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CRO Industry in China: 2011

Market Growth and Future Outlook

CRO Industry in China 2011 – Market Growth and Future Outlook

ChinaBio® LLC tracks the full value chain of China’s life science industry including new technologydevelopment, government funding programs, VC investment, IPO and M&A activity, partnering deals, clinicaltrials and more. This paper presents a brief overview of the CRO industry in China, its phenomenal marketgrowth, key drivers, challenges, and future outlook. For more information, please contact us.

I. Background

The pharmaceutical industry has been experiencing a drought in innovation for the past several years (Figure1). With rising R&D costs, upcoming patent cliffs, and generic competition, Big Pharma has sought ways ofsparking innovation, reducing costs, and increasing productivity. One of the areas of interest forpharmaceutical companies is to try to mitigate the risks of clinical trials. In fact, the cost of clinical trials hasrisen to comprise of almost half of over US$1 billion of the cost of development of a novel drug (Promodel,2009). Furthermore, greater than 80% of clinical trials experience delays, costing drug companies $35,000per day per trial (Promodel, 2009). With the major challenge of clinical trials conducted in the developedworld being the time-intensive nature of patient recruitment and retention (Yang, 2008), the pharmaceuticalindustry has no choice but to seek alternatives to resolve these cost-intensive risks.

Figure 1: Innovation gap ails the pharmaceutical industry with decreasing returns on R&D spending

(Source: Burrill & Company, PhRMA)



I. Background






I. Background




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II. Outsourcing Value Proposition

To address these risks, the pharmaceutical industry as a whole has sought to outsource many aspects of thedrug pipeline to specialized clinical research organizations (CROs). Like many companies in other industries,these pharmaceutical companies have looked at China to obtain the largest return on their investment forthe least amount of cost. Of course, having a foothold in the world’s most populous country presents a largeopportunity to market their products. Since therapeutics destined for the Chinese market must have clinicaltrials done in China itself, it was a good strategic move for these companies to utilize the Chinese CROs as agateway to enter the China market. Additionally, government regulations were more easily addressedthrough outsourcing to these CROs, as these firms were more experienced to fulfill the State Food and DrugAdministration (SFDA) submission criteria. Pharmaceutical companies may also contract with integratedCROs, which have the added benefit of not just obtaining efficiencies in cost, but also gaining economies ofboth scale and scope. With these considerations, outsourcing to Chinese CROs was a valuable and necessarystep for many multinational pharmaceutical companies to regain their competitive advantage in the drugR&D space.

III. Outsourcing Activity in China

Considering these benefits of outsourcing in China, it is no surprise that outsourcing activity in China hasincreased. In fact, anecdotal evidence suggests that about 80% of the China CRO activity involves developingtherapeutics intended for the Chinese market (Qiu, 2011). In this endeavor, the Chinese domesticpharmaceutical firms are also heavily involved, and not just the foreign pharmaceutical firms. Of 80% of thetotal domestic drug development activity, half of the drug development is performed by Chinese domesticfirms while the other half is conducted by foreign firms (Qiu, 2011). And as a result of this increasing demandby the pharmaceutical companies both foreign and Chinese domestic, outsourcing activity has increased inChina. In fact, according to CRO executives in China, outsourcing activity has increased 30-40% (Qiu, 2011),clearly reflecting the increasing amount of domestic drug development activity in China.

IV. CRO Market Size

The CRO markets, both worldwide and in China, have been growing fairly rapidly. Globally, the CRO markethas been growing at CAGR of 13.12%, from a US$14 billion market in 2006 to an estimated US$35 billion in2013 (Figure 2).


Figure 2: Steady Growth of the Global CRO Market (Source: Frost & Sullivan (2009); compiled by ChinaBio®)

Also following the global trend and the increased domestic drug development activity, the Chinese CROmarket has been growing even more rapidly, at CAGR of 20.59% over the same period since 2007(

Figure 3).




Figure 3).




Figure 3).


Figure 3: Rapid Growth of CROs in China (Source: Frost & Sullivan; analysis by ChinaBio®)

Several factors drive the rapid growth of the CRO industry in China. From the contract R&D standpoint, theyare decreased costs, and increases in patient pool, technical talent, partnerships, services, andstandardization. These areas will be explored in further detail below.

