New Prescription

Source: The China Daily, 24 March 2008
The success of Shanghai's WuXi PharmaTech, founded by US-trained scientist Li Ge, has showcased the rapid development of the pharmaceutical industry in China.

By providing services ranging from early-stage discovery chemistry and bio-analytical services to bulk manufacturing of active pharmaceutical ingredients for customers, including nine of the world's top 10 drug makers, such as Pfizer Inc, WuXi PharmaTech helps shorten the cycle and lower the cost of drug discovery and development, Li says.

Although his company employs 2,500 full-time scientists and researchers and is widely seen as one of the largest in the world, size matters little to Li, he says. "Being the biggest doesn't necessarily bring the greatest value for customers," he says. "My dream is to transform the way drugs are discovered."

Li, who has PhD degree in organic chemistry from Columbia University, believes that he can best realize his "dream" in China, particularly in Shanghai, where the supply of qualified researchers is plentiful and their salaries are competitive.

The shift to research labs in China is reducing expenses for US and European drug makers, which are also cutting thousands of jobs in response to cost pressures. In China, personnel and supplies can cost 60 percent less than in the United States, according to research data from Boston Consulting.

WuXi PharmaTech is also China's first contract research organization (CRO) to list on the NYSE, raising $184.6 million in an initial public offering in August last year and doubling its market value in the following four months. Gross profit in the third quarter of 2007 increased 76.4 percent to $16.0 million from $9.1 million a year earlier. Net income in the same period tripled to $8.6 million from a year earlier.

"Lower costs won't guarantee a bigger customer base without the insurance of product quality," Li says. "Through seven years of rapid development, WuXi PharmaTech has gained the trust and confidence of the world's leading pharmaceutical and biotechnology companies for its high quality drug R&D outsourcing services." Li's confidence was boosted after the company completed its acquisition of Apptech, a US-based supplier of biology services and medical devices. The purchase expanded the company's line of services to include biological capabilities.

The dream-follower
As one of the founding scientists of Pharmacopeia Inc in 1993, which is a NASDAQ-listed biopharmaceutical company based in Princeton, New Jersey, Li is well-positioned to see the potential of China's drug research industry. After receiving a bachelor's degree in chemistry from Peking University in 1989 he earned a master's degree and a PhD in organic chemistry from Columbia University, where he co-invented a technology used for new drug discovery.

Impeccably attired in a black suit and striped shirt, the bespectacled Li displays an obvious passion for his work as soon as he starts to talk. At 40, he seems easy-going and cheerful in contrast to the general impression of a decision-maker who is pushed to work around the clock without a minute for talk.

Li says he has a dream behind WuXi PharmaTech's success story.

"Many people may attribute the company's success to lower costs in China, but what I see is the power of dream in propelling everyone at WuXi PharmaTech to transform the way drugs are discovered," he says.

Drug development usually takes 12 to 15 years from discovery to marketing. As a result, the average cost is driven to a skyrocketing level between $1.2 billion and $2 billion, while the success rate is only 0.1 percent.

The reason, according to Li, is partly due to the limited resources available to researchers. A scientist with only 10 people working with him cannot expect to put all his ideas into experimentation, however brilliant he might be.

"But if I can provide him with a team of 100, they'll definitely have a greater chance of discovering potentially active chemical compounds, both reducing the time and raising the success rate of drug development," Li says.

That is why Li believes WuXi PharmaTech's business model, backed by China's abundant human resources, can make a difference to the pharmaceutical industry.

He estimates that if the time for new drug development can be reduced by one year, it would mean a total of $50 billion (take the annual profit of US pharmaceutical market for example) could be added to drug R&D. With time and costs reduced it means the possibility of developing medicines for rare diseases can be enhanced as well.

Motivated by such a dream, WuXi PharmaTech challenges the traditional drug research and development paradigm and has created a niche of its own. Its technological platform, which is open to all and meant to become as accessible as Microsoft's Windows, is benefiting more and more drug companies in their search for both pharmaceutical and biological services.

"We are a service company to be sure, and we don't have drugs of our own," Li says. "But we know the technology platform we offer may produce an even bigger impact upon the industry."

China story
Li's global ambition bears a national touch and he says he wants to use China's resources and personnel to transform the way drug R&D is conducted here.

While his business is gaining recognition from ever-widening circles around the globe, seven years ago when he founded WuXi PharmaTech, Li knew that nothing like this had happened before in China.

Western companies were reluctant to outsource drug R&D to China because preclinical work is often highly specialized and difficult to perform; and in China issues such as quality, infrastructure and IP protection are major concerns that discourage investment.

Li moved back to China and set up WuXi PharmaTech, which soon developed into Asia's largest drug R&D company in only four years' time. The success of its IPO last year gave Li greater confidence.

"It means that the world has turned its eyes to China's pharmaceutical industry," he says. "WuXi PharmaTech's success has proved the capabilities of Chinese companies and scientists to do equally well in China.

"Seven years ago 90 percent of the students majoring in chemistry couldn't do find a job in the industry," he says. Now things have changed. We are seeing a talent pool growing here which can be expected to produce an impact on the future."

WuXi PharmaTech is also giving foreign investors a new confidence in China's R&D capacity due to its respect for IP protection.

The company has established a strict documentation procedure to protect customers' confidential and proprietary information. As an extra effort to ensure the originality and integrity of all research results produced at WuXi PharmaTech, the company came to an agreement with Shanghai Notary Public Office in March 2004 to have independent notary services for all important business documents and research data.

"Companies such as WuXi Pharmatech are changing perceptions about IP protection in China," says Li. "It is a positive impact, as an increasing number of international drug makers are beginning to set up their R&D centers in China, including Astrazeneca, Novartis and Pfizer."