Tag: Regulation

Series A-5: What problems are these companies facing in hiring talents, conducting trials or launching products?

 

  • Talents

The lack of talents has been a well-recognized problem for China’s biotech industry[1]. China lacks seasoned experts with at least 10 years’ industry experience, say insiders. Companies are especially keen on experience in translational medicine, early-stage clinical trials and antibody manufacturing. Start-up biotech firms need experienced managers at every level, from clinical trials to drug manufacturing processes, to help build their companies[2].

 

This path from multinational drug company to biotech is clearly seen in the bios of many of the more ambitious start-up founders. Returnees with a few years under their belt in China and an ability to effectively navigate the system are far more valuable to employers than new arrivals. It becomes fairly common that multinational biopharma firms are finding themselves battling Chinese biotechnology startups to attract talent38,[3]. Those startups flush with cash from venture-capital financing are willing to pay top dollar (and upsides with options).

 

  • Trials

In terms of conducting trials, a historical lack of clinical research infrastructure in China has led to problems adhering to Good Clinical Practice, the international gold standard for maintaining ethical and quality standards in clinical trials. As an example, nearly all clinical research sites in China are hospitals, as there are no private practices. Because of that, clinical trial participants are treated exactly the same way as regular patients. That’s a problem because study staff — who are regular hospital employees — don’t have experience complying with Good Clinical Practice, putting the trial’s integrity, not to mention patient protection, at risk[4],[5].

 

Meanwhile, the rapid growth of Wuxi AppTex (and its affiliated Wuxi Biologics) has made itself one of the largest CRO/CMO players in the world[6], helping to facilitate drug discovery/development/manufacturing globally.

 

  • Launches

 

As most Chinese biotech startups are still in the r&d stage, only a few were approved recently. The most relevant example here might be the PD-1/PD-L1 space.

 

CFDA has long been seen as “slow” in terms of new drug approvals. A 2016 discussion quoted that usually a new drug needs 5-10 years for approval[7].

 

However, for the recent domestic PD-1 drugs for cancer, the approval speed was amazingly fast. Junshi won the first made-in-China PD-1 drug approval by NMPA (formerly CFDA) in December 2018[8]. Ten days later, the second PD-1 drug by Innovent was approved[9]. Each took 284 and 255 days respectively[10].

 

Two foreign PD-1 drugs, Merck’s Keytruda and Bristol-Myers Squibb’s Opdivo, were approved earlier in 2018. During 18Q3, Keytrude and Opdivo recorded ¥150 and ¥190 million in sales respectively[11].

 

Junshi started its sales in February 2019 and recorded nearly ¥80 million in the first quarter[12]. Innovent’s PD-1 launched its sales in March 2019 and finished the first quarter with $9.9 million in revenue, both of which are deemed as successful in media reports[13].

[1] https://www.kornferry.com/institute/download/download/id/17053/aid/219

[2] https://www.huamedicine.com/upload/down/5870180130135508.pdf

[3] https://www.ft.com/content/d3a2de0e-6fbb-11e8-92d3-6c13e5c92914

[4] https://www.statnews.com/2018/08/03/china-clinical-trials-infrastructure-transparency/

[5] http://www.appliedclinicaltrialsonline.com/running-clinical-research-china

[6] https://explorebiotech.com/top-cros-usa-contract-research-organization/

[7] http://journal.healthpolicy.cn/html/20160304.htm

[8] https://endpts.com/junshi-wins-the-race-for-first-made-in-china-pd-1-approval-as-execs-reap-394m-ipo-harvest/

[9] https://endpts.com/china-greenlights-second-homegrown-pd-1-in-10-days-as-innovent-celebrates-its-first-drug-ok-with-eli-lilly/

[10] https://www.bjcancer.org/Html/News/Articles/9321.html

[11] https://www.yicai.com/news/100135300.html

[12] https://xueqiu.com/8965749698/125984469

[13] https://finance.sina.com.cn/roll/2019-05-06/doc-ihvhiews0153982.shtml

Series A-3: What is the IP regime in China and how does it affect innovation?

According to a 2017 research “Evaluation of China’s intellectual property regime for innovation: Summary Report”[1]:

1) China’s IP laws and regulations have improved significantly over the years, and currently are generally in line with international standards.

2) Despite the surge in the quantity of patents in China in recent years, patent quality has not risen proportionately. Proliferation of low-quality patents can restrain China’s ability to

transition towards an innovation-based economy.

