Traditional Chinese Medicine Grows As Target For New Drug Opportunities

Nestle Health and Hutchison China MediTech’s JV has an ongoing phase III trial hoping to validate traditional Chinese medicine for Western health care systems. Reports of TCM contamination at China-based firms represent a market-incursion opportunity for Western firms with established supply chains.

Firms including Nutrition Science Partners Ltd. are moving toward pay dirt in mining traditional Chinese medicine compounds to boost their drug pipelines, but transitioning a TCM ingredient to drug status remains unexplored territory for most pharma firms.

Dealing with patent cliffs and increasingly steep costs for new drug development, some drug companies are betting they can sift through the tens of thousands of compounds used in TCM to supplement their pipelines. While this relatively new avenue of research so far has yet to yield substantial profits for Western drug companies, the market for TCM-based products is growing fast.

The China Association of Traditional Chinese Medicine expects the TCM industry to be worth $88 billion by 2017, up from $55 billion in 2011. Current TCMs, the refined and reformulated offspring of traditional remedies, already generate as much as $21 billion in annual sales, according to L.E.K. Consulting.

Drug companies have two basic approaches available to leverage TCM into new products, according to Helen Chen, a Shanghai-based partner at L.E.K. They can scour TCM compounds for active ingredients to be synthesized and developed into drugs, or develop herbal combinations for sale as supplements to strengthen immunity or help prevent chronic conditions, the way the products are primarily marketed in the U.S.

China’s third national survey on medicinal resources released earlier in 2013 found 12,807 different raw materials including plants, animal parts and minerals in China. More than 11,000 are herbs, a potentially fertile field for sowing drug ingredient opportunities.

“None of the Western companies have a clinical program involving TCM, so the jury is still out”

– Helen Chen, L.E.K. Consulting

However, TCM’s effects often are not easily verifiable, complicating the ingredients’ transition to drug status. For instance, some TCM products work in combination, but no one chemical can be distilled.

Developing patentable products requires detailed descriptions of how a product actually works and a level of consistent efficacy that TCM often cannot meet. Despite the 5,000-year pool of knowledge associated with TCM, there is little recorded evidence and few quality tests, and practitioners rarely are licensed or certified.

“Accepting that it might be a compound does need a change of mindset that is very hard for Western pharma to adopt,” Chen said. “None of the Western companies have a clinical program involving TCM, so the jury is still out.”

TCM’s Traditional Niche Continues

As for leveraging TCM by developing herbal combinations for commercial distribution, a number of the larger Chinese TCM companies, such as Tongrentang Group Co. Ltd. and Tongjitang Chinese Medicines Co., are using this approach and expanding their overseas presence. In May, Chinese drug maker Winteam Pharmaceutical Group Co. Ltd. paid $393 million for Tongjitang and announced plans to change its name to China Traditional Chinese Medicine Co.

A government push to develop the global market for TCM is helping these companies grow. China’s TCM product exports jumped from $600 million in 1996 to $2.33 billion in 2011, according to Liu Zhangling, of the China Chamber of Commerce for Import & Export of Medicines & Health Products.

Most advanced down this path among TCM products is Tianjin Tasly’s Compound Danshen Dripping Pill, undergoing phase III trials for cardiovascular disease. Tasly built a $40 million center in the U.S. to bring its angina product to market.

CDDP already is approved in Canada, Russia, South Korea, Vietnam, Singapore and several African countries. Tasly also is working with SemBioSys Genetics Inc. to develop plant-derived insulin (Also see "China's Tasly Focuses On Plant-based Medicines To Gain Entry To U.S.Market" - Scrip, 10 Jun, 2011.).

Tasly’s international sales jumped from $280,000 a decade ago to more than $70 million. Tasly’s annual sales in 2012 topped $1.15 billion, up from $1.07 billion in 2011.

Another firm, Luye Pharma Group Ltd. completed phase II trials for its drug Xuezhikang to lower cholesterol (Also see "Chinese Drug Firms Race To U.S. With Traditional Medicines" - Scrip, 18 Jan, 2013.).

Marketing Edge: Supply Chain Security

Foreign companies with established supply chains could have an advantage, even if they have to compete against the massive distribution networks of the likes of Tongrentang in China. When it sampled 65 TCM products in China earlier in 2013, the environmental nongovernmental organization Greenpeace found pesticide residues in 48.

Greenpeace tested products from nine companies including Beijing Tongrentang, Yunnan Baiyao and Teana, Zhejiang Hangzhou Huqingyutang, Hunan Jiuzhitang, Tasly Pharmaceutical Co. Ltd., Guangzhou Caizhilin, Jinan Hongjitang, Henan Zhangzhongjing and Hong Kong Tongrentang. In 26 cases, the residues tracked back to traces of six pesticides banned in China – phorate, carbofuran, fipronil, methamidophos, aldicarb and ethoprophos, according to the NGO.

In China, TCM products account for about 38% of drug sales and 46% of drugs on the reimbursement list, according to Roland Berger Strategy Consultants. In the U.S., TCM products account for less than 5% of the $10 billion in sales of OTC herbals, according to estimates.

Big Pharma Exploring TCM Waters

A number of multinational pharmaceutical companies are dipping their toes into the waters of TCM research, such as Nutrition Science Partners enrolling patients for a phase III study for its herbal-based colitis drug.

Hutchison China MediTech Ltd. and Nestle Health Science SA in 2012 formed Nutrition Science Partnersas a joint venture to research, develop, manufacture and market new medicines from botanical plant origins. The JV gave Nestle access to Chi-Med’s library of 1,500 purified natural products and 50,000 medicinal plant extracts, a treasure trove of potential research pathways (Also see "Nestle China JV Backs Nutritional And Rx Botanical Development" - Pink Sheet, 10 Dec, 2012.).

“This is the first of what we expect to be many landmark events that will be achieved by our joint venture … as it begins to invest in developing truly innovative and scientifically validated botanical-based solutions for personalized health care,” Chi-Med CEO Christian Hogg said when the firm initiated a trial in April.

Pfizer Inc. has explored leveraging TCM for several years, while GlaxoSmithKline PLC’s Discovery Performance Unit is seeking ways to merge TCM botanicals into products for neurodegenerative diseases. No drug candidates have been announced yet, but GSK has said it might make an announcement in this area soon (Also see "GSK Establishes Discovery Unit For Traditional Chinese Medicine" - Scrip, 5 Mar, 2012.).

Sanofi is hoping TCM will yield new therapies for diabetes and cancer, and is working with Hong Kong University of Science and Technology to develop modern versions of TCM products. In 2010, Sanofi bought Beijing’s BMP Sunstone Corp. for $520 million, adding the pediatric cough syrup and asthma medication Ha Wa Wa (Good Baby) to its product line (Also see "Sanofi Acquires BMP Sunstone To Expand Chinese Consumer Health Portfolio" - Pink Sheet, 1 Nov, 2010.).

Perhaps the most successful merging to date of Western and traditional Chinese medicine is Novartis AG’s Coartem (artemisinin). Coartem had been approved in other countries before FDA in 2009 approved the drug for malaria treatment in the U.S. (Also see "Year-End Push To Meet FDAAA Puts 14 Advisory Committee Meetings On Tap" - Pink Sheet, 10 Nov, 2008.).

Chinese scientist Tu Youyou used Chinese herbal products as a basis for developing Coartem, now available in more than 85 countries.

Novartis still is working with the Shanghai Institute of Materia Medica to research and develop natural products from TCM. The company also set up a $100 million research center in Shanghai in 2007 that, among other things, does TCM research.