Ties That Bind - Bay Area Council Economic Institute

Investment: Building Global Businesses in a New China
Valley. The firm hired 50 researchers at about $7,000 a year each and received from the government
a two-year business tax holiday, exemption from taxes on imported equipment and inputs,
and a grant covering 10% of first-year operating expenses. Together these benefits cut
Epitomics’ research costs in half, compared with its Burlingame operation.
In November 2005, Sen. Dianne Feinstein (D-CA) and San Francisco Mayor Gavin Newsom
took part in a Beijing ribbon-cutting ceremony for Bridge Pharmaceuticals’ 100,000-square
foot preclinical development lab, in the Zhongguancun Life Sciences Park. Menlo Park-based
Bridge, a contract research organization (CRO) spun off from SRI International in 2004, conducts
outsourced pharmacology, toxicology and other animal-based research for biotech and
pharmaceutical companies. The Beijing facility is the first of its kind in China, certified by the
international Association for Assessment and Accreditation of Laboratory Animal Care
(AAALAC) and designed to be fully compliant with U.S.-level OECD principles for good laboratory
practice (GLP).
Bridge has incorporated 1,200 SRI standard operating procedures (SOPs) and quality assurance
audits into its China program; all employees are trained in U.S.-level QA and SOPs are in English.
Data encryption and security procedures protect intellectual property. Animals come exclusively
from the only two U.S.-franchised animal breeders in China. An equity partner lab in Taiwan,
and the company’s BridgeNet network of 2,500 pre-screened chemical and manufacturing
suppliers, give Bridge regional coverage in Asia for providing research to Western clients that is
in full U.S. and EU regulatory compliance.
The scale of operation and the relative labor costs—$30,000 a year for a post-doctoral chemist in
China versus $250–300,000 a year in the U.S., and less than $10,000 a year for a Chinese researcher—dramatically
improve preclinical lead times and cost. Bridge raised $3.5 million in an
initial round of venture funding, and in June 2006 closed $22 million in Series B funding from
new and returning venture and equity investors, among them Burrill. Significantly, says Wang,
the China expansion has provided Bridge with the scale, cost savings and subsequent investment
to maintain and add staff in Menlo Park.
Burrill, which has a venture firm and a merchant bank, specializes in the biotech and life sciences
sector. It has advised Chiron in identifying Chinese partners, assisted Procter & Gamble Pharmaceuticals
in a $100 million China technology licensing deal, provided China strategic research
to Roche Diagnostics, and participated in Invitrogen Corp.’s acquisition of BioAsia Co. Other
investments include Shenzhen SiBiono Gene Tech, whose gene therapy product Gendicine treats
head and neck tumors; and Shanghai-based chemistry research services firm Wuxi PharmaTech.
In the absence of a strong social safety net in China and only 3% of GNP spent on health care
services—versus 14% in the U.S.—modern medical facilities are in short supply. At the same
time, demand for upscale medical care is steadily rising with the number of affluent Chinese citizens
and growing expatriate communities.
American Pacific Medical Group, founded by 35 U.S. physicians and surgeons in 1992,
develops and operates inpatient medical facilities, high-tech hospitals and treatment centers
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