V. Contract R&D Drivers

Decreased Costs

Having served as a low-cost outsourcing center for many different industries, it is no surprise that thepharmaceutical industry started to shift to China as well to regain its competitive advantage. Decreased costsfor many aspects of the R&D value chain are apparent in China. For instance, the cost of clinical trials isalmost 50% less than in Western countries (Yang, 2008). Additionally, the cost of R&D personnel, such asscientists and post-docs, is only one-third the cost incurred in Western countries (Yang, 2008). Also, the laborcost of a clinical research associate and an investigator is only 45% and 40% of the costs in the U.S.,respectively (Lee, 2008). With these financial and market incentives that China offers, multinational R&Dprograms are motivated to seek contract R&D opportunities in China.

Increased Patient Pool

The large patient population in China serves not only as a large market for pharmaceutical companies, butalso as a large, diverse, and heterogeneous population that’s desirable for clinical trials (Lee, 2008). Sincemany treatments are naïve to the population, there is less risk for cross contamination with othermedications so that enhances the purity of the clinical results. Moreover, the Chinese population tends toenroll in clinical trials much faster than those in Western countries, further reducing the risk of delays in theclinical trials (Yang, 2008). For instance, in the oncology space, patient recruitment could be 3-5 times fasterthan in the U.S. (Lee, 2008). Lastly, China has a much different disease profile than in the United States,which offers other opportunities for drug development (Table 1) (Center for Disease Control and Prevention,





Decreased Costs








Decreased Costs





2011) (Ministry of Health, PRC, 2010). Comparing the two countries, however, the top diseases are similarbut because China has a much larger population than the United States, the patient population is much largeras well. Therefore, pharmaceutical companies are incentivized to come to China to access the immense poolof patients for clinical trials and beyond.

Leading Causes of Death in the United States and China

Year 2009

Rank United StatesDeaths(U.S.) China

Deaths(China)

1 Heart disease 598,607 Malignant Neoplasms 2,176,599

2 Malignant neoplasms 568,668 Cerebrovascular diseases 1,869,442

3Chronic lower respiratorydiseases 137,082 Heart Disease 1,605,850

4 Cerebrovascular diseases 128,603 Diseases of the Respiratory System 1,106,459

5Accidents (unintentionalinjuries) 117,176 Injury & Poisoning 601,276

6 Alzheimer's disease 78,889 Diseases of the Digestive System 206,828

7 Diabetes mellitus 68,504Endocrine, Nutritional & MetabolicDiseases 206,623

8 Influenza and Pneumonia 53,582 Disease of the Genitourinary System 97,114

9Nephritis, nephroticsyndrome, nephrosis 48,714 Infectious Disease 90,799

10 Intentional self-harm (suicide) 36,547 Disease of the Nervous System 79,060

Total 1,836,372 Total 8,040,050

Table 1: Disease Mortality Profiles between U.S. and China (U.S. CDC National Vital Statistic Reports and2010 Chinese Health Statistics; compiled by ChinaBio®)

Technical Talent

Another driver for contract R&D in China is the increasingly abundant source of technical talent. The merefact that China’s universities generate more than 150,000 graduates per year in the life sciences (Figure 4), a


figure 10-fold higher than the United States, simply underscores the availability of the labor pool to supportthis growth (ChinaBio Consulting, 2011).

Figure 4: Abundant numbers of life science graduates help drive the growth of the domestic CRO industry

(Source: ChinaBio® Consulting)

Adding more than another 250,000 highly-educated Chinese returnees who bring back wealth of knowledgeand skill sets obtained at Western universities, research facilities, and biopharmaceutical companies, thequality of technical talent in China continues to rise (Figure 5). Furthermore, China has a large, quality talentpool of nurses and physicians for administering clinical trials. In fact, numbers of health care professionalshave increased from 6.9 million to more than 7.8 million from 2000 to 2009 (Chinese Health Statistical Digest,2010). These key pieces of talent positioned along the R&D value chain have invariably fueled the growth ofthe CRO industry in China.












Figure 5: Increasing numbers of Chinese returnees have fueled the growth of the domestic life sciencesindustry

(Source: Ministry of Education (MOE); compiled by ChinaBio® Consulting)

Increased Services

One driver for the contract R&D industry is the increasing breadth of services that these firms offer. ManyCROs are expanding into higher value-added activities such as discovery biology, preclinical development,and certain pharmaceutical development services. Compared to just three years ago, when only about 10%of the Chinese CROs was capable of offering biology-related services, about 40% of these companies are ableto perform these services today. This has contributed to the growth of the CRO industry in China.

