There will be more elderly people in China than the current total population of the United States by 2050, and all evidence suggests they will spend heavily on the latest healthcare services.
For those of us at the cutting edge of the stem cell world this gathering is incredibly exciting,” remarks Kyle Cetrulo, an American biotech entrepreneur gleaming with ambition and zeal as he gazes over the crowd gathered for an important conference in the prefecture-level city of Shangrao, set in rugged mountain terrain and tranquil lakes in the picturesque southern inland province of Jiangxi. Founder and CEO of US-based AuxoCell Laboratories, Inc. and President of the International Perinatal Stem Cell Society, Cetrulo is one amongst the many entrepreneurs on hand who hopes to cash in on China’s stem cell focus, “China is without a doubt the global leader in moving stem cells into the clinic and we are all eager to see that.”
Shangrao hosted one of China’s most important stem cell events in the medical world this June, gathering experts from around the world to compare notes at the Stem Cell Translational Medicine and Smart Health Conference. Floating on the breeze of the crystal clear air that makes this town special came a wave of anticipation — the sense that something really big was on the horizon, and everyone could feel it. The SBR Medical Team was on hand as scientists and physicians huddled together to discuss ground-breaking regenerative medical advances at a conference that was an act of scientific and business diplomacy of the highest order.
The importance of the Shangrao Summit was highlighted by a topic that has gained attention worldwide. Co-hosts Health & Biotech Corporation Ltd. and ExCell Bio Inc. invited foreign scientists to learn how revolutionary commercial applications developed in China could benefit the international industry. At the same time, Chinese regenerative medicine leaders were more than eager to further technological knowledge and sell products to vast overseas networks. The underlying theme of this synergistic collection of brain trusts was China’s eagerness to lead the way in the brave new world of regenerative medicine.
Combine China’s rapidly aging population with a strong cultural tradition for family managed care, an enviable real GDP per capita growth rate and deep support for rapidly rising government healthcare expenditures and China’s love affair with the medical field is easily understood. Incorporate an interest in medical innovation, acceptance of stem cell research and a comparative advantage in large-scale deployment and you have the perfect storm to push the regenerative medical industry over the threshold into widespread clinical application on the horizon.
As businesses, investors, regulators and scientists rally behind the immense possibilities of this breakthrough field, the role China will play in the coming medical evolution is beginning to set. Basically, regenerative medicine is a branch of research focused on tissue engineering and molecular biology that deals with the process of replacing, engineering or regenerating human cells, tissues or organs to restore or establish normal function. The ability to regrow and repair damaged or diseased cells, organs and tissues is sometimes considered the reversal of aging.
During the late 1940s and early 1950s in China, population growth was closely aligned with economic growth. More people meant more workers, and more workers meant more manpower devoted to industrial progress. Fertility rates climbed to over 6 births per woman before the drawbacks of such a birth rate became apparent and the One Child Policy came into effect in 1979. The repercussions of the mid-century population explosion are already being felt, and will continue to intensify until around 2050. In that year, for every 100 people aged 20 to 64 there will be 45 people aged over 65 – three times today’s ratio.
To give perspective to the immensity of the health care challenge and opportunity ahead, the size of the elderly population (people over 65) will reach about 350 million, surpassing the current total US population. This impressive demographic will be relatively wealthy, have the financial backing of their extended family network, and be eager to give cutting-edge technology a chance to cure their many age-related ailments. The challenge of commercializing current stem cell technology to the point of such widespread application could take time, but industry insiders are confident they will make headway in the race against the dreaded aging clock.
This is something that China’s elderly hope will happen sooner rather than later. Chronic, non-communicable diseases like cardiovascular diseases, respiratory illnesses and cancer are growing at alarming rates, in part due to decades of breakneck economic growth which have sullied the skies, water and food with industrial pollutants. Moreover, two-thirds of Chinese men are smokers, some 160 million adults are hypertensive (at increased risk of coronary disease, stroke, heart failure and more), and there are nearly an equal number of diabetics. Stem cell technologies, experts say, will have applications in treating all of these illnesses.
With a fifth of the world’s population, China’s unmet demand for health care services, which is certainly not limited to the elderly, is difficult to calculate. China’s annual healthcare expenditure is sky-rocketing well above GDP growth levels, and will climb to US$1 trillion annually by 2020, according to a recent report from global consulting firm McKinsey. As the nation quickly becomes the most elderly on earth, surpassing Japan around 2030, both the private and public sectors are pushing the regenerative medicine boom forward at full speed.
Ready for Innovation
China’s stance on research involving the development, usage and destruction of human embryonic stem cells differs from some societies, like those in the Americas and Europe. Ethical and religious objections in the Western world that hamper research and slow the pace of innovation are replaced with government support and one of the most permissive regulatory regimes in the world.
