How Southeast Asian Monkeys Are Alleviating China's New Drug Development Bottleneck

The investment boom in Southeast Asia quickly spread to the pharmaceutical sector.

During a phone call with Yang Chen, he was in Laos, which has a one-hour time difference from China. He spends most of his time there, providing critical outsourcing services to Chinese innovative pharmaceutical companies expanding across borders, including securing various licenses and qualifications, handling registration applications, and recruiting trial subjects. Recently, Yang Chen has taken on an additional responsibility: visiting a newly established cynomolgus monkey breeding facility to monitor the animals’ husbandry conditions. As the demand for preclinical CRO services from China’s new drug developers increasingly shifts toward Southeast Asia, Yang Chen and his team are among the first pioneers to seize this emerging opportunity.

In early 2022, data from Phase I clinical trials in Southeast Asia, conducted by Kangantu Medical founded by Yang Chen, helped a domestic innovative pharmaceutical company advance its pipeline into registrational clinical trials. The surge of new orders since the second half of last year further made him realize that the demand for preclinical CRO services transferred from China could no longer be underestimated. Consequently, Yang Chen began to expand Kangantu Medical’s preclinical CRO business segment, which included the scaled and standardized breeding of experimental cynomolgus monkeys. Now, as these locally introduced cynomolgus monkeys have entered their breeding phase, Yang Chen is confident in helping more domestic innovative pharmaceutical companies generate robust preclinical research data.

Laos maintains temperatures above 20°C year-round and is abundant in tropical fruits, making it an ideal location for breeding laboratory monkeys in Yang Chen’s view. In fact, Southeast Asia is the primary natural habitat for crab-eating macaques and rhesus macaques, with approximately 85%–90% of these monkey populations residing in the region. “Among all these natural habitats, Laos is one of only three countries that share a border with China, and the longstanding friendly relations between the Chinese and Lao peoples minimize macro-level risks,” Yang Chen told VCBeat. Before establishing the monkey breeding facility, he and his team had worked in various Southeast Asian countries for many years. Starting from cross-border healthcare services and later expanding into CRO (Contract Research Organization) services, they continuously broadened their business scope in response to evolving demands from domestic patients and pharmaceutical companies. This evolution led to the creation of multiple brands, including Kang’an Pharmaceutical and Kang’an International, and helped them grow into a leading team providing cross-border CRO services in Southeast Asia.

"Opportunity, as expected, always favors those who are prepared."

Since earning his Ph.D., Yang Chen has led the Kang’antu team in deeply cultivating Southeast Asia’s healthcare market for many years.

In recent years, Southeast Asia has been jokingly referred to as the next destination for top-tier global venture capital funds. Following 500 Startups and Sequoia Capital in establishing local teams in Southeast Asia in 2014 and 2017, respectively, Lightspeed Venture Partners, Prosus, GGV Capital, Accel, Qiming Venture Partners, and others have successively set up offices in the region, poised for action.

The potential to replicate the unicorn miracle in the Southeast Asian market has been validated by internet-based projects. This market has demonstrated remarkable momentum. In early April, GoTo Group, known as the “Indonesian Taobao,” listed on the capital market, with its market capitalization surpassing RMB 200 billion, setting a record at the time as the third-largest IPO in Asia and the fifth-largest globally. Previously, in December 2021, Grab, once renowned as the “Southeast Asian Didi,” successfully went public on Nasdaq through a SPAC merger, establishing the largest SPAC deal at that time, with its first-day market capitalization reaching USD 34.5 billion (equivalent to over RMB 200 billion). Meanwhile, Sea, dubbed the “Little Tencent of Southeast Asia,” has seen its stock price soar since its U.S. listing, with its market capitalization exceeding USD 40 billion. Once overlooked, this market is now brimming with glory and ambition.

