Domestic Drug Industry Coming of Age

For American Chamber of Commerce Taipei

Recent months have produced two events illustrating how Taiwan’s local pharmaceutical industry, long known mainly for producing generic drugs, is moving into a new stage of development. First was the establishment in late 2012 of the Taiwan Research-based Biopharmaceutical Manufacturers Association (TRPMA), whose 25 charter members focus on new drug development. Then in May this year, local firm TaiGen Biotechnology simultaneously submitted a New Drug Application (NDA) with the Taiwan Food and Drug Administration (TFDA) and the China Food and Drug Administration (CFDA) for its antibiotic nemonoxacin. Making this milestone possible was the Cross-strait Cooperation Agreement on Medicine and Public Health Affairs (CSCA-MPHA) under the broader Economic Cooperation Framework Agreement (ECFA) signed between Taiwan and China in 2010.

Broadly speaking, biopharmaceutical research and development on the island has been driven by two groups of players with different technology platforms and business models. One of them consists of Taiwanese scientists who built distinguished careers in the United States and Europe before returning with expertise and experience enabling them to establish R&D-based companies in Taiwan. Among the most prominent such firms are TaiGen, which specializes in developing treatments for cancer, diabetes-caused complications, and infectious diseases, and PharmaEssentia, which concentrates on developing new methods for protein engineering.

In the second group are companies that started off as generic-drug makers but subsequently begun developing new drug delivery systems. These systems alter the existing drug’s characteristics – such as penetration, absorption, and excretion – enabling the dosage frequency to be reduced and extending the application of the drug to new indications. Such an approach was taken, for example, by TTY Biopharm with oncology drugs and the Taiwan Liposome Co. (TLC) for liposome systems. Another fruit of Taiwan’s biopharmaceutical R&D has been supplements combining Traditional Chinese Medicine (TCM), modern capsules, and Western marketing techniques. Examples are anti-fatigue and liver-protective products made of niu zhang zhe, a wild mushroom grown in the decayed wood of stout camphor trees.

As a rule of thumb, new combinations and new delivery systems are required to undergo clinical trials, but other biopharmaceutical R&D products do not if the chemical compound on which they are based had already achieved the necessary approvals.

Over the decades, drug makers from the United States, Europe, and Japan with operations in Taiwan contributed to the emergence of a viable biopharmaceutical R&D industry on the island. From the early 1990s onward, they introduced not only innovative products but also modern management concepts regarding marketing, quality assurance, and training into Taiwan. Arguably equally important was the foreign pharmaceutical companies’ role in conducting clinical trials in Taiwan, which again involved a transfer of know-how to local researchers.

But with the closure of most of the international firms’ manufacturing sites in Taiwan due mainly to the relatively high cost of production, much of the impact of these companies on Taiwan’s domestic biopharmaceutical R&D has ebbed. An indicator on how the domestic pharmaceutical industry has risen in prominence was Taiwan’s inclusion earlier this year in the Pharmaceutical Inspection Convention and Pharmaceutical Inspection Co-operation Scheme (PIC/S). This PIC/S GMP standard enables Taiwan and the health authorities of the 41 other member countries to mutually recognize the certification of pharmaceuticals, an achievement that Taiwan’s regional competitors Japan, South Korea and China have yet to attain.

Still, the total revenue of the industry – including pharmaceuticals, medical devices, and licensing and royalty fees from biopharmaceutical R&D – remains relatively humble. The 2012 figure came to US$8.7 billion, according to the government-sponsored Development Center for Biotechnology (DCB), representing a rise of 6.1% from the previous year. In comparison, Taiwan Semiconductor Manufacturing Co. (TSMC), Taiwan’s world-leading semiconductor foundry, took in nearly double that amount in the same period.

About two decades ago, the Taiwanese government began making the development of a viable biopharmaceutical industry, conducting its own R&D, a major priority. Since then, a large number of action plans have been implemented and tax breaks and research grants awarded, and about a dozen specialized biotech industrial parks were established. Over time, the business model of choice for local biopharmaceutical R&D firms became the in-licensing/out-licensing circle. In this model, a candidate drug is acquired from another company in the hope that value-adding R&D will turn it into a winner that can eventually be sold to a multinational at a large profit.

Instead of such R&D in bits and pieces, the government is currently promoting the idea of “translational” drug development, meaning that the whole process from drug discovery to regulatory approval takes place on the island. The latest headline-creating effort in this direction is the plan for a National Biotechnology Research Park in suburban Taipei, scheduled for completion in 2016. Within the Park, the DCB, which primarily shoulders responsibility for the early stages of new drug development (that is, from toxicological screenings to animal testings in mice and dogs) will collaborate closely with Academia Sinica, Taiwan’s leading academic institution for basic research.