3) Based upon our quantitative and qualitative research, we find that, generally speaking, the courts in China handling IP disputes are more efficient and effective today than in the past. Despite these positive developments in IP enforcement in China, the effectiveness of judicial IP enforcement remains undermined by the low damages traditionally awarded in IP cases

 

In terms of IP regime for the pharmaceutical industry in China, several improvements have been made recently:

  • Patent Term Extension

Generally, the patent term in China is 20 years, similar to that in the US. But China didn’t provide other protections such as Patent Term Extension for drugs.

For drugs, which require years of premarket development and marketing approval before they can be commercialized, additional protections are usually available. In the US, a pharmaceutical patent may be extended by up to 5 years to compensate for any clinical trials and FDA regulatory time. However, the amount of time that a manufacturer has both patent and regulatory exclusivity cannot exceed 14 years. A study for 170 top-selling drugs that had a generic approved from 2000 to 2012 shows that nearly half (49%) of those drugs received a patent term extension, with a median extension of 2.75 years resulting in a total exclusivity period of 13.75 years[2],[3].

The State Council in China announced its intention to extend patent protection (and other improvements) in October 2017 《关于深化审评审批制度改革鼓励药品医疗器械创新的意见》.[4]

On April 12 2018, the State Council meeting said that 5-year patent term extension will be available for innovative drugs which apply for commercialization on domestic and oversea markets simultaneously[5].

In December 2018, the patent term extension was part of the fourth amendment (draft) of China’s IP Law[6].

 

  • Data exclusivity

Also an important protection for drug innovation, data exclusivity is newly structured in April 2018, following the October 2017 opinion[7].

The protection (6 years) was in place before, but can be applied only in limited circumstances[8].

Innovative drugs that are approved to enter the domestic market will be entitled to enjoy a data protection period of six years, doubled to 12 years for innovative biological products for curative uses, which is comparable to that of the United States and exceeds the ten-year protection period in the European Union

The exclusivity protection may be reduced or revoked under any of the following circumstances[9].:

  1. when a drug application uses data from an international multi-center clinical trial in China and the drug application filed in China is later than those outside of China, the exclusivity period is one to five years, depending on the delay, and if the delay is more than six years, there is no data exclusivity;
  2. if the drug application uses data from clinical trials conducted outside of China without involving any Chinese patients, the data exclusivity period is 25% of the foregoing;
  3. if the drug application is supplemented with clinical trial data in China, the data exclusivity period is 50% of the foregoing; and
  4. if a company fails to launch an approved drug into the market within one year of obtaining regulatory approval, the data exclusivity will be revoked.

Generally speaking, the recent reforms are pretty much playing a “catch-up” with the drug protection/exclusivity in the US. They serve both as a way to protect multinational drug companies and a way to promote domestic innovation. China’s own pharmaceutical industry has long been seen as a market filled with generic drug makers. But it is expected that more innovative drugs/therapies will be developed in China.

 

Another thing worth noting – China joined ICH in 2017. The ICH Assembly approved the CFDA as a new Regulatory Member in June 2017[10],[11]. China’s signing of the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use now exposes Chinese companies to litigation if registered patents are not honored19. This will make Chinese drug makers operating higher standard stand out and raise the play field for all the companies.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3118079

[2] https://www.uspharmacist.com/article/patent-and-regulatory-exclusivities-the-two-keys-driving-generic-and-followon-market-availability

[3] https://www.raps.org/news-and-articles/news-articles/2019/2/study-patent-term-restoration-extends-drug-patent

[4] http://www.gov.cn/zhengce/2017-10/08/content_5230105.htm

[5] http://www.gov.cn/guowuyuan/gwycwhy/20180412c06/index.htm

[6] http://www.phirda.com/artilce_19014.html?cId=1

[7] https://www.yigoonet.com/article/22344782.html

[8] https://www.hankunlaw.com/downloadfile/newsAndInsights/a180eb45f6f6f4a7c3530da2cdd6b463.pdf

[9] http://www.zhonglun.com/Content/2019/04-16/1353562780.html

[10] https://www.fda.gov/media/108538/download

[11] http://www.xinhuanet.com/health/2017-06/19/c_1121171609.htm

No Foreign Property Ownership Allowed In Indonesia

Just went to Indonesia last week and realized that protective rules are more general than I previously had thought.

So the origin – Indonesian Agrarian Law, Law No. 5 of 1960, governs the property ownership in Indonesia in regards to lands.

Article 21.

(4) As long as person possesses a foreign nationality in addition to his Indonesian nationality he/she may not possess any land with ownership right…

Land ownership is called Hak Milik (Right of Ownership) (“HM”), the most complete land title available under Indonesian law. Only Indonesian citizens are allowed to hold HM

Also stated in this law, foreigners are permitted to purchase land or homes under the “Hak Pakai” or “Right to Use” title.