Therefore, it comes as no surprise that venture capital firms with a keen sense for opportunity are accelerating their investments in Southeast Asia’s more specialized healthcare sectors. For instance, Etana, a leading biopharmaceutical company in Indonesia, completed a funding round in September 2021, with investors including Legend Capital and Innovent Biologics. Last month, STI Venture Capital increased its stake in toothsi, India’s leading direct-to-consumer (D2C) clear aligner brand, during its $40 million Series C financing round.

For medical innovators, this region—with a total population exceeding 600 million, still-low per capita income, and limited competitive saturation across sectors—represents a field of hope.

Yang Chen, who is on the front lines, has a profound awareness of these changes. “It is evident that Chinese pharmaceutical companies are rapidly increasing their attention to the Southeast Asian market.” A few months ago, KangAntu assisted a Chinese company engaged in the development of COVID-19 mRNA vaccines in completing its Phase I clinical trial in Laos. Currently, this company’s self-developed mRNA vaccine targeting the Delta variant has entered clinical trials in China as well as Phase III clinical trials in Laos, significantly accelerating its development progress. During this process, Yang Chen learned that due to the scarcity of eligible participants for COVID-19 vaccine clinical trials in China, several leading developers of COVID-19 mRNA vaccines are exploring the possibility of shifting their pipelines under development to Southeast Asia. “Especially after we successfully completed a Phase I clinical trial of a COVID-19 mRNA vaccine in Laos, new demands came flooding in,” Yang Chen told VCBeat.

Initially, the primary entities approaching Yang Chen for collaboration were domestic innovative pharmaceutical companies focused on COVID-19 vaccines, as Kangantu could rapidly and accurately identify suitable trial participants and efficiently organize them for clinical trials. Yang Chen recognized that the demand among domestic clients for overseas CRO services was expanding, but the pace of market growth exceeded his expectations. Although Southeast Asian countries have established robust new drug approval systems, significant market barriers persist across different regulatory ecosystems. Consequently, most pharmaceutical companies fail to achieve synergy between their domestic medical resources and their international expansion efforts, necessitating support from professional CRO teams with in-depth local expertise.

Within just a few months, leading domestic medical device companies and traditional pharmaceutical firms have reached out to KangAntu to explore outsourcing opportunities for product registration services in Southeast Asia. “Several collaboration intentions were quickly finalized, while others are engaging with other cross-border CRO teams, but the market has indeed heated up,” Yang Chen admitted. In the first half of 2022, KangAntu added several innovative drug clients.

Amid the prevailing tailwinds, Yang Chen is highly optimistic about the opportunities arising from the continuous evolution of Southeast Asia’s pharmaceutical ecosystem. “The Southeast Asian pharmaceutical market holds significant potential and is well-suited as an overseas expansion destination for innovative drug companies nearing commercialization or established pharmaceutical enterprises,” he stated. “Overseas product expansion requires complex supporting services. Kangantu positions itself as a strategic bridgehead for companies expanding into countries along the ‘Belt and Road’ routes. In this sector, industry giants are entering the fray, while we are also experiencing rapid growth.”

Yang Chen had long been mulling over the idea of establishing his own cynomolgus monkey breeding facility, and once launched, the project advanced rapidly. “This was primarily demand-driven,” he told VCBeat. Throughout the entire new drug development process, the demand for monkeys used in preclinical trials has surged. “The more complex the molecular structure of a drug, the greater the metabolic differences across species. Consequently, the likelihood of obtaining accurate data from animals distantly related to humans, such as mice and dogs, is lower.” In the development of an increasing number of novel biologics, accurate assessment of drug safety and efficacy has been moved earlier in the pipeline, leading to a rise in pilot study requirements using cynomolgus monkeys beyond those mandated for clinical trial applications. “We have recently received numerous requests for pilot studies from research institutions and pharmaceutical companies,” Yang noted. “These experiments can utilize conventional monkey colonies before they are fully qualified as standardized experimental animals, although basic breeding and testing conditions must still be met.”