According to DCB President Jeff Wang, R&D in the Park will focus on new biologics and small molecule drugs in the areas of cancer, immune disease, and infectious disease, among others. All projects aim for U.S., EU, Taiwan, and China approvals, he says. Also to be integrated into the Park are a TFDA drug validation unit and the newly launched Supra Integration and Incubation Center, which aims to reduce red tape in providing funding to qualified R&D companies. Once the drugs have completed preclinical studies in the Park, they will be turned over to the Hsinchu Biomedical Science Park Hospital and other organizations for clinical trials, thus making the R&D truly translational.  

Roads into China and ASEAN

The trend of increasing cross-Strait regulatory harmonization for pharmaceuticals may offer some significant benefits for Taiwan, says Heather Lin, Chief Operating Officer of the International Research-Based Pharmaceutical Manufacturers Association (IRPMA), an association of 40 international pharmaceutical companies active on the Taiwan market. Because Taiwan has an excellent reputation for well-run clinical trials, she predicts that more multinational drug companies will choose Taiwan as location for their clinical trials if all data from such trials data is recognized by China in future. Clinical investment into Taiwan would then increase greatly, she notes.

Another aspect of Taiwan’s potential positioning as a gateway to China is Taiwan’s huge database on diseases, such as hepatitis B, liver cirrhosis, liver cancer, diabetes, and lung cancer, that are particularly common in ethnic Chinese populations, Lin says. This resource could be a major advantage for Taiwan’s biopharmaceutical industry in approaching the massive Chinese market.

Carol Cheng, Chief Operating Officer of TRPMA, notes that the development of new drugs for diseases prevalent among ethnic Chinese has been a mutual and prominent target for the health authorities on both sides of the Taiwan Strait. She says that TRPMA members will seek to leverage the advantages of Taiwan’s experienced researchers, high-quality healthcare, and advanced regulatory management to speed up their new drug development projects. In addition, Cheng expresses hope that the signing of the CSCA-MPHA will prompt the TFDA and CFDA to follow the guidelines of the International Conference on Harmonization (ICH) – a project that aims to develop consensus among the pharmaceutical regulatory authorities and experts of Europe, Japan and the United States on regulations related to NDA and Investigational New Drugs (IND), and to facilitate joint inspections of clinical trial centers and manufacturing sites.

Cheng emphasizes, however, that even though TaiGen’s simultaneous NDA for nemonoxacin in Taiwan and China was indeed a milestone on the road toward swift license approval in both markets, Taiwan’s biopharmaceutical companies will need more than the backing of government-to-government agreements to do well in China. Given the enormity and importance of the China market, she notes, companies will need to develop individual strategies for success. TRPMA tries to assist by serving as a platform for mutual support among Taiwanese drug developers, as well as to provide a collective voice for communicating with government, Cheng says.

In the early 2000s, some Taiwanese biopharma companies had already set up offices in China, and some teamed up with Chinese firms to conduct research projects or enter into distribution agreements for the Chinese market, where the multi-layered sales channels are quite complicated. But Cheng says the cooperation has not extended to Chinese investment in Taiwanese companies, as there is no lack of funding in Taiwan for good projects, with abundant capital available either from private investors or IPOs. She notes that the number of biopharmaceutical companies listed on the Taiwan Stock Exchange (TWSE) and the emerging-stock securities market, GreTai, increased from 40 in 2008 to around 70 in 2013, giving a solid boost to the capital-intensive R&D biopharma industry in Taiwan.

Aside from China, Taiwan’s biopharmaceutical R&D companies have been gaining footholds in some other important markets as well. Some firms have engaged in collaboration with their international peers to fund expensive late-stage clinical trials in the United States, Europe, and Japan, and thereby gain access to those markets. But recently the growing ASEAN market, with its half billion people and rapidly growing middle class, has attracts a great deal of interest. Taiwan is closely watching ASEAN members’ efforts to harmonize one another’s pharmaceutical regulations by 2015, but the island’s diplomatic isolation might make it somewhat difficult for Taiwan’s pharmaceutical companies to link in to that effort, industry observers say. On the other hand, Taiwan’s recent entry into PIC/S is a hopeful sign that entry barriers to made-in-Taiwan pharmaceutical products may be less formidable than in the past.

Arguably the most important factor for Taiwan’s biopharmaceutical R&D companies may be that, after a decade or more devoted to developing new technology platforms and products, many of them are now arriving at a stage where their efforts are beginning to pay off. TRPMA’s Cheng predicts that by 2018 about five truly Taiwanese-developed new chemical entities (NCE) will have been brought to the global market, and TaiGen’s nemonoxacin next year is due to become the first Taiwanese-developed drug to be launched and reimbursed by the island’s National Health Insurance program.

In addition, a lot more Taiwanese-developed drugs are in the pipeline. DCB data shows that 93 new drugs from Taiwan are currently undergoing clinical trials, of which 28 are botanical drugs. IRPMA’s Lin notes that collaboration in marketing with the multinational pharmaceutical companies can contribute greatly to bringing such products successfully to the international market.

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