Date: September 2015
Source: Forbes China

 

At 7:00 p.m. on May 22, 2015, Lu Xianping—President and Chief Scientific Officer of Shenzhen Chipscreen Biosciences Co., Ltd. (hereinafter referred to as “Chipscreen Biosciences”)—made a rare appearance as a headline figure on China’s flagship national news broadcast.

 

The company’s independently developed original anti-lymphoma drug, Chidamide, was approved by the China Food and Drug Administration (CFDA) in December of the previous year and officially launched in March 2015.

 

This marks the world’s first approved orally administered, subtype-selective histone deacetylase (HDAC) inhibitor, and also the first innovative drug developed in China to have its patent licensed to developed countries such as the United States.

 

On the day following the broadcast, many pharmacies across China were flooded with patients seeking to purchase Chidamide. At one pharmacy in Chongqing, with only six boxes in stock, anxious family members of patients even surrounded the store at one point.

 

As an anti-tumor drug with a novel chemical structure, Chidamide is not only priced significantly lower than comparable imported drugs, but also shows clear improvements in efficacy and patient survival time.

 

This achievement reflects Lu Xianping’s 14-year commitment to a simple goal:“My dream is to invent a drug to treat diseases and save lives.”

 

To pursue this dream, Lu gave up a comfortable life in the United States, left his family behind, and spent 14 years patiently cultivating innovation in what he described as a “barren land” for new drug development in China, with each step resembling a pioneering effort.

 

Globally, innovative drug development is characterized by high investment, high risk, long timelines, and high returns. From its launch in March to the end of the year, Chidamide was expected to generate RMB 60 million in revenue, based solely on the relatively small indication of T-cell lymphoma.

 

With patent protection, Chipscreen Biosciences is expected to enjoy exclusive returns in this field for more than a decade—highlighting the appeal of innovative drugs. However, throughout the 14-year development process, Lu encountered multiple moments of crisis.

 

Compared with Europe and the United States, China’s environment for innovative drug development—whether in capital markets, regulatory systems, or taxation—was starting almost from scratch.

 

Chipscreen Biosciences does have one regret. About 10 years ago, in order to address funding challenges, the company granted exclusive international patent rights for Chidamide (outside China) to a U.S. company, which then took responsibility for its clinical trials in the United States.

 

While this licensing deal made Chipscreen Biosciences the first Chinese pharmaceutical R&D company to license an innovative drug patent to a U.S. firm, it also meant giving up significant future revenue from international markets.

 

For Lu, however, this was the only way to ensure the company’s survival at the time.

 

Around 2005, Chipscreen Biosciences and Lu faced one of their most difficult decisions.

 

After raising nearly RMB 50 million in its first round of financing in 2001, the company struggled to secure additional funding by 2005. At that time, the contract research organization (CRO) model was highly favored by investors in China.

 

At a board meeting, investors asked Lu to choose: either liquidate the company or pivot to CRO services with better cash flow.

 

In Lu’s view, however, CRO was not aligned with his vision as a scientist.

“I did not give up my life in the United States and leave my family to come back to China just to run a CRO,” he said firmly. “If the company had to change direction, I would rather return to the U.S. and let others take over.”

 

Confident in his team’s ability to change the absence of original innovative drugs in China, Lu persuaded shareholders to adjust the company’s business model. He licensed the global rights (excluding China) of Chidamide for $28 million, enabling the company to survive its most difficult years—while also giving up all international markets outside China.

 

In 2011, Lu attempted to repurchase the rights at three times the price, but the offer was declined.

 

“When times were toughest, what kept me going was still the dream,” Lu said. Another key factor was the company’s core technology platform for innovative drug development.

 

In global pharmaceutical R&D, small-molecule drug development carries extremely high risk—typically only one in 10,000 compounds ultimately becomes a marketable drug.

 

However, Lu believed that by building an early-stage drug screening and evaluation platform—leveraging technologies such as biochips, gene expression profiling, biostatistics, chemical genomics, proteomics, and metabolomics—it would be possible to shorten development timelines and reduce risk.

 

Thanks to rapid advances in chemical genomics and microarray technologies in the 1990s, this approach was already relatively advanced in global innovative drug development at the time. In particular, microarray technology provided a platform for rapid, high-throughput analysis of gene expression, which had previously been a slow process.

 

The “chip” in Chipscreen Biosciences reflects this vision: using microarray technology for chemical genomics research, combined with databases and big data analysis, to reduce R&D risk.

 

Previously, chemical structure data relied on expensive specialized software systems costing hundreds of thousands of yuan annually. To build its own platform, Chipscreen developed a simpler system based on an Oracle database, enabling integration between chemical structures and biological data.

