Asia Market Pivotal for US Biotech Outsourcing

First it was manufacturing, then IT. In 2006 — despite the recent stem-cell controversy in South Korea — the biotech industry is likely to continue to outsource research and development, as well as other activities, to science parks and contract firms in Asia.

In brief, groundbreaking stem-cell and therapeutic-cloning studies conducted by South Korea’s Dr. Hwang Woo Suk were discredited on reports that he used four times more the number of eggs than claimed, and that an assistant donated her eggs to the research.

The ongoing brouhaha highlights the pitfalls of conducting biotech research in the Asian region, where the regulatory and oversight environment can differ quite dramatically from that of the United States.

Cost Savings Override Concerns

Pharma and biotech companies are increasingly moving their R&D facilities overseas, according to an A.T. Kearney survey conducted last year, despite worries over loss of control and third-party relationship management.

On the plus side, the survey found reduced costs for specialists and facilities that equal those found in the United States and Europe. These factors make a persuasive argument for outsourcing. General and administrative costs for the pharma and biotech sector comprise some 33 percent of total revenue — double that of other industries — according to the study.

Many Asian nations have made significant investments in science parks. Australia, China, Hong Kong, Singapore, Japan and Taiwan are all recognized as having topnotch facilities. Foreign direct investment agencies, meanwhile, are happy to sweeten the pot by offering tax breaks.

It was a combination of circumstances that led San Francisco-based Bridge Pharmaceuticals to locate its preclinical drug development activities at a new facility at Zhongguancun Life Science Park in Beijing.

Site-Selection Issues

The park offered the company incentives to move its contract research and development activities, spokesperson Paul Joyce told CRM Buyer, but there were other site-selection issues that were equally important.

“The location is great — outside of Beijing but far enough away that you can get to it from the airport without having to drive through [the city],” Joyce pointed out. The facility was designed to Bridge Pharamceuticals’ specifications, he continued, which means the company can manufacture FDA-compliant products there.

When the firm began looking for a new site, “our CEO did an in-depth survey, visiting several countries to see where were the best places to do this work,” said Joyce. “Singapore and Hong Kong met our criteria in that respect, but their pricing was close to U.S. pricing.”

The choice narrowed to India, Taiwan and China. “It quickly became obvious we would settle on China, so we began looking there.”

The new 7,800 square meter facility is the first and only U.S.-level GLP (Good Laboratory Practices) and AAALAC (Association for Assessment and Accreditation of Laboratory Animal Care) designed facility in China, the company said.