Recently, industry rumors suggested that pharmaceutical giant Pfizer would shut down its China R&D center. However, after verification by a reporter from PharmaCube with Pfizer, it was confirmed that this information was a misinterpretation. Nevertheless, Pfizer has indeed recently decided to halt the planned launch of its Asia Discovery Labs (ADL). “The original intent behind establishing ADL was to support our external innovation efforts in the Asia-Pacific region through local validation of biological targets.”
“Following a comprehensive review and consideration of the company’s product pipeline priorities, we have decided to continue with the current model—seeking research funding, biotechnology collaborations, and equity investments through Pfizer’s Global Emerging Science & Innovation team—to establish flexible partnerships in the Asia-Pacific region.” Pfizer stated in its official response to PharmaCube.
“Pfizer will continue to explore opportunities to augment its R&D resources and expertise in emerging sciences in China and across the Asia-Pacific region, while continuing to seek productive collaborations to advance emerging sciences, promising potential therapies, and breakthrough technologies.” In fact, Pfizer’s investment in R&D in China has increased in recent years. On June 28, 2016, Pfizer announced a $350 million investment to establish the Pfizer Global Biotechnology Center in Hangzhou, marking its third such center globally and its first in Asia. Reportedly, this represents Pfizer’s largest overseas investment outside the United States in recent years.
1. Pfizer China R&D Center Achieves Outstanding Performance
“In the past two years, multinational corporations (MNCs) have been shutting down their innovative R&D operations in China, shifting their focus solely to clinical development to bring drugs into the Chinese market, seemingly showing dwindling interest in investing in early-stage innovation in China,” an industry insider who requested anonymity told a reporter from PharmaCube. This may also be one of the reasons behind the rapid spread of rumors about “Pfizer closing its China R&D center.” In recent years, numerous multinational pharmaceutical companies have announced the closure of their R&D centers in China or laid off R&D staff in the country, each instance sparking significant attention and heated discussion within the industry.
In early September 2017, Eli Lilly closed its early-stage clinical research laboratory in Zhangjiang, Shanghai, and laid off 3,500 employees. In the second half of 2017, GSK announced the closure of its neuroscience drug R&D center in Zhangjiang, Shanghai, which had been in operation for ten years. In September 2018, Novo Nordisk also announced a restructuring of its global R&D centers to accelerate the expansion of its product pipeline for severe chronic diseases. To support this transformation, approximately 400 employees were laid off at its R&D centers in Denmark and China. Additionally, actions such as Roche’s reduction of its biopharmaceutical R&D team in China have made “closing China R&D centers” a focal point of intense industry attention. However, to date, Pfizer’s R&D center in China continues to operate smoothly.
According to a Pfizer spokesperson, China-based R&D teams have contributed to every new drug launched by Pfizer in the Chinese market, with their contributions being indispensable. It is understood that the Pfizer China R&D Center, established in 2005, is one of the earliest and largest R&D centers set up by multinational pharmaceutical companies in China. Its functions cover the entire process of clinical drug trials, pharmacovigilance, regulatory affairs for registration, and other areas.
Currently, Pfizer China R&D Center has approximately 1,500 research and development personnel distributed across Shanghai, Wuhan, and Beijing. "The goal of Pfizer China R&D Center is to help China accelerate its transition toward an innovation-driven economy, meet urgent healthcare needs, and create a global biopharmaceutical R&D environment for China as part of the global R&D system by promoting upgrades in local R&D capabilities, systems, technologies/intellectual property, and culture. We remain committed to pursuing innovation and continuing to bring breakthrough new medicines from Pfizer’s pipeline to patients in China," said Ms. Chen Chaohua, Head of R&D at Pfizer China R&D Center.
According to the PharmaCube database, Pfizer has had eight new drug approvals in China since 2016. Its recently released Q2 2019 financial report showed a 26% year-over-year revenue growth for its Biopharmaceuticals segment in China during the second quarter, with strong performance from products such as palbociclib, apixaban, and tofacitinib. The Biopharmaceuticals segment also reported a 9% year-over-year increase in Q3. On May 15 this year, Pfizer’s innovative targeted therapy for lung cancer, Vizimpro (dacomitinib tablets), was approved in China. This approval marked the first time that Pfizer achieved nearly simultaneous global submissions and regulatory approvals in China, aligning closely with timelines in the United States, Europe, and Japan.
