for an American biotech
products find their way into the such leaders as Daniel Vasella, CEO company, the picture leaves a lingering
American market. In addition, FDA and chairman of Novartis; Franz question: How much, if at all, will
inspection of Chinese medical Humer, CEO of Roche; and Sidney biotech share in this general
products is increasing with three Taurel, CEO of Eli Lilly. The avowed pharmaceutical expansion, especially
offices set to open in China before the goal of the program was to promote considering the short history of
end of this year (2). the next high-end product industry in biotechnology in China?
Even though the pharmaceutical China by promising better intellectual An unpublished study by Strategic
export market is expanding, a 2006 property pro