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TCM demand grows globally

By Liu Jie and Wang Hongyi | China Daily | Updated: 2013-02-20 07:48

Foreign drugmakers explore opportunities in traditional Chinese medicine as the remedies become popular in Western markets, report Liu Jie in Beijing and Wang Hongyi in Shanghai

Traditional Chinese medicine, or TCM, holds a unique place in Chinese healthcare, which is widely accepted by the 1.3 billion Chinese - old and young, urban and rural.

Nowadays, it's also growing in popularity in Western markets, where many want to pursue a more natural lifestyle.

International drugmakers are exploring ways, including joint ventures and co-development partnerships, to combine Western approaches to drug discovery with the material repertoire of TCM.

"No matter the model, we believe this bodes well for the industry in general, as it may help accelerate TCM standardization and modernization, as well as TCM acceptance in overseas markets," said Bruce Liu, partner and co-head of the Pharma & Healthcare practice at Roland Berger Strategy Consultants.

But that expansion effort faces challenges, he added.

In November, Nestle Health Science, a fully owned subsidiary of Nestle SA, and Chi-Med, the pharmaceutical and healthcare subsidiary of Hong Kong-based Hutchison Whampoa Ltd, agreed to form a 50-50 joint venture to research, develop, manufacture and market innovative nutritional and medicinal products derived from botanical plants.

The joint venture focuses on gastrointestinal health and may in future expand into metabolic diseases and brain health, according to Nestle.

The new partnership gives Nestle access to the Chinese side's TCM library of more than 50,000 extracts from 1,200-plus herbal plants. Moreover, the Chinese side can offer TCM expertise and a botanical-based research and development platform, including discovery research, non-clinical and pharmaceutical science functions, and an understanding of the botanical guidelines and regulations for the joint venture.

"This joint venture provides us with an opportunity to develop and commercialize truly innovative and scientifically validated botanical-based nutrition," said Luis Cantarell, president and CEO of Nestle Health Science.

Other western giants have also sought out TCM opportunities. In 2009, Switzerland-based Novartis AG announced TCM-related R&D in China and plans to spend 500 million yuan ($80 million) to merge and acquire Chinese TCM enterprises in the coming years.

UK-based pharmaceutical company GlaxoSmithKline PLC has also established a new research unit in China to carry out a molecular study in TCM.

GSK said innovative TCM is an important part of the company's R&D in China, with a strategy of integrating the existing TCM knowledge of diseases with modern drug discovery technology and clinical trial methodology.

At the end of 2011, Hutchison MediPharma Ltd- a subsidiary of Chi-Med - reached an agreement with international drugmaker AstraZeneca PLC for global licensing, co-development and commercialization of Volitinib, a TCM extract that halts the progress of breast and lung cancer. Under the terms of the agreement, development costs for Volitinib in China will be shared between the two sides, with Hutchison MediPharma continuing to lead the development in China. AstraZeneca will lead and pay for the development for the rest of the world.

In addition to creating partnerships, many international pharmaceutical companies have chosen to cooperate with Chinese academic research institutes, given the local partners' rich resources of talent, basic research and academic expertise.

France's largest drug maker, Sanofi-Aventis SA, has worked with the Hong Kong University of Science and Technology to develop modern versions of traditional Chinese medicines to treat chronic diseases such as diabetes and cancer.

GSK has also established partnerships with academic bodies and TCM experts in China. "We are developing novel therapeutic TCM mixtures as prescription medicines through innovative extraction methods and combinations, and we use clinical data/evidence to differentiate from existing TCM products on the market," said Zang Jingwu, senior vice-president and head of GSK R&D China.

Novartis set up a six-year research partnership with the Shanghai Institute of Materia Medica in 2009 to identify and test the pharmacological properties of some traditional medicines.

The Shanghai institute is a unit under the Chinese Academy of Sciences and currently the largest natural-herb research base in the nation. A series of multinationals, including Johnson & Johnson Pharmaceuticals and MSD - known as Merck & Co in the United States and Canada - have established R&D cooperation agreement with the institute.

Why TCM?

International consulting firm McKinsey & Co estimates that the size of China's TCM market reached $13 billion in 2011. It defined the market as herbal medicines formulated according to traditional Chinese philosophy.

