HanShu Bio: Building a Moat in CNS-Focused CRO Services Through Specialized Animal Models and Standardized Platforms

Scientists engaged in the development of nervous system drugs and pharmacological research are well aware that the mechanisms underlying neurological diseases are complex, making drug development fraught with challenges. To achieve a breakthrough in the success rate of innovative drug development in the central nervous system (CNS) field, it is imperative that more scientists devote themselves consecutively to this cause, continuously deepening their expertise at every stage.

Hanshu chose to begin by establishing CNS animal models. This September, Shanghai Hanshu Biomedical Co., Ltd., founded by Dr. Guo, officially relocated from Shanghai Waigaoqiao to Zhangjiang Science City. The animal facility and laboratories, which took one year to build, have now commenced operations. As a rare CRO company in China dedicated to providing R&D services for the central nervous system (CNS), the completion of its small-animal pharmacology and efficacy research base and in vitro biology facility marks a significant step forward for Hanshu in advancing integrated biological discovery for neurological drugs.

Across the biopharmaceutical industry, there are only a handful of CROs in China with a strategic presence in the CNS field.WuXi AppTec and ChemPartner were among the earliest companies in China to establish a presence in the CNS (Central Nervous System) sector, although this area is not currently their primary strategic focus. In contrast, CROs specializing in the CNS field have been visible internationally for much longer. For instance, QPS, an Austrian company founded in the 1990s, has nearly 30 years of history and currently generates annual revenue of over $40 million. Additionally, other players such as Neural Proof and Preclinical Models have also begun to expand their footprint in this space.

As a CRO company that has been in operation for just over a year, Shanghai Hanshu Biomedical Co., Ltd. (Hanshu) has set its sights far ahead: Amidst the future CXO industry landscape dominated by sector leaders and niche “little giants,” Hanshu aims to secure a firm foothold and become a well-recognized CRO in the CNS field. To achieve this, it must target unmet market needs to accelerate growth and establish competitive moats while the track remains relatively uncrowded.

CNS disorders represent an unmet and growing health need, with enormous market potential in China. According to statistics from Nhwa Pharmaceutical, the United States accounted for 49%, Europe for 26%, and Japan for 9% of total CNS drug consumption in 2021, while China currently accounts for only 3–5%. The Chinese CNS pharmaceutical market has been growing year by year, with a compound annual growth rate (CAGR) of 9.1% from 2015 to 2019, and is projected to reach RMB 250.9 billion in 2024.

Regarding the market demand for CNS drugs, industry insiders often joke:"Who hasn’t developed a neurological disorder yet? It’s simply because they aren’t old enough."

However, as the pathogenesis remains elusive, current clinical medications can only alleviate symptoms to a certain extent and cannot achieve a cure. In this context, many multinational corporations (MNCs) have made repeated attempts at drug development in this field, only to face repeated setbacks.Drug Development for CNS Diseases Faces Significant Challenges in Many Aspects.

Over the past decade, Dr. Guo has maintained that animal models and rational drug efficacy evaluation systems are key to improving clinical treatment success rates. Over the last 20 years, cancer animal models have evolved to include patient-derived tumor xenografts (PDTX) and other humanized tumor models, thereby advancing clinical oncology therapeutics and demonstrating significant application potential. However,It is highly challenging to develop the animal models required for CNS drug research.— Unclear targets, poorly understood biomarkers and pathogenic mechanisms, coupled with the absence of a standardized set of evaluation metrics, have significantly contributed to the low success rate of drug development.

“Meanwhile, there is a wide variety of neuropsychiatric disorders. Mental illnesses include depression, anxiety, and schizophrenia; neurodegenerative diseases include Alzheimer’s disease and Parkinson’s disease; and other conditions encompass peripheral pain and amyotrophic lateral sclerosis (ALS), among others. Correspondingly, there is also a vast array of animal models,” Dr. Guo told VCBeat New Medicine.

Diseases in the CNS field require more realistic animal models that mimic human disease phenotypes for drug validation. Meanwhile, different animal models necessitate distinct standard operating procedures (SOPs) to ensure reproducibility of experimental results, thereby requiring the establishment of a relatively comprehensive quality system. However, most CRO companies, driven by urgent short-term development goals, find it difficult to invest significant time and effort into this niche area with uncertain returns. There is a need for a company to fill this industry gap, which constitutes the original intention behind the establishment of Hanshu Biomedical.

Long before the company was officially established, the core team of Shanghai Hanshu Biomedical Co., Ltd. had already built an in vivo and in vitro pharmacological efficacy research and development platform for neuropsychiatric disorders, and engaged in in-depth collaborations with domestic pharmaceutical companies, providing them with multiple Investigational New Drug (IND) enabling services. To further expand its service scope, optimize its service model, and focus more on animal model development and the establishment of standardized systems, Shanghai Hanshu Biomedical Co., Ltd. was registered and established in Shanghai Waigaoqiao in March 2021.

Drawing on nearly a decade of scientific research accumulation and industry observations in CNS drug development, particularly regarding the discovery of new targets and novel mechanisms, Dr. Guo aims to establish a high-throughput R&D system at Shanghai Hanshu Biomedical Co., Ltd. to achieve high-standard industrialized operations.

In June 2021, Hanshu began preparing for its angel round of financing and successfully secured the first tranche of funding in less than two months.

