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GLOBAL CAPITAL

Sending biotech research to China

A San Diego firm is setting up a lab in Asia to save on costs.

June 02, 2007|Evelyn Iritani | Times Staff Writer

SHANGHAI — Donkey meat with garlic juice and deep-fried duck bills aren't Dajun Yang's favorite fare. But while accompanying two U.S. colleagues on a recent trip to Beijing, he made sure they were exposed to cuisine they couldn't find back home.

Culinary tour guide is just one of Yang's many unofficial jobs. As the head of the China subsidiary of San Diego-based Ascenta Therapeutics Inc., Yang also is responsible for staffing the company's new lab in Shanghai, vetting animal-testing facilities and helping colleagues navigate China's regulatory jungle.

Yang's ability to bridge the two cultures is crucial to Ascenta's big gamble: creating a new breed of biotech start-up that marries U.S. and Chinese scientific talent with China's cheap labor and resources. The firm is using technology licensed from the National Institutes of Health and the University of Michigan, where Yang and Ascenta co-founder Shaomeng Wang, both natives of China, conduct their research.

Ascenta is betting that its China subsidiary, which employs 20 scientists working for a fraction of what they would be paid in the United States, will drastically reduce the price tag -- and time -- of bringing its promising cancer-fighting medicines to market. Investors apparently agree. In April, the company announced it had raised $50 million, bringing its total funding to $85.5 million.

If Ascenta succeeds, biotech experts predict it could chart a new path for global drug development, helping China in its bid to leapfrog India and Eastern Europe, the current favorites for drug research outsourcing.

Ascenta is "essentially leveraging the best that both countries have to offer," said Greg Scott, a San Diego investor and editor of industry newsletter ChinaBio Today, who recently opened an office in Shanghai's Zhangjiang High-Tech Park.

The outsourcing of global drug development is risky. China's drug industry, long dominated by production of herbal and traditional medicines and generic drugs, is in the early stages of transitioning to a Western-style pharmaceutical system.

Eager to boost the credibility of its fledgling drug industry, the Chinese government has launched a major overhaul of the country's State Food and Drug Administration.

This week, the Chinese government sentenced the former head of the administration to death for reportedly taking bribes from companies trying to get approval for their drugs. During his tenure, dozens of Chinese died after ingesting fake or dangerous medicine.

U.S. executives said they were proceeding with care to ensure that their employees and subcontractors were working to U.S. standards and all research results would meet government approval in the U.S. and China. California is leading the trans-Pacific migration, thanks to its proximity to Asia and its large pool of expatriate Chinese scientists.

BioDuro Inc., a San Diego company providing contract research services to drug firms, recently opened a 40,000-square-foot lab in Beijing. Immusol Inc., a San Diego biotech firm developing anti-cancer drugs, is outsourcing chemistry work to firms in Beijing and Shanghai.

Much like how the U.S. software industry was forced to remake itself after the technology bust early this decade, the biotech industry is undergoing a painful readjustment as early-stage research moves to lower-cost countries. Ascenta's chief financial officer, Craig Kussman, came from Discovery Partners International Inc., a San Diego firm that closed up shop after it lost several large research contracts to companies in Asia.

A subsidiary in China wasn't in the business plan when Ascenta jumped into the crowded cancer field in 2003 with a compound derived from gossypol, a substance contained in cottonseed oil. Three decades earlier, Chinese health officials had traced an outbreak of male sterility in several villages to gossypol. It turned out that the villagers had been using unprocessed cottonseed oil for cooking.

World health experts discarded plans to use gossypol as a contraceptive because it was too effective; 99% of the men became sterile. But Yang and Wang picked up the trail, convinced that the protein inhibitors that killed the sperm might also trigger apoptosis, or cell death, in cancer cells. Their early research was promising.

But their timing was bad. Venture capitalists had gone into deep retreat, stung by the bursting of the technology bubble. With several promising drug candidates in the pipeline and limited funds, Ascenta's executives decided they had to figure out a way to buy more research for their dollars.

They found their answer in China, where the government had set its sights on developing a world-class biotechnology sector and was offering foreign firms cheap land, tax breaks, a huge pool of low-cost scientific talent and cheap raw materials. The savings were significant: A chemist with a doctorate earning $20,000 to $30,000 in China would be paid three to four times as much in the United States.

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