2. Transformation of R&D Strategy in China
“In my view, China has already built up core capabilities for innovation; it would be ill-considered for large companies to abandon R&D in China at this juncture,” said an industry expert with many years of experience at multinational pharmaceutical companies.
There has been extensive discussion within the industry regarding why multinational pharmaceutical companies have successively shut down their R&D centers in China. Reasons cited include “exorbitant costs of new drug development and rising labor costs for R&D talent in China,” “premature entry into the Chinese market (due to immature timing),” and “overexpansion.” There are even speculations that these closures are part of a technological blockade against China’s pharmaceutical sector.
“A top-tier R&D center entering China first looks favorably upon China’s broad policy landscape (the conditions for its long-term sustainability) and the scientific research environment (the overall strength of domestic research institutes). Most importantly, it must clarify its own strategic objectives. In the past, due to the insufficient capabilities of domestic research institutes, many R&D centers operated like orphans, fighting isolated battles. Despite substantial investments, they achieved minimal results and ultimately had to cease operations,” a researcher from a multinational corporation told PharmaCube.
In the exploration of new drugs, he believes that the following points are relatively important for multinational companies: 1. Establishing a top-tier R&D team with core leaders; 2. Leveraging the company's decades of R&D achievements; 3. Collaborating closely with capable domestic research institutes for joint development and utilization.
Notably, as mentioned above, an increasing number of multinational pharmaceutical companies are shifting their R&D strategies in China by establishing innovation collaboration centers and “innovation incubators,” as well as strengthening partnerships with local innovative drug enterprises to deploy new drug development initiatives in the country.
For example, shortly after closing its diabetes drug R&D center in Zhangjiang, Shanghai, Eli Lilly announced in March 2018 the establishment of an Innovation Collaboration Center in Shanghai, with a greater focus on advancing early-stage new drug development through local collaborations. Julio Gay-Ger, President and General Manager of Eli Lilly China, clearly stated, “The establishment of the Eli Lilly China Innovation Collaboration Center will further strengthen Eli Lilly’s partnerships with outstanding Chinese enterprises and institutions, catalyze innovation, and achieve win-win cooperation.”
“Eli Lilly is pleased to collaborate with high-quality, innovative, original research enterprises in China to create a win-win environment.” Novo Nordisk, a giant in the field of diabetes, is also shifting its R&D strategy by establishing the INNOVO platform. It aims to leverage this open innovation platform to seek new treatment solutions through external collaborations, thereby positioning its China R&D center as an innovation accelerator. On June 27, 2019, Johnson & Johnson’s JLABS laboratory in Shanghai began operations.
It is reported that this is the largest JLABS facility by area globally outside of North America and the first in the Asia-Pacific region. With a total gross floor area of over 4,400 square meters, it can accommodate approximately 50 innovative entities in the life sciences and healthcare sectors. This development is seen as local technological innovation driving multinational giants to accelerate their deployment of “incubators.”
Collaborations between multinational giants and Chinese local enterprises are also increasing, such as AstraZeneca partnering with Genetron Health to jointly build an ecosystem for lung cancer diagnosis and treatment, and signing a strategic agreement on precision medicine with Zhenhe Technology; on August 13, 2019, Pfizer Inc. signed a strategic R&D collaboration with the AI-driven drug development company XtalPi.
In addition, Sanofi and Zai Lab, Eli Lilly and Innovent Biologics, as well as Roche and Hua Medicine, have all entered into relevant collaborative development agreements.
The advancement of China’s pharmaceutical reform is steadily dismantling the established order, presenting significant challenges to both domestic and foreign pharmaceutical companies while also offering unprecedented opportunities for development. A series of effective reforms—including the deepening of the drug approval and review system, the acceleration of new drug approvals, and negotiations for inclusion in the National Reimbursement Drug List—are reshaping the operating environment for multinational pharmaceutical companies in China. How to promptly adjust strategies, adapt to the new landscape, and seize emerging opportunities has become a new imperative for these multinational giants.