At this stage, Kangantu has completed Phase I construction of its monkey breeding facility in Laos. The nearly 1,000 breeding monkeys introduced at costs significantly lower than those in China are already able to meet, to a certain extent, the preclinical experimental demands of domestic new drug development. “Currently, the operation of the breeding facility follows a two-pronged approach: on one hand, improving breeding conditions for standard laboratory monkeys and cultivating model animals for new drug clinical trial applications; on the other hand, providing monkeys for preclinical experiments in new drug development without compromising the integrity of the breeding population.”

Yang Chen stated that efforts will continue to be strengthened in the construction and operational investment of cynomolgus monkey breeding facilities, aiming to establish a large-scale supply center for laboratory monkeys. “From both the supply and demand perspectives, the supply of laboratory monkeys is expected to remain tight over the next 3–5 years.” A small-scale survey indicated that China’s shortfall of laboratory monkeys reached 2,750 animals in 2020, with the average annual growth rate projected to exceed 15% over the next five years. Without an increase in market supply, this annual deficit is likely to widen further. Meanwhile, prices for laboratory monkeys have risen significantly; according to the survey, procurement prices at certain institutions in Shanghai increased by 80.42% in 2020.

Meanwhile, Laos’s natural environment and infrastructure conditions allow the cost of breeding laboratory monkeys to remain low over the long term. “There are four main categories of costs associated with breeding laboratory monkeys,” explained Yang Chen. “First is the cost of breeding stock. As Laos is a natural habitat for crab-eating macaques, with abundant wild populations, the acquisition cost is very low, and breeding stock accounts for a significant portion of monkey farm operating expenses. Second are variable costs such as feed, utilities, and labor, where Laos also holds clear advantages.”

Specifically, as the natural habitat of cynomolgus monkeys, the mountains and wilderness of Laos are rich in natural food sources such as fruits and river crabs that are well-suited for these primates. These natural foods are more conducive to the growth and development of cynomolgus monkeys than artificially formulated feed. In terms of hydropower, the Mekong River, which flows through Laos, features a significant elevation drop along its border with Yunnan Province, China. The numerous hydropower stations distributed along the Mekong River can supply abundant, low-cost electricity, providing sufficient energy for temperature control, cleaning, and other operational needs at monkey breeding facilities. Furthermore, the relatively low labor costs have long been a dividend attracting capital relocation to Southeast Asian countries, enabling these facilities to hire cynomolgus monkey breeders at salaries far below domestic levels in China. “The barrier to entry for ordinary laboratory monkey breeding is not high; local Laotians are generally competent for such roles,” stated Yang Chen.

According to Yang Chen’s plan, the rapidly expanding non-human primate (NHP) breeding facility is a core component of Kang’antu’s cross-border CRO business. “In practice, we can either ship new drug samples abroad or transfer NHPs into China; both approaches are highly feasible.” In particular, the new drug development model involving outbound sample shipping has already been successfully validated in the Phase I clinical trials of COVID-19 mRNA vaccines conducted in Laos. Currently, existing specialized cold-chain logistics systems can provide the specific conditions required for transporting most biopharmaceutical samples. This means that the majority of studies involving NHPs can be relocated to Southeast Asia, while research teams in China analyze the transmitted data to draw key conclusions. This approach will significantly reduce costs while ensuring the quality of research data.

Yang Chen told VCBeat that, in addition to its experimental monkey facility, Kang’antu will gradually enhance its outsourced capabilities in production and sales to provide more comprehensive local support for Chinese pharmaceutical companies expanding into Southeast Asia. “Currently, our established Element Pharma has deployed production lines for tablet and capsule formulations. Moving forward, Kang’antu will expand into additional high-end formulation pipelines. In terms of sales outsourcing, we are progressively building a market team covering all ten ASEAN countries to offer outbound clients more diversified options,” Yang Chen stated.

Today, expanding into Southeast Asia has become an inevitable trend. However, effectively connecting the abundant resources within this vast market requires professional teams to invest substantial effort and accumulate deep expertise.