In keeping with tradition

As casualties mounted during the Vietnam War, the North Vietnamese army noticed a troubling statistic: More of its soldiers were dying from malaria than from combat. The country’s leaders reached out to Mao Zedong and, in 1967, the Chinese army began screening plants used for centuries in traditional Chinese medicine (TCM) in the hope of finding a cure.

The war had ended by the time China’s scientists had isolated an active ingredient. But decades later, Swiss pharma firm Novartis picked up where the army had left off. Through its Chinese joint venture Novartis developed the anti-malarial drug Coartem. Since 2001 the company has distributed over 180 million treatments of the drug in partnership with the World Health Organization.

Industry insiders acknowledge Novartis as the prime mover among major pharmaceutical firms in terms of using TCM as a starting point for developing Western-style drugs.

“We are totally convinced this is the right way to go,” said Dr Paul Herrling, head of corporate research at Novartis.

For over a decade, Novartis has been working with the Shanghai Institute of Materia Medica (SIMM), building what Herrling calls “a treasure trove” of natural compounds from which the next blockbuster drug may emerge. Several compounds based on TCM are in early stages of pre-clinical development.

Big business

Buoyed by a legacy of public trust in its cures, TCM is already big business in China. It is only in more recent years that the West has caught on, fueled by rising interest in alternative medicines and a so-called “wellness industry.”

Current estimates of the size of China’s TCM market vary wildly, but analysts say that the sector’s growth has been helped by Beijing, which made development of the TCM industry a priority in the 11th Five-Year Plan.

“Government regulations and policies have encouraged the development of TCM. This has led to a growth of investment in this market,” said Qin Hailin, manager of the Industrial Research Center at CCID Consulting.

According to data provided by the group, domestic sales of TCM – primarily herbs and herb-derived products, stood at US$23.1 billion in 2007 – up from US$13.2 billion in 2004.

Yet the closer regulatory attention may be responsible for closing as many doors as it opens. Jamie Davies, head of pharmaceutical research at Business Monitor International in London, notes that all developing countries are keen to ensure what people are taking is safe and effective. The problem for TCM is that efficacy and safety, particularly in clinical trials, are hard to prove.

This factor, together with government protection and the presence of well-established Chinese TCM firms like Tong-rentang, makes life difficult for foreign firms keen to enter the market.

It would appear that the Novartis model of creating Western-style drugs from Chinese medicinal herbs represents overseas players’ best chance of making money from TCM. Even then, it would be no easy sell. Once the significant regulatory barriers have been navigated, firms would face the arguably larger challenge of winning over consumers who have little experience with the products.

Peter Cartwright, a healthcare analyst with Evolution Securities China, said that TCM products may be able to find some success as specialty products in the West. However, he doubts it would amount to anything more than a niche market.

A cost-effective option

Meanwhile, TCM advocates say using medicinal herbs as the starting point for drug development can deliver cost and time savings. The US Food and Drug Administration got on board in 2004 and devised a regulatory framework for botanical drugs. Two years later it approved the first product, a medicine for viral warts named Veregen.

But convincing the major drug manufacturers to take a chance on a botanical drug remains difficult.

“The biggest obstacle is on the commercial side, the idea that drug companies will accept what is for them an unconventional type of drug,” said Robert Miller, chief executive of Phynova, a UK firm listed on London’s AIM market that develops botanical drugs from Chinese plants. Phynova currently has a botanical drug for Hepatitis C in clinical trials.

The progress made by Novartis and SIMM is cause for optimism, however, and now other Western pharma firms are following their lead. The likes of Merck and Eli Lilly have reached discovery and development deals with botanical drug specialists.

According to Phynova’s Miller, it all comes down to supply and demand.

“The drug industry is so starved of new successful drugs. If you look at the statistics on the amount of R&D spending in the pharma industry versus the number of new drugs getting approved every year, the spending has been going astronomically higher but the number of new drugs has been reducing,” he said.

“We think this is a pretty smart place to be prospecting for new drugs.”