This post is part 2 of a three part series by Robert Walsh, the founder of Samsara Biopharma Consulting, and his colleagues, Jennie Shi, Wendy Zheng, and Zhou Tong. Part 1, “The Basics on China Pharma,” can be found here.
This post is aimed at small-to-medium sized foreign pharma companies that want to enter the Chinese market.
• Your company has something unique, not a generic, and it provides a new and innovative therapeutic approach for its target indication. It can, however, be a new formulation including an off-patent molecule, or perhaps a new delivery system, say, oral or transdermal patch, vice injection.
• Your IP is very solid, and it and your trademarks are protected by well thought-out registrations.
• The product is already approved in your home country, and your registration files all meet international requirements. Of course you will have the ability to obtain Free Sales and GMP Certificates, and have them legalized at the Chinese consulate having jurisdiction over your area.
Unless your company has a massive war chest for establishing its China market and is therefore unconcerned about making expensive mistakes while getting into the market, you will want to partner with an appropriate Chinese company. Ideally, this Chinese company will be large, will have its own manufacturing, sales, and distribution networks, and, more importantly will have a product line already selling into the sorts of clinics your product should enter.
The first step is to do a market survey, mostly to determine demand, and to identify which treatment regimens are currently in practice in China and the key players in the therapeutic area in question. This does not have to be a long and expensive undertaking. For one, until you actually meet with a company at their operating location in China, you’ll be unable to discern whether you are working with a legitimately successful company or an internet-based Potemkin company.
The second step is to short-list 5-10 good candidates according to the criteria cited above. At this point you will want to fax and Fedex letters of introduction to each of these companies, including all pertinent contact info, as well as standard marketing brochures and prescribing information used in your own market. This can be in English. You should explain that your company is considering entry for the product into the Chinese market and is considering working with a Chinese partner. Depending on response(s), and the intelligence level of questions asked, you will probably narrow your selection of candidates down to about 3-5 companies.
The third step is for your company to go on a road show to China with a team that should include your CEO, your business development head, your medical director, and the head of regulatory affairs.
It is often advisable to secure signed Non Disclosure Agreements (NDA) from the Chinese companies before meeting with them. We do not recommend massive 20-page English language tomes threatening all manner of actions if the slightest thing goes wrong. A 5-6 page Chinese language one that conforms to what is typical in China is definitely preferred, especially since you are the one who proposed the introductory meeting.
Unless your company already has staff who speak Chinese and are familiar with China, it is advisable to identify, assess, and hire a local person to act as coordinator for the trip and to interpret, and help run the meetings. This person should have a pharma background and be versed in the material to be covered.
We suggest you budget at least a day and a half for each company, and allow a day for travel from city to city. During each meeting, strive for the highest level of formality in your presentations. The Chinese company typically presents its corporate introduction first with yours following.
Your CEO probably should present the corporate brief, your medical director the clinical aspects of the product, and your regulatory affairs person the pathway followed for registration in your home country. The business development person should cap off the presentation by describing your company’s overall marketing strategy and giving a thumbnail view of your company’s China market entry strategy.
The Chinese companies will want to know:
- Your company’s financial health and whether your business model is working.
- The level of acceptance of the product by Key Opinion Leader (KOL) doctors. In China, drug companies do not make drugs for patients; they make them for the doctors who write the prescriptions.
- Whether your company would consider manufacturing in China for the local market, in order to address local price sensitivity. This is quite a separate discussion, but be prepared for the question.
- How your company would structure an out-licensing and sales & distribution agreement, dossier consideration fees, royalties, transfer prices, etc. You should have already had discussions on how to answer this before leaving home.
After this sort of session, the Chinese side may express unequivocal interest in carrying your company’s product, and suggest that both companies enter into business negotiations after a suitable period for further exchange of information. Especially if the Chinese company is a State Owned Entity (SOE), they likely will ask for some sort of Letter of Understanding (LOI). The LOI is meant merely to record the substance of the meeting and lay out timelines exchanging information and engaging in further visits.
The meeting is usually followed by a plant tour, which we highly recommend you use to gauge the Chinese company’s manufacturing expertise and quality standards. Effusive praise and glowing satisfaction are the default modes for this portion of the visit.
Your fourth step is for your team to settle on the candidate company and begin courting them. Once this company is onboard, both sides should work on crafting an agreement for out-licensing, marketing, sales, and distribution that works to get product registration and marketing approval in China.
The following are typical sticking points in reaching agreement:
- Who pays the costs to conduct any clinical trials SFDA (China’s Food and Drug Agency) may require, over and above those already completed in your home country? Who will own the data, which may be useful in a Korean or Japanese registration attempt?
- Will you use your own or the Chinese company’s branding scheme?
- Who will be responsible for minimizing fakes/counterfeits/copies?
The above represents our thinking on best practices for getting into the Chinese formulary. In our third and final part of this series, we will talk about Chinese pharma successes disasters.