To Build a World-Class Global PharmaceuticalCompany in China

Before making the decision to start a new business back in China， John Niu had worked in the US pharmaceutical industry for 18 years. With the dream of vision and entrepreneur spirit， John Niu， together with a group of scientists created a new company “McCull Pharma” in Delaware， the U.S.， and served as the CEO in full time since 2009.

In 2010， McCull Pharma selected an important industrial city Nantong to establish their modern cGMP pharmaceutical production base in China. Nantong is adjacent to Shanghai and is one of the fast-growing coastal cities in China. Dr Niu then had more connection with China.

Originally born in China， Dr. Niu lived in the U.S. for about 22 years. After coming back in China， John Niu received an adjunct professorship from Nantong Medical University. He was then selected as a candidate of China’s “one thousand talents” program， and received the “Innovation and Entrepreneurship” award in 2010.

There is an interesting poster on the wall of Niu’s office， saying “Whatever you can do or dream you can， begin it. Boldness has genius and magic in it!” quoted from Johann Wolfgang von Goethe (1749-1832). Dr. Niu told China’s Foreign Trade “We have prepared this for years， and we feel confident to build up a modern global pharmaceutical company in China”.

China’s rising importance in pharmaceuticals

John Niu told the reporter during the interview that “China’s rising importance in pharmaceuticals is a major reason for us to start the new business here”.

“We are aiming to become a top Chinese pharmaceutical company with global-level capabilities， and we will be committed to developing products that address significant unmet medical needs in the world.” said Dr. Niu. “However， our company is not competing with the big pharmas; instead， McCull will collaborate with partners at different phases in drug development and will provide cost-effective products and quality services for them.”

Based on Dr. Niu， the global pharmaceutical business constitutes a massive industrial value chain， with every piece of its link representing potential commercial products.

The global pharmaceutical industry is undergoing dramatic change nowadays. On the one hand， the RD costs of new drug development is surging; on the other hand， the patents of many global brands are about to expire. Under such circumstance， the global pharmaceutical giants will have to change their business strategies somehow. It is becoming increasingly evident that more and more CRO/CMO outsourcings are shifting towards the emerging countries， such as China and India， for cost advantages.

Dr. Niu pointed out that the Chinese pharmaceutical market itself is huge and attractive; It has grown at double-digit rates (>20%) over the past decades， compared with about 1-3% increase rate of US and European countries. It is forecasted that China is likely to overcome US to become the world largest market within the next decade. “The future decade will see a golden era for Chinese pharmaceutical industry. That we chose to start our new business in China is simply because China’s rising importance for the changing world and the opportunities to grow in this emerging market，” added Dr. Niu.

According to Dr. Niu， the international brands by multinational companies or joint ventures have been leading forces in the Chinese market. Most Chinese pharma companies are generic drug manufacturers， and the medical products manufactured are unable to find their way into the world mainstream. In contrast， More than a dozen Indian companies have entered the highly regulated markets of Europe and U.S. Not like “Made in China” that can be seen all over the world， China’s pharmaceutical industry of the finished products has not made significant progress in the global market， even though many companies are making strides in the most lucrative segments of global value chains.

“China itself is a part of the global pharma industry， so Chinese companies inevitably face great challenges from their international counterparts even at home，” said Dr. Niu. China has become one of the world’s largest suppliers of bulk drugs， but not the finished dosage forms in the global market. “For a long time， the Chinese pharmaceutical industry in general has been at the low-end of the industrial value chain. If Chinese companies only compete at home， they will lose more opportunities. In term of globalization， China’s pharmaceutical companies are lagging far behind those Indian companies.”

“In recent years， the low-cost competition and overcapacity of production are becoming more and more severe in China’s pharmaceutical industry. The leading Chinese pharmaceutical companies are facing the bottlenecks in development. The advertising blitz and hospital end-user strategies would not solve the fundamental problems for future growths，” said Dr. Niu.

The international market has great potentials， but the regulation standards are also very high. “McCull Pharma has experiences and international ‘know-how’ to develop innovative products and build up a world-class pharmaceutical company in China，” said Dr. Niu.

Build up innovation platform for new product development

McCull is intended to be an innovative company in China. For the new molecule entity， McCull will mainly focus on pre-IIa preclinical drugdevelopment， and then cooperate with global pharmaceutical giants to finish the new drug development and put it in the global market. “We have experiences and resources in both China and western markets，” said Dr. Niu.

At present， McCull’s strategy is to develop the finished products and biological “Blockbusters” or “niche-busters” that present one or more competitive barriers to entry， such raw materials that are technically complex or difficult to source， new formulation and special handling requirements. Dr. Niu told the reporter that “We employ our proprietary technologies and formulation skills to develop value-added bioequivalent versions of selected brand pharmaceuticals with no IP infringement. Commercially， we are strategically positioning in some selected niche markets that big pharma are not willing to do， or could not do well.”