 

This made Chipscreen one of the few pharmaceutical companies in China to hold software copyrights. The company even licensed one of its tools to the U.S. National Institutes of Health (NIH), enabling integrated data mining of biological and chemical information.

 

Although predictive models based on big data cannot be 100% accurate, Lu noted that in a process lasting over 10 years and costing hundreds of millions, even a 50% reduction in risk would significantly improve the probability of success.

 

In 2001, Lu invited several partners with expertise in chemical genomics and bioinformatics to co-found Chipscreen Biosciences, aiming to leverage cutting-edge scientific advances to transform China’s pharmaceutical innovation landscape from the ground up.

 

Although he knew the process would be long—“10 years was expected”—he also recognized that, while starting from the same line as international innovators, the broader environment made the journey far more difficult.

 

At the time, China had more than 6,000 pharmaceutical companies, but over 98% focused on generics. Even among drugs approved as “new,” few were truly original innovations, with most originating from Europe and the United States.

 

When Chipscreen was founded, there were almost no domestic companies engaged in innovative drug development. Lu also found that China’s regulatory framework differed significantly from international systems, particularly in policies and legal structures for innovative drugs, limiting the space for such companies to grow.

 

“In the past, China’s drug registration regulations were designed for generics, and even the definition of ‘new drugs’ differed greatly from international standards,” Lu said.

 

What was once considered a “new drug” in China could simply be a reformulation—for example, converting a tablet into a capsule.

 

Across the entire regulatory system—from registration procedures and submission requirements to clinical guidelines—there were gaps that made it difficult to support innovative drug development.

 

Lu also noted that during the drug application process, regulators required companies to provide not only preclinical data, but also detailed production processes and even packaging design.

 

“For generics, this is relatively straightforward, because the drugs have already been tested abroad, and data can be referenced from agencies like the U.S. FDA. But for innovative drugs, which involve entirely new compounds, all data must be generated step by step through clinical trials. Requiring production details at such an early stage does not align logically.” Nevertheless, Lu invested significant time and effort to meet these requirements.

 

Typically, patents for innovative drugs last 20 years. For a drug generating $1 billion annually, launching even one year earlier can mean an additional $1 billion in revenue. While Lu initially aimed to shorten development timelines through biotechnology, he found that time saved in research was often lost during the approval process.

 

In the United States, drug registration follows a filing system—if the FDA raises no objections within 30 days, clinical trials can proceed. In China, however, approval-based registration can take at least six months, often up to a year. For Chidamide, the full approval process lasted four years.

 

A U.S. company targeting the same mechanism was acquired as early as 2005, and its drug entered the market in 2006—while Chidamide was still in Phase I clinical trials. Such differences made it difficult for Chinese innovators to compete globally.

 

Despite these challenges, Lu was encouraged that Chidamide, due to its unique structure and selectivity, was still the first in its class globally to reach the market.

 

However, he found it puzzling that in China, a drug must be on the market for three years before being eligible for reimbursement. He was often asked by officials, “Is your drug really effective?”—a question he found ironic given the rigorous trials and lengthy approval process required to demonstrate precisely that.

 

In June of that year, the head of the local tax bureau visited Chipscreen’s Shenzhen headquarters, puzzled by the company’s sudden increase in value-added tax payments—from previously only paying personal income tax to now exceeding RMB 1 million per month.

 

“At one point, they even wondered if we had switched to selling invoices,” Lu joked.

During the visit, a shipment of Chidamide was being loaded—one box, about the size of a desktop computer, valued at RMB 800,000—demonstrating the high value-added nature of innovative pharmaceuticals.

 

Today, Chipscreen has only around 180 employees, including its manufacturing workforce. While production costs for chemical drugs are minimal, the majority of costs are concentrated in R&D.

 

“In the past, China’s tax policies were designed for processing trade. For high value-added industries, more appropriate frameworks need to be considered,” Lu said.

 

Chidamide alone is expected to generate at least RMB 500 million in revenue over the next three years, with exclusive market positioning protected by patents. In addition to T-cell lymphoma, the drug is also undergoing clinical trials for other cancer indications.

 

Beyond oncology, Chipscreen has built pipelines in diabetes and autoimmune diseases, and has filed 80 global patents, with 50 already granted.

 

However, Lu also noted new challenges:“Compared to 10 years ago, China’s cost advantages are gradually diminishing. Costs are rising across both R&D and clinical trials.”

 

When Lu returned to China in 2001, his younger son was just three and a half years old. This past summer, he returned to the United States to send him off to college.

 

“Scientific research turns money into knowledge; innovation turns knowledge into value.”Over the past 14 years, what sustained Lu was his belief in innovation:“We have proven that China is capable of innovation.”