Article 41.

(1) The right of use is the right to use and/or to collect the product, from land directly controlled by the State, or land owned by other persons which gives the rights and obligations stipulated in the decision upon grating this right by the authorized official, or in the agreement to work the land, as far as it not conflict with the spirit and the provision of this law.

Article 42.

Those who may obtain the right of use are:
a. Indonesian citizen;
b. Foreigner residing in Indonesia;
c. Corporation which have been established according to Indonesian Law and having they seat in Indonesia;
d. Foreign corporations having a representation in Indonesia.

There is also the “right to lease”

Those who may become holders of the right to lease are:
a. Indonesian citizens;
b. Foreigner residing in Indonesia;
c. Corporation which has been established according to Indonesia law and having their seats in Indonesia;
d. Foreign corporation having a representative in Indonesia;

In practise, there are usually 3 ways:

1. Hak Pakai (right to use),

for a period up to 80 years (an initial period of 30 years and can be extended twice by 20 years and a further 30 years).

The Indonesian banks will NOT lend money to property owners that only have Hak Pakai status for their property.

2. PT PMA (Perseroan Terbatas Penanaman Modal Asing)

In short, PT PMA = foreign limited liability company

PMA is a legal entity through which a foreign person, foreign company, or foreign government body can obtain the property ownership in Indonesia (meaning generating revenue streams and profit). The establishment of a PT PMA is regulated by Law No. 40/2007 regarding Limited Liability Companies.

PMA can acquire “Hak Guna Bangunana” (“HGB” )  titles, which is the “right to build”

HGB can later easily be converted back to Hak Milik, for example, if the property is sold to an Indonesian or if the foreign investor decides to use the Nominee method.

HGB has a maximum initial period of 30 years and can be extended for a maximum period of 20 years.

HBG can be mortgaged for credit applications to financial institutions.

3. Nominee method

Essentially, it is purchasing a property with its title in the name of an Indonesian citizen. Not allowed.

 

Single-use Plastic Bags Ban And More

Following California’s ban in November 2016, New York State will begin a similar ban of single use plastic bags in March 2020, according to its FY2020 budget agreement.

While California also imposed a minimum & mandatory 10 cents fee if a recycled paper bag is provided to the customers, New York State makes it an optional 5-cent charge.

According to the New York State Department of Environmental Conservation, an estimated 23 billion plastic bags are used by residents across the state annually. New York City alone uses more than 10 billion single-use plastic bags a year. [National Geographic]

If 5 billion recycled paper bags are used in the new program with a 5-cent fee, New York City will generate an additional $250 million. [40 percent will be supporting local programs to buy reusable bags for low and fixed income consumers, and 60 percent will be supporting programs in the State’s Environmental Protection Fund]

In China, nation-wide restrictions on certain plastic bags started in 2008 and a mandatory fee is imposed. More recently, with services including food deliveries growing increasingly popular, the use of single-use plastic bags becomes harder to regulate.

On province level, Jilin Province is the first in China to ban sing-use plastic bags overall in 2015. Shoppers can bring their own reusable grocery bags or they can use biodegradable bags. In Hainan, the province will begin by banning non-biodegradable plastic bags and eating utensils by the end of 2020 and ban the material completely before 2025.

EU member states will have until 2021 to implement a ban on plastic straws, cutlery, cups, drink stirrers, and sticks for balloons. [Quartz]

A worldwide map

On the other hand, more efforts are needed than an executive/legislative order. Less expansive and environmental-friendly alternatives are needed.

A recent study from Denmark’s ministry of environment and food (agreeing with other studies) has found that no all seemingly “good” bags are ultimately good enough. A conventional cotton bag might need to be used more than 7,000 times before making a smaller cumulative environmental impact (water use, energy use, etc.) than a classic plastic bag does.

There is no easy answer. Problems not solved by a few regulatory decisions.

New Foreign Investment Law, Boao Forum for Asia 2019 And China Development Forum 2019

Following the closing (March 15) of National People’s Congress (NPC)’ 2019 annual meeting in Beijing, two important annual forums were held – China Development Forum 2019 (March and Boao Forum for Asia 2019

One of the major progress made during NPC’s annual meeting is the approval of the new foreign investment law #中华人民共和国外商投资法 (original link here)

The law was first introduced as a draft in 2015 and will come into effect on January 1, 2020.