Increased Standardization

Along with the increasing demand for CROs, Chinese CROs have started to conform to international standardsto meet the regulatory need of the foreign pharmaceutical firms. In fact, more CROs are now vying for cGCP,cGLP, and other major certifications and accreditations from institutes around the world (Table 2).




Increased Services







Increased Services





China's Emerging GxP EnvironmentR&D Phase Target Lead Pre-Clinical Clinical Commercial

Status ofCRO Market Mature Mature Developing Emerging Emerging

Number ofCROs/CMOs 150-200 CROs 150-200 CROs 75-100 CROs

75-100 CMOs

75-100 CN CROs10-15 FDA CROs

5-10 CMOs

5-10 CROs5-10 CMOs

GxP Status - - 25-30 CN GLP3-5 FDA GLP

5-10 GCP5-10 cGMP (sm)

0 cGMP (lg)

5-10 GCP3-5 cGMP (sm)

0 cGMP (lg)

Table 2: China's emerging GxP environment (Source: ChinaBio® Consulting)

Increased Partnerships

As a result of all these factors, partnerships across the R&D value chain lead to strong, rising growth indomestic and multinational outsourcing drug discovery and development partnerships. For instance,ShangPharma is one of the largest CROs in China and its top two customers are Big Pharma: Eli Lilly andGlaxoSmithKline (GSK). These companies accounted for 27% and 10% of its net revenues for 2009 and 20%and 9% of its net revenues for the first half of 2010, respectively (ShangPharma, 2010). From years 2008 to2010, ShangPharma earned more than US$59 M from Lilly and US$22 M from GSK. Earlier this year, anothermajor Chinese CRO, WuXi PharmaTech, signed a strategic partnership agreement with Bristol-Myers Squibb(BMS) to build, equip, and operate a cGMP-compliant 25,000 ft2 analytical testing center in Shanghai toperform services for BMS (BusinessWire, 2011). WuXi had signed a 3-year in vitro ADME collaborationagreement with Pfizer in late 2008 and has a history of many collaborative projects with Pfizer in the past(PRNewswire, 2008). These are only some of the many examples that demonstrate the growing numbers ofpartnerships between Chinese CROs and multinational companies.

VI. Challenges for Contract R&D

Decreased R&D Budgets of Western Pharmaceutical and Biotechnology firms

Despite the growth of these CROs, several challenges exist in this industry. For instance, according to oursources in the industry, about 40% of China-based CRO revenues are derived from overseas Big Pharma andbiotech firms (Qiu, 2011). Furthermore, with increasing global industry consolidation, R&D outsourcing maybe reduced to streamline operations. But China has resisted these trends and is continuing to increase R&Dspending (Figure 6).


Figure 6: R&D expenditure in the Chinese medical industry continues to rise

(Source: China Science & Technology Statistics, compiled by ChinaBio® Consulting)

Increasing Competition among CROs

The increase in R&D spending has resulted in the establishment of more CROs, creating additionalcompetition among large multinational CROs, domestic CROs, and public institutions (e.g., government, non-profit, research institutes, etc.). Geographically, these CROs have spread throughout the country (Figure 7).Firms compete on quality and scope of services, pricing, depth of consumer relationships, etc., and haveresulted in the increase of overall quality of CRO services in China. These firms have also branched out tocover many different functional areas of the R&D value chain, further enhancing the contract R&D climate inChina (Figure 8).












Figure 7: Proliferation of CROs has resulted in increased competition in China


Figure 8: Functional Areas of CROs and CMOs in China (Source: ChinaBio® Consulting)










IP Protection

China has had a poor reputation as a protector of IP in various industries. However, IP enforcement has beenevolving, with the last amendment passing in 2009. Compared to the first patent law that was enacted in1984, which had no protections for pharmaceuticals and chemical entities, it has developed to include theestablishment of a State Intellectual Property Office (SIPO), protections for microbiological products andprocesses, as well as simplified patent application process and improved enforcement protocols (Chen, 2011)(Figure 9). By 2009, China had conformed to the U.S. and EU standards for patent protection, incorporatingthe “Bolar” provision which exempted parties such as generics manufacturers from being liable for patentinfringement from “manufacturing, importing, or using a patented drug or patented medical apparatus forthe purposes of acquiring information necessary for regulatory approval” (Xiao & Vella, 2009).

