2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Challenges and Successes in Challenges and Successes in

Evaluation and Management of Evaluation and Management of

NonNon--clinical Studies Using a clinical Studies Using a

ChinaChina––based CRObased CRO

J. Brian Xu, MD, PhDDiplomate, American Board of ToxicologyVice President & Chief ToxicologistWuXi AppTec Co., Ltd.

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Table of ContentsTable of Contents

� Introduction – China’s Economic and CRO Growth

� China’s GLP Toxicology Services – Opportunities for Western Sponsors

� The STATUS: Capabilities, Competencies, and Regulatory Compliance

� The BENEFITS: Cost Reduction / Resources

� The FUTURE: “IP through IND” Services

� Keys to Success – China’s CROs

� The COMPLIANCE: Meet Western Standards

� The TALENT: Effective Training Programs and Continued Education

� The FLEXIBILITY: Capabilities and Capacities

� Keys to Success – Western Sponsors

� The PARTNERSHIP: Collaborative

� The COMMUNICATION: Culture and Language

� The OPTIMIZATION OPPORTUNITIES: Virtually Integrated Operating Model

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Fastest Growing Large Economy in WorldFastest Growing Large Economy in World

Sources: NASA, IMSChina at Night Seen from Space

–– China’s Economy: Grew 25 times in 20 years … Doubled last 5 years

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

CRO Booming in ChinaCRO Booming in China

� China to become world’s 3rd-largest pharmaceutical market in 2011, 2nd-largest in 2020, and 1st-largest in 2025

� China ranked first among the most favored offshore bases for R&D

� Many expansions and many newcomers in China’s CRO market, ~140 CROs now

� Competition to supply CRO services began to cause consolidation within China

Sources: IMS, UBS, Modular R&D, The CRO Market Outlook

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Preclinical Development Clinical Development

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

GLP Toxicology Services in ChinaGLP Toxicology Services in China

� Until 2003, there were no GLP regulations, no expertise, and few studies conducted

� Toxicology CRO industry in China is only a few years old, but ramp up toward standardization and global competitiveness

� GLP processes are becoming more standardized

� China’s market for Toxicology services is estimated about $20 million in 2009 and may jump to $200 million in 5 to 7 years

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

ChinaChina’’s Toxicology s Toxicology CROsCROs

� Estimated >20 Toxicology CROs in China, varies in size, quality of offerings, and management capabilities

� 9 accredited Toxicology Labs in China so far

� Enthusiasm to learn and work with Western partners, but most local CROs’ customers tend to be local Chinese pharmaceutical companies

� Estimated 2 to 4 million sq. ft. Toxicology facilities are built or under construction in China

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Evolving Preclinical Study Capabilities Evolving Preclinical Study Capabilities

� FDA and EU regulators’ willingness to accept non-clinical data generated by China-based CROs.

� A number of China-based CROs are close to operating in compliance with Western GLP standards and were audited by FDA and OECD

� Within 12–24 months, a lot more GLP toxicology studies are expected to be done in China

� China-based CROs

� The FOREIGN or JOINTLY OWNED CROs: Charles River Lab and WuXi AppTec is leading the way

� The LOCAL CROs: Pharmaron/Bridge Lab, Joinn Laboratories, and state owned institutions

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Conducting Toxicology Studies in ChinaConducting Toxicology Studies in China

� Benefits

� large local talent pool, strong work ethic and eager to learn

� Access to large non-human primate breeding facilities and offer a clear advantages of conducting non-human primate studies

� Study cost savings of ~50% and likely to continue within next 5 years

� Challenges

� Due diligence monitoring and managing studies without an in-country presence

� China's unique regulatory environment and business culture

� Cultural and language barriers

� Experienced talent pool is shallow in some areas, particularly at the senior level and well-trained veterinarians and veterinary pathologists from West

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

China Universities: 5.7 Million Graduates per Year China Universities: 5.7 Million Graduates per Year

Sources: National Bureau of Statistics of China

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2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

