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San Diego biotech firms pursue Chinese connections

12 July 2010 No Comment

By Helen Kaiao Chang

See original story on SDNN

Saturday, June 13, 2009

Peter Ulrich believes China can help San Diego firms survive the downturn. Ulrich is the founder and CEO of Targegen, a San Diego-based biotech firm that develops inhibitors for cancer and other diseases.

Ulrich tells this story to illustrate his point.

In 2002, Targegen was working on a compound that would be the first of its kind to enter U.S. clinical trials.

The company had a U.S. vendor, which was supplying a particular material. But when Targegen got the material, it found something was wrong. If they accepted, it would set back their work by six months.

The vendor admitted to making a mistake. But because of other orders, it would not be able to correct the problem and supply the right material for another three months.

A Targegen vice president contacted an old colleague he knew from working at a large U.S. pharmaceuticals company. That colleague was a Chinese native who received a PhD in the U.S., but moved back to Shanghai to start his own company.

The Chinese company, Wuxi Shanghai, took Targegen’s problem and supplied the right material in three weeks.

“That was a moment of catharsis for me,” said Ulrich. “Over there, to be a customer for those firms means something. If you spend the time to develop the trust and the relationships, I think you’ll find the tremendous service and quality orientation that sadly, at least in our dealings, is not found in those type of vendors in North America.”

Ulrich is just one of many in San Diego’s biotech companies that see China as an important extension of their business. Many biotech companies are looking to China as a source for research, clinical trials, investment dollars and a new consumer market.

Industry professionals said San Diego is uniquely poised to tap this resource. Some 275 professionals are gathering in San Diego June 14 to 16 for a conference organized by Biocom, called “CalAsia — Bridging the Pacific.” Participants span China, India, Singapore, Australia and the U.S.

“We have a tremendous international population in San Diego — people with strong ties to China and Asia Pacific,” said Jack Florio, senior vice president at investment bank Brinson Patrick, who has worked with biotech companies partnering with Chinese companies.

“We need to be relying on these contacts,” said Florio. “They understand the culture, the science, the language. These very strong ties are (what companies need to) develop relationships with China.”

Virtual partner

Chinese companies offer San Diego companies virtual partners for getting work done.

“More and more companies are increasing their head count to outsourcing partners,” said Zhu Shen (pronounced Joo Shen), founder of BioForesight, a San Diego-based matchmaker for U.S. and Chinese life science companies.

The relationship is also quickly evolving beyond cheap, subcontracting jobs, as it was a few years ago, said Shen. “It’s more like a partnership, where (Chinese contractors) are in alliance with biotech clients, where they take on more and more challenging work and deliver more higher-end services.”


Chinese companies offer a San Diego companies business flexibility for surviving the economic downturn, said Ulrich. To cut costs, Targegen this year shrunk its San Diego staff from 59 to 13 full-time employees, while continuing to engage its Chinese partner.

“The trick in biotech is to survive the period of time when you’re not making any money in product sales,” said Ulrich. “Being able to utilize outsourcing to China enables more companies to survive the neo-natal process and grow up to be big companies. Collectively, they will employ a whole lot more people by surviving than not surviving.”

China itself offers a huge new market for pharmaceutical companies. “It’s a significantly growing market, and it continues to gain in affluence,” said Florio. “As the middle class continues to grow, they will be looking for western medicines and broader range of therapies.”

Investment capital

Chinese companies are also becoming new sources of investment capital. They have started to buy biotech companies in other states. In San Diego, “they are looking at deals here quite often,” said Shen.

Shen worked with two San Diego companies last year to seek Chinese partners. Under the agreements, the Chinese partners would pay licensing fees upfront and development milestones later. In return, these companies would have the right to continue pre-clinical trials or secure regulatory approval for eventual drug sale in China.

The two deals eventually fell through, but opportunities are growing, said Shen.

“Five years ago, (U.S. companies) wouldn’t look at China because they didn’t have the financial wherewithal to pay for the upfront payment,” said Shen. “But now you have at least a handful of (Chinese) companies that would have the financial capabilities to do a bridge deal with U.S. entities.”

“In the future, I think we will see more and more of these types of deals,” she said.


The greatest challenges to Sino-U.S. business links are language, culture, and regulatory barriers, said experts.

“The single biggest obstacle is the written language, especially for regulatory documents,” said Florio. This hinders administrative work, as well as translating data from one culture to another, he said.

Legal and contractual agreements are also a barrier, said Targegen’s Ulrich. These differences affect the clinical approval process, how prices are established and how payments are made in China. “It’s a different ball game,” he said.

San Diego’s Chinese population

One key to overcoming these challenges is tapping San Diego’s large Chinese population, said experts.

San Diego is already home to many “sea turtles” — Chinese expatriates who move back and forth between the two countries, said Shen. Her husband is such a “sea turtle,” spending two months at a time in the U.S. and China for work, while Shen and their son live in Carmel Valley.

“The greatest opportunity is the human resource we have here,” said Florio. “We have tremendous science going on in the university and industry, and much of science is being done by people with Asian American backgrounds.”

For collaboration to truly work, cultural integration needs to happen at all levels — from top managers and scientists down to administrators, said Florio. In China, “it’s a different business culture, in a different language. We have the strength here to help us build those ties.”

Follow Helen on Twitter @HelenChang.

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