Figure 9: Evolution of the Chinese patent law

(Source: Chinese Patent System, Peng Chen, PhD, Esq., Partner, Morrison & Foerster, LLP, 2011 and Janet Xiaoand Michael Vella, Morrison & Foerster, LLP, 2009)

Salaries Escalating throughout China

With the rapid growth of the Chinese economy, wages have been rising rapidly as well. Even with thedownturn in the global economy, real wages for year 2009 actually increased 5.9% (Hay Group, 2010) (Figure10). Real wages increased 3.9% in 2010 and is forecasted to increase to 5.0% this year.


Figure 10: Real Wage Increase in China since 2007

(Source: China salary outlook positive for 2011, News Release, Hay Group, 2010.)

For the life science industry, wages have been rising even higher, especially for the much-sought-afterexecutives with multinational company (MNC) experience. Wages have been increasing at a rate as high as15-30% per annum while top executives demand as high as 50-100% increase in salary when they look fornew employment (Buxton, Li, & Tantau, 2007). In addition, recruiting and retaining top talent is also achallenge as competitors will try to target the top stars at other companies, often presenting them with amore lucrative compensation package. This results in a high turnover rate, especially as employees in Chinaconsider switching jobs every 2 years to be the norm (Buxton, Li, & Tantau, 2007). And the turnover rateappears to reflect the trends in the average base salary, as expected (Figure 11). Some observers point outthat this phenomenon is a sign of a hot economy, similar to what was seen in the United States during thedot-com boom, when wages continued to rise for the IT personnel who were in much demand.


Figure 11: Employee turnover rate in China since 2007

(Source: China salary outlook positive for 2011, News Release, Hay Group, 2010.)

Other Challenges

Other challenges exist for the Chinese CROs. For smaller CROs, for instance, access to efficient capitalmarkets to finance growth can be difficult because China is still developing robust venture capital, privateequity, and debt markets. Additionally, for the Chinese CROs as a whole, they face increasing globalcompetition from other developing nations. For instance, India has become a major player in clinicaldevelopment. Russia and Brazil are developing their own CRO industries. But compared to these other BRICcountries, China offers the largest market, one of the most developed infrastructures, and opportunities forfurther rapid growth.


VII. Survey of Top 5 CROs by Category

In this section, we examine and rank the top five CROs by the following categories: discovery, preclinical,clinical, and commercial (contract manufacturing organizations/CMOs).

Top 5 Discovery CROs

1) Wuxi Pharmatech

Operating as Wuxi AppTec in China, this company was founded in 2000 and is based in Shanghai. It is anintegrated R&D service company with capabilities in discovery chemistry and biology, preclinical trials,process research, formulation, toxicology, biologics testing, and manufacturing for preclinical and clinicaltrials. This company went public on the New York Stock Exchange in 2007 and had revenues of US$334M in 2010. As one of the top CROs, it has signed partnership deals with Big Pharma, such as Bristol-Myers Squibb and Pfizer. Employing 4500 workers, it has operations both in Shanghai and in the UnitedStates.

2) ShangPharma (ChemPartner)

ShangPharma is one of the largest CROs in China and is a holding company for two entities, ShanghaiChemPartner and Shanghai ChemExplorer. Based in Shanghai’s Zhangjiang Hi-Tech Park, it employs 1600scientists in chemistry, biology, pharmacology, DMPK, process R&D, pre-formulation, and analyticaldevelopment services to global pharma and biotech companies. For fiscal year 2010, it reported netrevenues of US$90.3 M, an increase of nearly 25% from 2009, which was attributed to an expandingcustomer base and larger volumes of orders from top clients. For 2011, the company is expecting togrow another 23.0 to 28.0%, with net revenues of US$111.1 M to US$115.6 M.

3) Pharmaron

Pharmaron is a private CRO that employs 1200 people and is headquartered in Beijing. It handleschemistry, pharmaceutical development and manufacturing, biology, DMPK, in vivo pharmacology, GLPbioanalytical services, preclinical services, integrated R&D, and project management. Founded in 2003, ithas operations both in China and in the United States. In March 2011, it announced an agreement withIsis Pharmaceuticals to provide nucleoside phosphoramidites, a key component of antisense therapeuticproduction. And in February 2011, Pharmaron successfully closed a Series C financing totaling more thanUS$40 M from existing investors such as DCM and Legend Capital, as well as from a new investor namedGL Capital Group.