The new foreign investment law will replace the “three foreign capital laws” – Law on Sino-Foreign Equity Joint Ventures #中外合资经营企业法, Law on Foreign-Capital Enterprises #外资企业法 and Law on Sino-Foreign Cooperative Joint Ventures #中外合作经营企业法, which were introduced in 1979, 1986 and 1988 respectively. They were updated along the way but structural/fundamental changes won’t be easy. (you can’t expect a law to be efficient and perfect after 30-40 years.. in a fast-changing environment)

China Development Forum is more focused on China. And of course, the newly-passed foreign investment law was discussed and introduced to all the CEOs/managements from foreign companies among others.

Again, on Boao Forum For Asia, Premier Li Keqiang reemphasized the plan to make detailed regulations to enforce the effective implementation of the foreign investment law.

Updates:

Recently adjusted (cut) government subsidies for electric EV in China

EV is probably one of the most mature new market. It is still something new for most families, but it seems to me that the global EV technology readiness is pretty much similar to that of iPhone in 2013-2015 (iPhone 5S – iPhone 6S).

The industry is more likely to make incremental improvements over the next decade. It won’t be easy in terms of technological progress; it will also need much more effort/thinking in terms of commercial strategies.

One of the latest sign is the most recent subsidy cut for “new energy vehicles”, dated March 26 in Beijing #财建〔2019〕138号.

The reduction in subsidies has been outlined as early as April 2015 #财建〔2015〕134号, in which 1. the subsidies for 2016 was announced and 2. projected that certain vehicles’ 2017-2018 subsidies shall be 20% lower & 3. 2019-2020 subsidies shall be 40% lower, among other things.

2017－2020年除燃料电池汽车外其他车型补助标准适当退坡，其中：2017－2018年补助标准在2016年基础上下降20%，2019－2020年补助标准在2016年基础上下降40%。

#财建〔2015〕134号

Here is the list of updates in the following years:

#财建〔2016〕958号 – Announced Dec 30, 2016; Effective Jan 1, 2017

#财建〔2018〕18号 – Announced Feb 12, 2018; Effective Feb 12, 2018; Grace Period till Jun 11, 2018, during which passengers would follow the previous program x 40%, trucks would follow the previous program x 70%, fuel cells would follow the previous program

#财建〔2019〕138号 – Announced Mar 26, 2019; Effective Mar 26, 2019; Grace Period till Jun 25, 2019, during which vehicles unqualified for 2019 standard shall follow previous program x 10%, qualified for 2019 standard shall follow previous program x 60%, policies for fuel cells and buses will announce separately

A summary of national government (not including regional) subsidy base for battery electric vehicles

More restrictions are added in 2018 and 2019, especially in terms of technical standards.

Smaller EV manufacturers with little R&D resources will need to restructure or pivot. Profitability will be an issue for many companies; but a needed test to form a mature market that can run itself and benefit most stakeholders.

FDA’s Updated Biosimilars Naming Policy

Two days after Mr. Gottlieb announced his departure from the FDA within a month on March 5, he released an updated draft guidance on biologics naming policy, adding another accomplishment in the last month of his tenure.

The question at the core is how to market “generic versions” of biologics, aka biosimilars. Unlike generic versions of traditional drugs, which could achieve a very confident level of equivalence to their original forms, the difference between biosimilars and their originals are “theoretically” high.

A biosimilar is a biological product that is highly similar to and has no clinically meaningful differences from an existing FDA-approved reference product.

– FDA

The naming policy comes into play to assert that difference.

For interchangeable biosimilars, the agency will designate a proper name that combines the core name and a distinguishing suffix that is devoid of meaning and composed of 4 lowercase letters.

– FDA

It is another confirmation that, biosimilars will not provide the similar competition as generics [to traditional drugs].

Biosimilars can be seen as lower-priced branded drugs. And it will really need real-world experiences to tell the interchangeability and other considerations.

A new biosimilar approval could be seen as providing a new solution, instead of providing a less expensive version of the current solution, to patients.

FDA Head Will Resign In A Month (Not Good..)

Scott Gottlieb, the commissioner of the Food and Drug Administration, will leave the office after a tenure of 23 month.

[Original Resignation Letter]

In a previous post, I listed some of the agency’s innovative approvals during the past two years under Mr. Gottlieb’s lead. The departure of the head of this crucial regulatory body will negatively impact the overall (biotech, pharma, medical devices, etc.) industry. (possible slower, less innovative approvals)

What seems odd here: 1. Mr. Gottlieb publicly has said in January on Twitter: “I want to be very clear — I’m not leaving. We’ve got a lot important policy we’ll advance this year.” 2. Mr. Gottlieb was working throughout the morning

Mr. Gottlieb March 5th Twitter

There should be an increasing intensified pressure from industries that are experiencing headwinds due to his policies and the end users/stakeholders that are complaining about some current situations (but not in total control of FDA I believe), such as opioid abuse, prevailing of e-cigarettes among teens, etc.