According to a McKinsey survey, 52 percent of the respondents regard TCM as "more trustworthy" than Western treatments, and 82 percent believe TCM therapies have fewer side effects. Almost half of the respondents said they prefer TCM because of the "long-term effects on health and adjusting body holistically". The survey covered more than 1,000 Chinese people.

In the international market, thanks to the interest in pursuing a healthy and natural lifestyle, demands for herbal medicine are increasing.

The China Association of Traditional Chinese Medicine said the TCM industry output was worth $55 billion in 2011 and is expected to hit $88 billion by 2017, with an annual growth rate of 12 percent.

Recognizing the popularity of TCM, the Chinese government is actively promoting its use as part of recent healthcare reform. In addition to requiring all community health centers to establish TCM departments, the government mandates greater inclusion of and higher reimbursement rates for TCM in its new rural medical reform scheme. Furthermore, it has increased the number of TCM products on the national reimbursement drug list to 307 by the end of last year, accounting for one-third of the list.

"The Chinese government's support for TCM development also encourages foreign companies to join hands with Chinese counterparts," said Liu from Roland Berger. Over the last three years, the government has invested $2.7 billion in TCM clinical research centers and hospital infrastructure upgrades.

The TCM market in China is still highly fragmented. There are about 1,000 local companies, but only a handful - such as China Resources Sanjiu Medical and Pharmaceuticals Co Ltd, Tianjin Tasly Group and Beijing Tongrentang Group - boast annual revenue of more than $200 million. Foreign businesses can invest via merger or acquisition of small businesses.

Sino-foreign partnerships are expected to make market registration easier in both Chinese and foreign markets. Due to their local knowledge, Chinese companies can help foreign partners take full advantage of their resources to promote simultaneous commercialization and marketing of new products they jointly develop.

On another level, the newly kindled interest in TCM may also be attributed to the R&D bottlenecks confronted by most global pharmaceutical majors. "In recent years, the global pharmaceutical industry has seen fast-rising R&D costs yet declining R&D productivity and a longer time to market," Liu said.

On average, only about 20 new drugs get approval from US Food and Drug Administration annually, many of them for rare diseases. Few blockbuster drugs - medicines or medications can be loosely defined as any chemical substance intended for use in the medical diagnosis, cure treatment or prevention of disease - have been discovered in the past decade.

International pharmaceutical companies are desperate for breakthroughs to find new treatments for diseases heavily affecting people's lives and living quality, such as hyperlipemia and hypertension. They have found that TCM is effective in dealing with chronic diseases.

Some foreign firms have already tasted success with TCM.

Novartis, for example, worked closely with partners in China to use artemisinine, a TCM extract, to make malaria vaccine which is used around the world.

Although foreign companies attach great attention to TCM development, it's not an easy way to go.

Challenges ahead

According to Liu, a great challenge comes from TCM itself, as traditional TCMs are typically a mixture of diverse compounds, making it difficult to explain how they work and to standardize the dosage, among other things.

Assessing effectiveness and ensuring safety are also issues that have inhibited multinational companies' significant engagement with TCM and its global expansion so far.

"It's often hard to market TCM in many other countries because of the difficulties of explaining its working mechanisms and extracting its effective ingredients," said Zang from GSK, adding that his company will transform TCM from an experience-based practice to evidence-based medicines through innovation and differentiation.

TCM is a well-established system of medical practice developed through thousands of years of empirical testing and refinement of herbal mixtures, and relies on clinical experience. Western medicines are generally target-based small molecules or biologics, and their approvals for clinical use are based on clinical evidence of safety and effectiveness by staged clinical trials.

"What we will do is to transform the TCM's mechanism into clinical data and evidence through Western methods," said Zang.

Many measures have been used in developing TCM products, and one is to extract the effective ingredients from TCM and form a new compound drug.

"We don't do it like that, and we still abide by the concept of TCM," Zang said. "We will test the effective ingredients of TCM, and see how they work and form through innovative means."

So far, the State Food and Drug Administration requires TCM manufacturers to follow clinical procedures similar to those required of their Western counterparts. For instance, three phases of clinical trials are required before a new product's approval. However, thorough implementation is impossible, given the shortage of time and money, insiders say.

"Drug discovery takes time, money and more importantly, perseverance, TCM or not. We should not be shortsighted and expect quick results," Liu said.

Novartis has spent more than three years on TCM R&D in China. The international drugmaker said it is not yet ready to answer questions related to progress in its ambitious plan announced in 2009.

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