China is overhauling its drug registration system as a part of efforts to accelerate commercial production of new medications, especially those developed by start-up firms.
It's also seeking to broaden a trial program that allows start-up companies without their own manufacturing facilities to become the holders of new drug licenses and assume responsibility for their quality.
Before the trial program came into effect, start-up pharmaceutical companies had to build their own manufacturing capability in order to quality for a drug license.
Shanghai-based Hua Medicine was one of the first companies to apply for such a license. A start-up founded in 2010, it has farmed drug manufacturing out to STA Pharmaceutical, a subsidiary of WuXi AppTec.
Chen Li, co-founder and chief executive of Hua Medicine, told an industry forum in Shanghai last month that commercial production facilities usually cost up to 200 million yuan (US million) to build, and few start-up companies or their financiers are willing to put up that much money if success in clinical trials isn't assured.
"Building manufacturing facilities from scratch after successful clinical trials would take two or three more years, so outsourcing the manufacturing shortens the new drug launch time," he added.
By the end of May this year, 381 applicants had filed under the trial program, most of them in Shanghai and the provinces of Jiangsu, Guangdong and Sichuan.
In Shanghai, nine of the 24 new drugs under the pilot program target serious diseases, such as cancer and diabetes and have not been marketed yet overseas.
A government report to the annual session of the National People's Congress earlier this year reiterated that China will promote research and transformation in the bio-pharma industry. Shanghai is taking the lead in transforming new drug discoveries into commercial medicine.
Research and development for pharmaceutical companies across the world have always been a costly and sometimes risky undertaking. Intricate facilities and strict quality control are required. And research doesn't always lead to government approval or production lines.
Yang Sheng, director of drug registration at the China Food and Drug Administration, estimates that at least 1 billion yuan of investment in drug manufacturing facilities has been saved since the introduction of the pilot program.
"The trial puts new pressure on regulators because oversight of drug developers and producers is no longer restricted to a single region,"Yang said.
In November 2015, the State Council, China's cabinet, released detailed plans for the pilot project, called the Marketing Authorization Holder program. It was approved for 10 provinces and municipalities and will run through November 2018.
"The program can shorten the time required for innovative medicines to become commercialized without their developers having to build their own manufacturing facilities," said Chen Yaoshui, vice director of the Shanghai Food and Drug Administration.
He said the policy fits well with a city of limited land resources to build new pharma factories. Shanghai also set up a fast track assessment process to evaluate capabilities of outsourced manufacturers.
Shanghai is seeking to become the first city in China to carry out a trial program allowing medical device manufacturers registered in the city's Free Trade Zone to outsource their production to qualified local manufacturers within the city. Chen said his agency is working with national authorities to advance the idea.
Biopharmaceuticals is a key emerging industry in Shanghai, which wants to become a center for advanced science and technology.
The Zhangjiang High-Tech Park Administration Committee has created a 50 million yuan "risk relief fund" to give developmental pharma companies a cushion of liability protection. Eligible companies that receive commissions from clients to produce drugs on their behalf would also benefit from the probable expansion of the pilot program, market watchers pointed out.
In the long run, contract-manufacturing organizations would benefit from the new system, PingAn Securities analyst Ye Yin wrote in a research report.
Such organizations, on average, have annual revenue size of about 2 billion yuan, and PingAn Securities estimated that in five years time, the domestic CMO market would grow twice as fast as the global average pace and reach 60 billion yuan
Globally, that market is expected to reach US billion in the same time period.
Chen Minzheng, chief executive officer of STA Pharmaceutical, said his company does contract work for some 40 projects that have already entered Phase 3 clinical trials or commercial production.
"Innovative drug companies are like incubators, and I hope the pilot program could become an important final boost to new drug launches," he said.
Overseas companies are also riding the trend.
German pharmaceutical giant Boehringer Ingelheim earlier this year unveiled the first phase of its 70 million euro ( million) biopharmaceutical manufacturing site in the Zhangjiang High-Tech Park, the first of its kind set up by a multinational pharma company in China.
Luo Jiali, general manager of Boehringer Ingelheim Biopharmaceuticals (China), said the new facility aims to bring international standards to biopharmaceutical production in China and to support multinational companies seeking better access to the Chinese market.