Most startups that have just secured angel funding tend to allocate their capital toward equipment and staffing. Dr. Guo, however, made a decisive move to immediately establish a standardized animal facility—a significant step for a CRO aiming for rapid growth. This was not an easy decision to make.

Dr. Guo reasoned that although establishing an animal facility is time-consuming, labor-intensive, and costly, it is indispensable for building a high-throughput, standardized service system distinct from conventional laboratory operations. Furthermore, through prior business discussions, Dr. Guo observed that many pharmaceutical companies place significant emphasis on whether a CRO has its own animal facility; thus, such a facility can serve as a key leverage point in attracting partnerships. More importantly, in the field of CNS drug development, animal models are widely recognized as a critical bottleneck and challenge, presenting substantial long-term growth potential.

Having decided to build an animal facility, Shanghai Hanshu Biomedical Co., Ltd. faced another challenge: where to construct it and how much capital to invest?

Animal housing facilities can be established in areas near Shanghai Waigaoqiao, Lingang, and Songjiang, where rental costs are lower, and it may even be possible to secure rent-free premises. ButConsidering the density of enterprises and talent, the final decision was made to build the first animal facility in Zhangjiang Science City, where land is extremely valuable.Dr. Guo shared, “First, to attract talent. As a CRO company in the CNS field, we require relatively high-level professionals and hope to attract rigorously trained technical personnel. Second, Zhangjiang is a hub for pharmaceutical innovation, with many well-established pharmaceutical companies located here, allowing us direct access to our customer base.”

The first SPF-grade mouse and rat animal facility established in Zhangjiang cost nearly RMB 20 million, covers an area of over 1,500 square meters, and is equipped with specialized R&D laboratories and comprehensive instrumentation. It provides research services including target screening, pharmacokinetics, pharmacology and efficacy, CNS safety pharmacology, and neuro-mechanistic studies, as well as IND filing support.

Hanshu provides laboratory animal facility clients with experimental services including drug formulation, surgical procedures for animal studies, and comprehensive or partial outsourcing of animal experiments. In addition to offering efficacy evaluation services for neuropsychiatric disorders, Hanshu also provides animal models and efficacy evaluation services for conditions such as hypertension, irritable bowel syndrome, liver fibrosis, uterine contractions, preterm labor, hot flashes, and preeclampsia. Experimental animals are sourced from more than ten suppliers, including Shanghai SLAC Laboratory Animal Co., Ltd., Nanjing Biomedical Research Institute of Nanjing University (Jicui Yaokang), and Beijing Vital River Laboratory Animal Technology Co., Ltd.

The completion of the first animal facility enabled Hanshu to fully relocate from Waigaoqiao to Zhangjiang, marking the most critical step since the company’s inception and a significant milestone ushering in its next phase of development.

When scientists first enter the industry as entrepreneurs, they conduct a more profound analysis of both the sector and themselves; Dr. Guo is no exception. The transition from the laboratory to Zhangjiang Science City marked this first-time entrepreneur’s “period of struggle.”

Starting a business is like sailing a ship, with hidden reefs everywhere along the way. Focusing only on what lies ahead can easily lead to losing one’s direction. Where should Hanshu’s ship head, and how should it navigate? These became the questions Dr. Guo pondered every night before going to sleep.

From economic cycles to industry status, and then to the company’s overall strategy, departmental regulations, and individual work practices—every link requires exploration, continuous research, and summarization for the founding team of Shanghai Hanshu Biomedical Co., Ltd. After more than a year of entrepreneurship, Dr. Guo has been engaging in deeper reflection, particularly developing a greater sense of “reverence” and “crisis awareness.”

“A sense of awe enables Dr. Guo to better observe the qualities possessed by entrepreneurs around him, while a sense of crisis allows him to keenly perceive the dynamic shifts within the industry. ‘CROs, in particular, must maintain a strong sense of crisis. Without technological breakthroughs or industry leadership, how can we secure our long-term viability? With three to four thousand CRO companies in China, how can we, as latecomers, quickly identify our advantages and build a robust moat?’”

Domestic small and medium-sized CXO companies are closely monitoring the movements of large CXO firms, fearing that shifts in the international landscape may prompt these giants to suddenly pivot back and compete for the domestic market. However, the key issue for each small and medium-sized CXO company should be how to secure a first-mover advantage before the large CXOs establish their presence.

Hanshu is one of the faster-moving CRO companies. At the end of September 2022, its animal facility officially began operations. Within three months, it had generated RMB 2 million in revenue. According to reports, nearly 10 new projects were signed this year, with an additional 5–8 projects currently under negotiation. Pharmaceutical companies such as Hansoh Pharma, Sailuoruo, Tasly, and Tianze Yuntai are among its clients.

Over the next two years, Shanghai Hanshu Biomedical Co., Ltd. will accelerate project services by leveraging its current mouse and rat platforms, while simultaneously expanding into new technology platforms to strengthen the application of cutting-edge approaches in peptide, antibody, gene therapy, and small nucleic acid drug R&D. “Based on the current landscape of funding and clinical development, gene therapy and small nucleic acid drugs are expected to experience a significant surge in the next 3–5 years.”

Meanwhile, Hanshu plans to lay out its neural stem cell and neural organoid business in 2024–2025, complete the establishment of a non-human primate pharmacology and efficacy platform, and achieve simultaneous growth in both revenue and gross profit from its services.