4) Sundia MediTech

Sundia MediTech is a CRO that was founded in 2004 by returnees who have had work experience in drugR&D in the United States. Based in Shanghai’s Zhangjiang Hi-Tech Park, its research facilities encompass150,000 sq. ft and are staffed with over 300 scientists. Sundia specializes in chemical development,QA/regulatory, scale up, preformulation/formulation, analytical development, and drug discoveryservices. Sundia’s investors include IDG (2005 & 2007), AsiaVest (2007), JAIC (2007), and PinPoint (2007).It has collaborations with more than 80 client companies in the U.S., Canada, Europe, and Japan.


5) CrownBio

CrownBio is a CRO specializing in preclinical, translational, and clinical capabilities in oncology andmetabolic diseases. Founded in 2006 by returnees with biopharmaceutical experience in the West, itemploys 425 people worldwide and is headquartered in Silicon Valley but has research facilities inIndianapolis, Beijing, and Taicang, China. A private company, it has undergone three rounds of financing,most recently a US$28.4 M Series C financing that was successfully completed in May 2011. Led byOrbiMed Advisors Caduceus Asia Partners Fund, Argonaut Private Equity, CID Group, IBT, CDIB CapitalInvestment, and other existing shareholders, the funds will be used to expand services in integratedcancer drug discovery and translational oncology, as well as for other novel therapeutic areas.

Top 5 Preclinical CROs

1) Joinn

Headquartered in Beijing, Joinn was founded in 1995 and handles drug discovery, drug screening, animalmodels, pharmacology, pharmacodynamics, ADME, pharmacokinetics, pathology, and general andspecial toxicology studies. With an office next to the FDA in Washington, DC, it also has a clinical servicesteam and regulatory support to file applications for IND, NDA, ANDA, or DMF. A privately-held company,it is scheduled to open a new one million sq. foot facility in Shanghai this year.

2) Wuxi PharmaTech (See Discovery section)

3) Shanghai Medicilon, Inc.

Founded in 2004, Shanghai Medicilon is headquartered in Shanghai’s Zhangjiang Hi-Tech Park withadditional facilities in Chuansha Economic Park in Shanghai. With over 300 employees and 200,000 sq. ftof lab space, it specializes in integrated drug discovery services, from hits to IND filing, discovery biology,assay development, medicinal chemistry, custom synthesis, library synthesis, analytical chemistry,bioavailability, animal models, PK/PD, pharmacology services (disease models), and toxicology services.A private company, Fortune Capital of China signed an investment agreement in 2011 aiming for an IPOin China.

4) Pharmaron (See Discovery section)

5) Shaanxi Jiuzhou Biotechnology Co., Ltd.

Shaanxi Jiuzhou Biotechnology Company was founded in 2001 and is located in Xi’an High-Tech IndustrialDevelopment Zone. A privately-held company, it specializes in early stage vaccine discovery and R&Dsupport. Areas of development include vaccines for HPV and senile dementia, as well as anti-hepatitis Bvirus human monoclonal antibody. Other areas of development are tumor blood vessel targetedinhibitors, osteoporosis, TCM-based product for myopia, and genetically-engineered human SOD, whichis a naturally-scavenging agent against superoxide radicals in the body.


Top Clinical CROs – Domestic

1) Tigermed

Based in Hangzhou, Tigermed is a CRO specializing in clinical research, data management, regulatoryaffairs, medical translation, GCP training, and R&D consulting. Founded in 2004 with offices in Shanghai,Beijing, Chongqing, and Guangzhou, it has since expanded to a total of 35 offices in China and one officein America, with a total of 500 employees. Funded by Qiming Venture Partners, Tigermed has strategicalliances with Simcere, ICON, and Shanghai Clinical Research Center. Similar to many other domesticCROs, many of the management personnel are returnees with advanced degrees and biopharmaceuticalexperience in U.S. and Europe.

2) Venturepharm

Venturepharm is a CRO based in Beijing but listed on the Hong Kong Stock Exchange. Founded in 1998, ithas several investors, including C Tech Fund, Government of Singapore Investment Corporation, KerryGroup, K. Wah Group, SUNeVision, JAFCO, founding members and public investors. It performs clinicalresearch, preclinical, regulatory services, quality assurance services, data management and biometrics,and market access services. Employing over 300 scientists, it has eight R&D centers, three GMPintegrated manufacturing facilities and four bulk API manufacturing facilities.

