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7-Business: On the biotech sector in China



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TITLE:  Seeds are sown but few are harvested
SOURCE: Financial Times, UK, by Geoff Dyer
        http://www.firstnews.com.ua/en/science/science.html?id=113406
DATE:   19 Oct 2005

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Seeds are sown but few are harvested

Under the logic of globalisation, developing countries are supposed to
have an advantage in labour-intensive industries such as manufacturing,
leaving the developed world to dominate research-heavy sectors and other
capital-intensive industries.

Yet, having marvelled at China's rapid rise as a force in manufacturing,
some people in the west are beginning to fear that China will also
establish its own research-based industries that can commercialise home-
grown scientific innovations.

Biotechnology is one of the main battlegrounds. The Chinese government
has placed great emphasis on trying to develop its own biotechnology
sector, and public spending in research and development has trebled in
the last five years.

Chinese scientists have grabbed headlines with experiments in the area of
stem cells, including the creation of embryonic stem cells.

Meanwhile, a trickle of returnees - Chinese scientists who did
postgraduate research and worked in the private sector in the US - has
added professional lustre to the huge numbers of new scientists being
churned out every year by local universities.

Yet for all the hype and the volume of scientists, Chinese companies have
made little impact yet in the biotechnology field. China has great
strength and depth in engineering, but its life sciences faculties are
often not nearly as strong. Meanwhile, few universities have an
established procedure for spinning inventions into private companies.

The companies that are formed face a precarious time procuring financing.
The large banks favour state-owned companies in their lending, and the
venture capital sector is in its infancy, especially for research into
new medicines - which can often take a decade before producing commercial
re-sults. Large US venture capital groups have taken a strong interest in
Chinese information technology companies - hoping to list them on Nasdaq
at a later date - but few biotechnology companies have attracted such suitors.

The small group of companies that are making a name for themselves in
biotechnology have stuck to niche areas where they have some form of
comparative advantage or expertise.

One such company is Capital Bio, based in a luxurious campus on the
outskirts of Beijing, which is developing new biochips - tools which
combine electronics and biotechnology to monitor the progress in medical
experiments.

The company was founded by Cheng Jing, who had become an expert in the
field during a 12-year stay in the US, and received Dollars 50m from the
State Council. The company has recently signed an agreement with
Affymetrix, the US group which is one of the pioneers in the biochip field.

The area plays to China's strengths. It is a new field where a few
scientists with established expertise can make a swift contribution,
without huge outlays of capital. It is also an area that combines medical
science with China's more deeply entrenched skills in electrical engineering.

"It is a natural process for any developing country to go for areas that
do not require a lot of basic research, but rather applications of
existing discoveries," says Mr Cheng, Capital Bio's chief executive.

Another biotechnology start-up that is making a name for itself is Wuxi
Pharmatech, a Shanghai-based group that provides chemistry services to
drugs companies.

The drug research process is largely a hi-tech exercise that requires
both expensive machinery and scientists with decades of experience.

However, there are some areas - especially the screening of new chemical
compounds and identifying new biological targets for drugs - that might
be described as the heavy-lifting of the research process. Wuxi has a
deal with Merck of the US to provide a broad-range of chemistry-related
services.

"We now have 400 chemists, and 500 by the year-end, which is about the
same as a large pharmaceuticals company," says Hai Mi, the company's
director of strategic planning.

There is one area of biotech where China is competing at the top level,
and that is in the field of genetically modified crops. The numbers may
not be huge - China spent about Dollars 121m on GM crop research last
year - but China is already one of the pioneers in the field.

Its main contribution so far has been the development of a form of GM
cotton that gives the seeds the protein from a soil organism that
protects the plants from some diseases. (The principal GM cotton seed
produced by Monsanto, the US multinational, is based on the same gene.)

Invented in the 1990s, the seed is now used by 65 per cent of the Chinese
cotton crop, and according to government scientists, has contributed to
an 80 per cent reduction in pesticide use. "We have shown that it is not
just western countries that can innovate in this area," says Jikun Huang,
director of the Centre of Chinese Agricultural Policy in Beijing.

The government is now examining a more controversial invention - a form
of GM rice that Chinese scientists have developed. If the authorities
give the go-ahead - and a decision is expected within a year or so -
China would be the first country to approve a genetically modified
version of a main staple food.

Greenpeace, the environmental pressure group, says it has already found
evidence that rice from trial plantations has entered the food chain in
several parts of the country. It could be a fierce battle ahead.




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