“Chinese society is not yet concerned about the moral status of the human embryo and foetus,” says Cong Yali, a leading medical researcher on public and physician views about stem cell therapy in China. Cong conducted a survey on this matter and found that nearly 90% of surveyed physicians believe nucleus transfer, a contentious area of research that “may lead to human cloning”, should not be regulated. In other words, scientists should be allowed to make headway without major restrictions in the innovative new world of medicine.
Another overlooked trend in Chinese culture is vital to the regenerative medical revolution: familiarity with change. A wonderful photo series by Dheera Venkatraman called Time Travelling in China presents before-and-after shots of modernization. These photos clearly show no large population on earth has been through such a dramatic shift as the Chinese people, and the economic transition has left a population more accepting and eager of technological change than any other.
A KMPG report notes China’s ready acceptance of mobile payments and the “way in which it is affecting businesses and consumers has come as a surprise to many.” While technologically predisposed, American and European populations have not been eager to test the waters of Apple Pay, while even rural and elderly populations scramble to buy the latest phones to install WeChat Wallet and Alipay. China’s percentage of Internet users who make mobile payments is well over twice that of the US. While in other countries e-commerce is “a way to shop” noted Alibaba’s Jack Ma, “in China it is a lifestyle.” Why is this relevant? The same trend is seen throughout cutting edge technological fields like regenerative medicine. While much of the world is fearful of the unknown, China seems to eagerly embrace the unknown as an opportunity.
This is observed in biotech areas, which have already shown substantial results and commercial applications. Zhu Zhen is a researcher at the Chinese Academy of Sciences’ Bureau of Life Sciences and Biotechnology and Deputy Director General of the Chinese Society of Biotechnology. “In recent years,” Zhu says, “many talented scientists have returned to China from overseas to become the pillar of China’s GMO (genetically modified organism) growth, conducting important research that has resulted in new medicines and foods. This migratory trend is strikingly similar to what is occurring in stem cell research now.”
Despite massive commercialization of accomplishments in areas such as GMO, Zhu’s main frustration is that things do not move even faster. “It’s important to maintain an advantage in research, but if the technology is not commercialized it will not be rewarded by the market. This will make our research initiative lose momentum,” Zhu adds, picking up on a recurring theme in Chinese R&D. “Research is directed not in pursuit of lofty academic ideals, but where those in the know see imminent potential for large economic rewards. The market will not wait.”
From the mobile payment revolution, to President Xi Jinping’s exhortation that industry “boldly research and innovate, and dominate the high points of GMO techniques”, China’s willingness to readily adopt the new and exciting is something to bet on when it comes to stem cell technology.
To say the Chinese government has high hopes for the biotech sector is an understatement. The biotech industry, experiencing incredible double-digit growth at a time of sluggish national economic performance, is central to all sides of the equation: rebalancing the economy toward technology innovation, comforting a rapidly aging population and providing a valuable story of “indigenous innovation” are all factors that make government look good.
Fostering an innovative healthcare sector to deal with the needs of its aging population is a foremost concern of the central government. The need for reform in this regard has been recognized for some time. Speeches like former leader Hu Jintao’s Scientific Outlook on Development and Xi Jinping’s Four Comprehensives cover the need to restructure the economy along a high-tech path. China’s Great Rebalancing, as a McKinsey report calls this dynamic, consists largely of “tentative but encouraging steps” so far, with policy-makers hesitant to slash support of the old system before the economic viability of the new is set in stone.
It is just a matter of time before the stone is set. The central government has few concerns about “picking winners” that it feels are able to fulfill key economic objectives. Biotech as a whole, and, more recently, the boon that is regenerative medicine, along with its incredible promise of health and longevity, appears to be a major winner. It is not unreasonable to expect policy to smooth the regenerative medicine industry’s development path, and that is exactly what is happening.
Currently, biotech R&D funding is allocated by a variety of national bodies. The Ministry of Science and Technology, Ministry of Health, military medical science departments, and universities under the Ministry of Education have jumped on the regenerative medicine bandwagon. In keeping with the position of biotech research as the object of the government’s development objectives, the National Development and Reform Commission (NDRC), a Beijing-based body under the State Council with broad powers to administer and plan the economy, oversees and approves biotech appropriations.
To centralize control, as early as 2004 when the industry was just heating up, China’s Science and Technology Minister Guanghua Xu announced the creation of a high-level leadership committee to coordinate biotech development. Far more than a standard government/industry alliance, such leadership committees are usually formed when urgent strategic guidance is needed.