3) Fountain

Fountain Medical Development, Ltd., is a CRO with offices in Tianjin, Beijing, Shanghai, and the UnitedStates. It focuses on clinical operations, central laboratory services, biostatistics, data management,clinical trial design, project management, and safety operation. In the past, it has performed trials inoncology, cardiovascular diseases, rheumatoid arthritis, HIV, HBV, antibiotics, and reproductive health.

4) Guangzhou Boji Medicinal and Biological Technology Co., Ltd.

A subsidiary of Boji Medicinal Service Group, Guangzhou Boji is based in Tianhe Hi-Tech Industrial Park inGuangzhou, with a consultation office in Beijing. It specializes in clinical trials, preclinical,registration/marketing, data management, biostatistics, and project management. A privately-heldcompany, it employs more than 50 people, has local offices in 25 cities, and has relationships with morethan 300 major hospitals.

Top Clinical CROs – International

1) PPD, Inc.

Headquartered in Wilmington, North Carolina, PPD is a CRO with multiple locations worldwide. Withearnings of US$1.47 B, it employs 11,000 workers globally and specializes in clinical development services,global product development services, laboratory services, and cGMP laboratory practices. In China, PPDhas development facilities in Beijing, Shanghai, Hong Kong, Guangzhou, Chengdu, and Taizhou in JiangsuProvince. It has a strategic partnership with Peking Union Lawke Biomedical Development Limited to set


up its central lab services in Beijing, as well as a collaborative relationship with Merck that enabled PPDto obtain access to Merck’s vaccines and biologics infrastructure.

2) Quintiles

Quintiles is one of the largest CROs in the world, with presence in 60 countries with 22,000 employees. Ithas had presence in China since 1999, establishing offices in Beijing, Shanghai, and Hong Kong.Estimated to have global earnings of US$30 B according to Forbes, Quintiles performs early developmentservices, clinical development services, fully integrated product development and commercialdevelopment. Other services more specific to China include regulatory services, clinical monitoring,clinical site management, and project management.

3) Covance

Headquartered in Princeton, New Jersey, Covance is a global CRO with more than 10,000 employees in60 countries. With annual earnings of US$1.93 B, it signed a 10-year agreement with Sanofi-Aventis in2010 to acquire its sites in France and the UK, as well as acquiring a Seattle-based laboratory from Merckin 2009. Covance conducts preclinical services, clinical pharmacology services, clinical developmentservices, clinical trial support, and market access services. It arrived in China in 1998 with the opening ofthe Beijing office, followed by opening of the clinical offices in Shanghai in 2005. In 2007, it established acentralized laboratory in Shanghai to better serve the growing demand in China.

Top 5 Commercial Manufacturing Organizations (CMOs)

1) Asymchem

Established in 1995, Asymchem is headquartered in Morrisville, North Carolina, but with productionfacilities in Tianjin, Fuxin (Liaoning Province), Dunhua (Jilin Province – pending), and a business office inBeijing. It has capabilities in raw materials and intermediates, API synthesis, and drug productmanufacturing. The company has grown steadily since its founding, increasing the R&D staff from 100 in1999 to 1300 in 2008, reaching US$54 M in sales.

2) Wuxi PharmaTech (see Discovery section)

3) Sundia MediTech (see Discovery section)

4) 2Y-Chem, Ltd.

2Y-Chem is located at Zhangjiang Hi-Tech Park in Shanghai and specializes in custom synthesis, analyticalservices, quality control, and technical consulting. The company has returnees who are Western-educated and have experience in the North American chemical and pharmaceutical industries.

5) AutekBio, Inc.

AutekBio is a CRO that is headquartered in the San Francisco Bay Area, but has facilities at ZhongguancunMedical Scientific Park in Beijing. It performs cell line generation, process development, contract


production, and bio-analytical services. The company’s leadership is composed of returnees withadvanced degrees from the United States. A private company, AutekBio is funded by Sandy Chau, thechairman of Accela, Inc. and Founder and CEO of SUMA, Inc., as well as by Acorn Campus Ventures.

VIII. Trends and Future Outlook

With the ever diminishing returns of drug development, Big Pharma has increasingly reached out to newsources of innovation to help fill its pipelines with novel molecules while its existing brand name drugs areexposed to patent expiry. Many Big Pharma companies are downsizing their own R&D departments and arenow going virtual, focusing more on project management on multiple products while utilizing CROs todevelop and test the molecules. This trend results in more reliance on CROs by these pharmaceuticalcompanies, contributing to the current and future growth of the CRO industry.