China’s pharmaceutical industry still lacks research and development capabilities for real innovation. There is a saying to describe the Chinese way to tap home and overseas market: “follow Hisun (a Chinese pharma company) at home， and imitate India overseas”. McCull， however， proposed to learn more from Japan in drug innovation. In the past 30 years， Japanese companies have created many world popular drugs in the global markets. China does not have significant number of branded drugs with intellectual property rights， while the traditional herbal medicine is hardly accepted by the international mainstream market.

For new drugs development， it is hard to win the recognition of the highly regulated global markets without following the international compliance system and development regime. However， if a new drug could not enter the global market， the RD costs will be very hard to recover for the manufacturer and the profitability will be limited.

According to Dr. Niu， Chinese science research institutions and universities may have strong technology research ability， but should not serve as major platforms for new drug development and international outsourcing. Many talents who came back from oversea in earlier years are from areas such as organic synthesis research and clinical studies. China needs to attract more talents with new drug development experiences and industrial manufacturing background.

Dr. Niu told China’s Foreign Trade that nowadays more than 98% drug products manufactured in China are generics. Many Chinese pharmaceutical companies are just seeking shortterm benefits and lack incentives to increase investments. The Chinese drug approval system is more tailored to the generics， and the pricesystem could not well support innovation. Most Chinese companies don’t have experiences for developing drugs at a global level in innovation. In recent years， Chinese new drug registra

tion has improved progressively. Dr. Niu believes that it is the right time for China companies to invest more in new drugs development.

To build a superior CMO Manufacturing Service platform

While focusing on new drug RD， McCull also establishes cGMP (Current Good Manufacturing Practice) production facilities for CMO outsourcing services with the U.S. FDA regulation standards.

As the world pharmaceutical industry is changing， the GMP (Good Manufacturing Practice) production capacities of the emerging countries such as India and China will attract more attention of the global drug manufacturers. However， Dr. Niu believes that the international regulation standard is still the biggest obstacle for the emerging countries. McCull is dedicated to becoming primary global CMO outsourcing company in China following the high standard international regulations. The McCull staff has many years of GMP experiences with world famous big pharma.

For the international market， the business operation model that McCull adopts is different from the traditional “U-shape”， Dr. Niu called it Double “Y” Model. The advantages in the Export Processing Zone would allow McCull to enjoy the special favorable tariff policies.

McCull will pay more attention on injectables. In recent years， more and more injections and transfusion products will lose IP property protections. “McCull predicts that the future decade will witness a robust growth of the injec- tions，” said Dr. Niu. McCull will provide CMO services for global partners with great advantages in “product quality”， “cost” and “speed”.

To build high standard quality and compliance system

Dr. Niu considers international compliance and the quality management system as the most important factors for Chinese pharma industry in the process of globalization. “Mr. Deng Xiaoping once commented that ‘the scientific technology is the primary productive force’. For global pharmaceutical manufacture， however， technology is not all. Without sufficient compliance and quality system， technology would hardly be turned into productive force in the highly regulated global market，” said Dr. Niu.

Dr. Niu said that advanced quality and compliance management should be an integrated part of technology innovation and should be considered as important as innovation.

McCull’s team members from overseas were highly trained in the U.S. pharmaceutical industry， and the management team members from China are talents with experiences in phamaceutical companies such as WuXi AppTec， Yangtze River Pharmaceutical and CP Group Pharmaceutical Co. More than half of the McCull managers hold master or doctor degrees. In addition， McCull offers training courses on a weekly basis and Dr. Niu has given presentations on the courses associated with drug development and global compliance regulations.

Dr. Niu told the reporter that although the Chinese SFDA (State Food and Drug Administration) has enforced GMP regulations in recent years; many Chinese companies are still at the early stage in the GMP practice. GMP is only the basic requirements for pharmaceutical manufacture practices though. The current U.S. cGMP is based on the 1978 version with newly issued FDA guidelines. Companies have their own responsibilities to implement the detailed guidelines and specific operation procedures to ensure the manufacturing process is compliance with the GMP principles. Dr. Niu said that McCull is drafting their own “Quality Manual”documents based on their industrial experiences and international “know-how”.

Dr. Niu stressed that McCull also pays much attention on building the corporate culture and HSE (Health， Safety and Environment) system. McCull drafted a Social Charter to illustrate its responsibility for staff， environment and the society. “As a global company， McCull will follow strictly the international rules for business conducting，” Dr. Niu concluded.