Some of topics he is intervening include: 1) brand drug companies withholding samples needed by generic drug makers 2) rebate traps and other anti-competitive abuses in the pharmaceutical supply chain 3) rising use of electronic cigarettes (e.g. JUUL Labs).

[Warning Letter from FDA to JUUl Labs]

Last December, Altria invested $12.8 billion into JUUL for a 35% ownership. JUUL projected revenue of $940 million in 2018, with gross margins of 70 percent, and its 2018 projected EBITDA approximately $250 million. [Crunchbase News]

(So assuming 100% growth -> 1.84 billion in revenue in 2019, it’s valued at ~20.0x revenue multiple)

Last year, FDA issued more than 1,300 warning letters and fines to convenience stores, gas stations and other stores over the summer for selling e-cigarettes to minors, Gottlieb says. The FDA says it’s the agency’s largest such action in history. [npr.org]

Mr. Gottlieb also planned to seek a ban on menthol cigarettes.

Mr. Gottlieb has received criticism for the approval of Dsuvia, a powerful opioid painkiller.

Update on March 6: Tobacco giants’ stocks rising…

  • Altria Group Inc (NYSE: MO)
Source: Google finance
  • British American Tobacco PLC (NYSE: BTI)
Source: Google finance

India E-commerce Chaos and Complexity

The New E-commerce Regulation in India – Be a participant or an organizer, not both

Starting from February 1, 2019, Amazon India and Flipkart by Walmart, among others, are not allowed to hold inventory and sell to customers.

The rules now bar any entity in which an e-commerce firm or its group companies have a stake from selling on their online platform. This is a problem for Amazon, which had been picking up stakes in offline Indian retailers to boost its market share. (Reuters)

The Regulation In Four Dimensions

eCommerce in India can be broadly categorized as:

  1. domestic and cross-border
  2. B2B and B2C
  3. marketplace and inventory based
  4. single brand and multi brand

B2B: 100 percent FDI is allowed in companies engaged in B2B eCommerce, e.g. Walmart and Alibaba can operate a cash & carry (B2B) business.

B2C Marketplace: 100 percent FDI is allowed in the online retail of multi-brand goods and services B2C under the marketplace model, e.g. Amazon, Flipkart, Snapdeal. Any eCommerce entity providing a marketplace cannot exercise ownership over the inventory and is not permitted to sell more than 25 percent of total sales through its marketplace from one vendor to their group companies. There are also conditions restricting to offer discounts by marketplace.

B2C Inventory-Based: FDI is not allowed in inventory-based model of eCommerce.

Single Brand: A single brand retail trading entity operating through brick and mortar stores is permitted to undertake retail trading through eCommerce subject to local sourcing requirements. Food retail: 100 percent FDI is allowed for trading (including eCommerce) of food products manufactured or procured in India.

Multi-Brand Retail: No FDI is allowed in companies which engage in multi-brand retail trading by means of eCommerce.

Source: https://www.export.gov/article?id=India-e-Commerce

Other Conditions
  • E-commerce marketplace may provide support services to sellers in respect of warehousing, logistics, order fulfillment, call centre, payment collection and other services.
  • An e-commerce entity will not permit more than 25% of the sales value on financial year basis affected through its marketplace from one vendor or their group companies.
  • In marketplace model, any warrantee/ guarantee of goods and services sold will be responsibility of the seller.
  • E-commerce entities providing marketplace will not directly or indirectly influence the sale price of goods or services and shall maintain level playing field.
  • The government has also prohibited e-commerce firms from pushing merchants to sell any product exclusively on its platform. The sellers can, however, choose to have a preferred online partner.

Source: https://dipp.gov.in/sites/default/files/CFPC_2017_FINAL_RELEASED_28.8.17.pdf

Some Context

Indian marketplace is dominated with many small shops and business. If foreign investment in multi-brand retail is to be permitted, then the business of these small shop owners will be in danger. Consumers will be spoilt with choices and due to high competitions, prices will go down, thus these multi-brand retail establishment will be able attract consumers at a large scale. However, in case of single-brand retail shops, they usually bring premium or luxury goods in the market so as such they are not in direct conflict with Indian small business.  (blog.ipleaders.in)