Additionally, Big Pharma is also becoming more dependent on smaller companies to perform more of theR&D tasks. These smaller companies, often sprouting out of centers of innovation such as universities andresearch centers, are often more nimble than the more bureaucratic R&D departments of Big Pharma, andare able to make strategic decisions more quickly. Therefore, Big Pharma sees these smaller companies as agood source of innovation to fill its drug pipelines. As more of these molecules are acquired by Big Pharma,they will be turned over to CROs to further develop the molecules. Therefore, this trend will continue todrive the growth of the CROs as well.

From a macro perspective, as emerging markets continue to grow, these countries are able to invest moremonies into the medical industry to help address its healthcare needs. This is quite true in China, wheregovernment funding has helped establish the necessary infrastructure (i.e., life science parks) as well asproviding seed monies for many start-up life science companies. Because of the proportionately largepopulation with pressing medical needs such as cancer, heart disease, and hepatitis, and because of theabundant funding that is available to support these life science companies, more innovation is expected to begenerated from China and the other emerging economies in the future. Again, this translates for morebusiness opportunities for CROs and will contribute to their growth as well.

In conclusion, the CRO industry in China has been growing at a rapid pace and is expected to continuegrowing into the foreseeable future. Factors such as decreased costs, increased patient pool available forclinical trials and for market, availability of high quality technical talent to support the CROs, increasedpartnerships between CROs and overseas pharmaceutical companies, increased breadth of services andincreased standardization to conform to international standards have helped drive the Chinese CRO industry.However, existing challenges for contract R&D remain, such as decreasing R&D budgets of Westernbiopharmaceutical firms, increasing competition between multinational and domestic CROs, the need toimprove IP protection, lack of efficient source of capital markets to finance growth for smaller CROs,escalating salaries in China, and global competition from other developing economies. Despite thesechallenges, outlook for the Chinese CRO industry is positive when one considers the overwhelming number offactors that support its growth.

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If you are a U.S. life science company looking toestablish relationships or operations in China,or a China company seeking partners orinvestors, ChinaBio® has the expertise andtalent to help.

China strategy development Market assessment Competitive analysis Technology and partner searches Market entry services & support

As the only merchant bank focused exclusivelyon China's life science industry, ChinaBio®Capital Partners is uniquely positioned to helpwestern or domestic companies raise fundingor execute strategic transactions in China.

Mergers & Acquisitions Corporate Financing Venture/PE Funding Government Funding

Conferences |会议 Information |信息

ChinaBio® organizes the premier life scienceinvestment and partnering conferences inChina. We also work with key partners toorganize custom events in China, the U.S. andEurope.

ChinaBio® Partnering Forum ChinaBio® Investor Forums ChinaBio® Leadership Retreat Customized Events

ChinaBio® Today, with over 18,000 subscribers,is the most widely read publication on theChina life science industry. ChinaBio alsomaintains the broadest and mostcomprehensive knowledge base on theindustry, including:

7500 life science companies 3200 novel molecules / technologies 2500 professors / researchers 160 government funding programs

Please visit our website or contact us for more information on how ChinaBio can help your companyachieve success in China.

ChinaBio® LLCConsulting | Capital | Conferences

Shanghai | San DiegoChina Phone: +86-21-5137-0751 | US Phone: +1-858-926-4566www.chinabiollc.com | www.chinabiocapital.com | www.chinabiotoday.com


ChinaBio® 2011 Event Schedule

See www.chinabiollc.com/upcomingevents for more information.

ChinaBio® LLC www.chinabiollc.comConsulting | Capital | Conferences www.chinabiotoday.com

China Office US Office

Zhangjiang Hi-Tech Park 3525 Del Mar Heights Road, #463Biotech VC Plaza San Diego, CA 92130780 Cailun Road, Suite 822 USAPudong New Area, ShanghaiChina 201203 Email: [email protected]

CN Phone: +86-21-5137-0751 US Phone: +1-858-926-4566




CN Phone: +86-21-5137-0751 US Phone: +1-858-926-4566




CN Phone: +86-21-5137-0751 US Phone: +1-858-926-4566

cro industry in china: 2011 market growth and future outlook · cro industry in china 2011 market...

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