For now, Pfizer has opted to work via smaller-scale collaborations. But Yang says the company remains “open-minded” about attempting new approaches in China. Late last year it launched a research partnership with Tsinghua University to study the structural biology of kinases, a type of enzyme known to have therapeutic implications. It has sponsored similar work with academics at Peking University and the Chinese Academy of Sciences. Pfizer also has ongoing partnerships with local CROs such as WuXi Pharmatech (although Yang declined to discuss the nature of that research).

 

Seven-year-old Wuxi, which counts Pfizer as its number-one customer, now does R&D outsourcing for nine of the top 10 global pharmaceutical firms. Though bigger than most, it represents the ambitions of a new breed of CROs that have sprung into being in just the past few years.

 

China is now home to hundreds of such firms, many based in Shanghai’s Zhangjiang Hi-Tech Park or Beijing’s Zhongguancun Life Science Park. While some manufacture active pharmaceutical ingredients and conduct outsourced clinical studies, a smaller number, like WuXi, offer more sophisticated drug discovery research and are quickly building out their portfolios.

 

Earlier this year WuXi branched out from its bread-and-butter business—drug discovery work for foreign companies—into drug metabolism and pharmacokinetics and general toxicology. With almost 2,000 employees, its business has grown sufficiently fast to justify a listing on the New York Stock Exchange last August.

 

Granted, the sheer youth of China’s drug research industry imposes some limitations. With the exception of a few elite local companies such as Hutchison MediPharma (a pharmaceutical firm backed by Hong Kong conglomerate Hutchison Whampoa, which has developed two of its own drug candidates now in clinical development), most R&D is conducted by CROs focused on discrete specialties. This means that foreign companies that want to contract out R&D work in China may have to link up with a number of research firms, each with different specialties, such as chemistry, animal toxicity, formulation development, and so on.

 

“China is great in functional capability, but you don’t find all the capabilities in one single company, with some exceptions,” notes Gulati. In the future, that’s bound to change, he says. But for now, China requires a more involved outsourcing strategy than India, which has a longer private sector history and has given rise to export-oriented giants like Ranbaxy Laboratories and Dr. Reddy’s Laboratories. “You’ve seen that most pharmaceutical companies in China are either setting up their own R&D or having multiple relationships with contractors, then trying to integrate cross the chain,” says Gulati. “Whereas in India you can have a relationship with one, two, or three independents which span the full spectrum, from the molecule to the launch stage.”

 

Still, one factor likely to work in China’s favor is the perception that its IP protection regime—while still far from ideal—is better than India’s. In August Novartis CEO Daniel Vasella, angered at losing a patent protection case in India, warned that he might pull research funding out of the subcontinent and redirect it to other countries, including China.

 

China has made big strides since 1993, when pharmaceutical patents first won legal protection. A series of amendments followed in 2001 before China joined the World Trade Organization, and now a third round of amendments is under way. “The situation has improved in the past several years, both in the number of enforcement actions people have taken and the favorable judgment for IP owners, including in the pharma space,” says Tony Chen, a patent and life sciences lawyer for Jones Day in Shanghai.

 

Pfizer’s legal victory in protecting its Viagra patent is a case in point. After the State Intellectual Property Office revoked Pfizer’s patent on Viagra in 2004, Pfizer took the unusual step of fighting back in court. The drug maker was rewarded last year when a Beijing court ruled in its favor.

 

There’s still far to go, of course. Privately, local industry insiders offer up a lengthy wish list of IP improvements they’d like to see, both in regulation and enforcement.

 

What’s striking is that China has turned into enough of an R&D center to warrant such concerns. It’s becoming more feasible for top Chinese scientists to work on cutting-edge research without having to leave home.