Good prospects for pharmaceutical R&D outsourcing accelerate foreign companies' acquisition of Chinese CRO companies

The Chongqing Brewery case that has been heated up in the past not only focused its attention on the information disclosure process of listed companies, but also pushed the branch of the pharmaceutical industry, CRO (Research and Development Outsourcing Contracting Organization), to the eyes of the public. With the global pharmaceutical industry transferring R&D outsourcing to developing countries, mergers and acquisitions of Chinese CRO companies by foreign drug companies are also accelerating. This solves the problem of R&D funding for local companies and brings opportunities for “going global”, but R&D of companies The results also face the embarrassment of being transferred.

CRO has great potential for growth

CRO literally means "research and development outsourcing". In fact, its industrial chain includes front-end CMO research and development, animal experiments, mid-term clinical trials, new drug registration applications, and later-stage drug promotion, business consulting, and drug efficacy tracking. Relevant information shows that the Chinese CRO industry started 40 years later than Europe and the United States. Although there are more than 300 companies, it only accounts for 5% of the global market share in 2010.

The person in charge of the Business Development Department of Tiger Medical Technology Co., Ltd. told the reporter that in the new drug development process, usually more than 50% of the cost and two-thirds of the time are for clinical trials, and therefore high quality research is obtained in a shorter period of time. As a result, pharmaceutical companies can do more with their efforts in applying for listing of new drugs. This is where CRO's expertise and growth potential lies.

According to experts from the pharmaceutical industry, the development time of major new drugs in international pharmaceutical companies is often more than 10 years. R&D outsourcing can often shorten R&D time by 30%. Taking the example of major anticancer drugs with annual sales of more than US$2 billion, even in the morning market, In one month, it will be able to add 200 million U.S. dollars in potential revenue, which does not include the labor costs and equipment costs of drug companies.

In fact, in the case of the Chongqing Brewery Hepatitis B vaccine, the CRO is responsible for the ultimate success or failure. It can even be used to describe the clinical trial control of innovative drugs. The person in charge of the above-mentioned Tiger Medical Business Development Department told the reporter, “In the clinical trials of domestic innovative drugs, there were cases where the first-phase trial was unsatisfactory, the three-phase clinical trial was successfully completed after the replacement of CRO, and it was successfully listed,” he said. To be responsible for the subject's medical safety, on the other hand, it is also responsible for drug efficacy control, experimental progress, and data collection and analysis. CRO qualification largely determines whether the new drug can be successfully listed.

As pharmaceutical companies increasingly rely on CROs as their external resources for R&D, CROs also face great potential for growth.

Industry cross-border M&A accelerates

Perhaps it is precisely to see the huge space of the Chinese pharmaceutical market, the good qualifications of the local CRO, and the very competitive R&D costs. Foreign companies are accelerating the acquisition and merger of Chinese CRO companies. Following PPD's acquisition of Igus Medical Technology and CRL's acquisition of Wuxi YiXing Kangde New Drug Development Co., Ltd., in the middle of this month, Ireland's Acorn Clinical Research Corporation (ICLR) announced that it will include China's Kavis Technologies. As a result, only a few of the leading local CRO companies have left Tiger Medical.

According to Xie Yanbin, general manager of Kavis, the success of China's clinical CRO depends on a sound regulatory environment, the management of research institutions, and adequate research and development funds. In her opinion, local CRO financing is difficult, and there are not many companies that have sufficient funds to conduct clinical research according to global standards. According to public information, only local drug CRO is listed by WuXing Kangde and Shanghua Medicine, and no company has yet landed on the domestic capital market.

Regarding the merger issue, there are opinions from the industry that foreign capital will transfer the soon-to-be mature research results of domestic enterprises through capital operation methods such as cooperation, acquisitions, and mergers, which will seriously restrict the development of innovative drugs in China in the long run.

A Shanghai CRO company official told reporters that due to the low threshold of the industry, many low-end CRO services now rely on price competition. As hospitals continue to raise the cost of clinical research, some companies have begun to lose money in their previous research projects. From a favorable point of view, with the increasing demand for clinical trials, this merger can lead the industry to develop to the norm, and it is not a bad idea to be merged. However, it also reflects that the domestic CRO industry has fewer projects and the supporting policies are not perfect. The problem is the helplessness of the industry. (Author: Li Xian)