China Labor & Utility Costs: up to 10 times Cheaper than in WestChina Labor & Utility Costs: up to 10 times Cheaper than in West

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2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Language and Cultural Barriers Language and Cultural Barriers

� English skill

� English language capabilities are modest at most facilities,

� Limited pool of English-proficient scientists, technicians, and veterinarians

� Chinese Culture

� FACE (面子面子面子面子): Avoid loss of face, don’t want to admit mistakes or show a lack of knowledge

� CONNECTIONS (关系关系关系关系，，，，人情人情人情人情): “You scratch my back, I’ll scratch yours”. One is always part of a network and a person’s identity is rarely treated on an individual basis

� GOLDEN MEAN (中庸中庸中庸中庸): Group orientated, values harmony and stability

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Western Western vs.vs. Chinese CulturesChinese Cultures

Appointment times flexibleEscape from direct confrontation

Act based on consensus, rather than on individual initiative

Hesitant to challenge authority or ask questions

Sources: www.yangliudesign.com

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Keys to SuccessKeys to Success –– CROsCROs

� Meet Sponsors’ Expectations

� Acceptable lead times, effective process flows, and tracking measures

� Acceptable documentation and records control procedures

� Acceptable interim data reporting, error reporting, and ongoing communication

� Acceptable draft and final report timelines

� Flexible and Agile: Resource allocation and reallocation procedures to tailor rapidly to specific needs

� Relationship building

� Establish a good working relationship

� Risk sharing for long-term success

� Compliance with Western GLP standards

� GLP is mindset

� Quality systems (QC & QA) to ensure international regulatory compliance

� Management must monitor all aspects of compliance closely on a day-to-day basis

� Quality of the supply chain

� Animals, feed, etc.

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Keys to Success for Keys to Success for CROsCROs (cont(cont’’d)d)

� Technical proficiency and expertise

� Establish effective and well-planned training programs

� Documentation standards: Protocol, SOPs, Reports, Data, and Computer systems

� “IP through IND” service capabilities

� Establish correction and prevention (vs. punishment) mechanism

� Employees must strictly adhere to the SOPs in all respects

� Endeavor to keep errors to a minimum

� Communicate effectively

� Weekly and ongoing updates/reports with sponsors

� Constant and consistent communication with employees, focus on clear, open, and honest communication

� Balance between work and everyday life to ensure long-term efficiency

� Local colleagues can be overly dedicated

� Retention: Development and growth opportunities and job satisfaction

� Employees engaged, empowered, committed, and responsible

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Keys to SuccessKeys to Success –– Western Western SponsorsSponsors

� Appropriate due diligence and upfront evaluation

� Scientific Capabilities – Meet your needs

� GLP Compliance – Quality and GLP practices

� Preclinical Capacity – Implementation readiness; Experience; Quality of services and quality history; and Process/cycle times

� Business and Financial Strengths – Financial stability and capabilities of business and technical representatives

� Establish a good working relationship with CROs

� Turn differences into success, be collaborative and partnership

� Build relationships, strengthen local connections

� Adapt China's unique regulatory environment and business culture

� More supervision and technical support

� Frequent technical discussions with the CRO staff

� Pathology peer-review

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

Study MonitoringStudy Monitoring

� Establish realistic timelines and expectations

� Consistent monitoring and managing studies

� Communicate effectively

� With a physical presence in China, is better able to communicatewith and supervise work at local CROs

� Close long-distance oversight – frequent tel/video conferences

� English-speaking monitors and project managers

� Direct instructions

� Avoid Western slang

2nd DIA China Annual Meeting | May 16-19, 2010 | Beijing, China

ConclusionsConclusions

� The MARKET – CRO booming in China

� The STATUS – A number of CROs in China are close to operating in compliance with Western GLP standards

� The CULTURES – Turn Differences into Success

� The OPPORTUNITIES – Innovative drug discovery emerging in China and Virtually Integrated Operating Model