If the industry was warm back then, it is boiling now. The 12th Five Year Plan topped up massive private investment with a US$2 billion injection into R&D, and the 13th Five Year Plan earmarks unprecedented support for stem cell and translational research. Grants will be awarded following evaluation processes intended to identify competitive technologies with widespread commercial applications. Specific announcements in terms of the structure will abound shortly, according to Tongji University President Pei Gang and Pei Duanqing, Director of Guangzhou Institute of Biomedicine and Health. “Given the size of its population and the wide spectrum of unmet medical needs, China recognizes the promise of stem cell and regenerative medicine as one of the key thrusts for modernizing its system,” notes Pei Gang. Biotech is the future, and regenerative medicine the crown jewels.
Clinics and Devices
Just as pluripotent stem cells differentiate in the body according to their environment, stem cell research is beginning to differentiate according to comparative advantage and regulation. China’s focus on quick applicability is in no small part a result of basic economic logic. With a real interest rate nearly triple that of the US, long-term payoffs are discounted more rapidly. By the logic of present value, combined with China’s capital controls restricting cross-border investment, a dollar 25 years from now is arguably worth about half as much today to a Chinese investor as it is to an American. Regenerative medicine projects with near-term viability, on the order of 5 to 10 years, are China’s domain.
Deploying massive stem cell storage facilities and processing plants may be seen as jumping the gun to American researchers, where longer-term payoffs arise from further academic study. Yet, Chinese companies are pragmatic about their advantages. Other nations’ researchers and academic institutions are pushed to study the stem cell science. In the meantime, China finds commercial clinical applications and pulls average costs down to highly profitable levels by spreading overhead over massive scale. Nationally, planners seem to accept this immediate hands-on route, so long as it involves a measure of quantifiable indigenous innovation, especially that which creates and protects intellectual property rights.
Along these lines, ExCell Bio Inc., a Shanghai-based company founded in 2006, is one of many Chinese companies cashing in by supplying biotech and stem cell research products with immediate application based on research conducted by others. ExCell Bio provides fetal and newborn calf serum, ELISA kits (for testing substances using antibodies and color change), reagents for molecular stem cell research, and other chemicals, biological products and devices. By complying with relevant GMP and ISO standards, these companies have positioned themselves to reap rewards from the research, development and deployment of global peers.
The perception among foreigners attending this unique gathering of stem cell scientists and business at the Jiangxi Summit was that Chinese biotech firms gain perceived legitimacy from interacting with foreign researchers. Despite China’s massive scientific and biotech leaps in the past decade, domestic companies have an extra burden of proof to overcome before selling products on the world stage or even the domestic stage (as buying power increases and consumers perceive imports as being higher quality). Quality perceptions seem to lag the reality of “Made in China” products.
Though China is eager to become a global player in this field, companies at the forefront of clinical applications do not seem to publish research to the extent of their foreign counterparts. This highlights a difficulty, and an advantage, for those investing in this emerging field. Having little published, peer-reviewed research means greater variance in the potential payoffs of FDA, JV and other stakes. Surmising the clinical relevance of technologies is not easy, and without information garnered from the public input of the scientific community, company fundamentals can only tell so much. However, this lack of information sharing creates a far more defensible position. If a technology does succeed, barriers to entry and replication are high, as companies need not rely on weak intellectual property enforcement to protect inventions.
Breaking the Mold
Perinatal stem cells, according to Dr. Morey Kraus of American multinational PerkinElmer Inc., are “the most abundant and promising raw material in the regenerative medicine space”. As such, companies from China and around the world are looking for new and innovative ways to deliver this raw material and each of these groups competes for positioning in this creative market.
“AuxoCell has a Chinese-issued patent which we are very proud of,” Cetrulo remarks. Foreign companies trying to get into the clinical applications and device market for stem cells, especially segments exposed to the private hospital sector which recently opened up to wholly foreign-owned hospitals, may consider the step to attain a patent as helping legitimize their brand. In a competition with sparse information, Chinese companies are eager to show off partnerships with foreign firms having provable and publicly available research track records.
Similar to ExCell and AuxoCell in its focus of developing stem cell applicable technologies, National Equities Exchange and Quotations (NEEQ) listed Health & Biotech Corporation Ltd. (H&B), co-host of the Jiangxi conference, is a pioneer of stem cell banks. H&B aims to bring scale to the supply of products used widely in clinical research, and pave the way for autologous transplant technology, with people storing stem cells for use later in life. H&B is positioned for profit in the near future by partnering with overseas research groups such as the French Academy of Medical Sciences and French Association of Placenta-derived Stem Cells and is active in international research conferences.
“We all hope to see stem cells used to actually treat patients,” notes Cetrulo. “So what China is doing is most important.” AuxoCell manufactures a solid tissue processing system used on umbilical cords, placenta, adipose and muscle. Cetrulo believes in China’s focus on clinical applications at a time when global peers lean towards academic pursuits. “Biology already has the answers,” Cetrulo adds. “We just need to study biology and learn from natural processes. Work in the Chinese clinical field has opened our eyes to some of the amazing work which is taking place.”