“The Wonder” – Start Business in China SABPA, San Diego, March 26th, 2005 1 2004/2005 GDP Outlook China: Real Economic Growth Source: Goldman Sachs Annual data, 2004 are forecasts CRO Market CRO Market: Revenue Forecasts (Asia), 1998-2005 Revenue Revenues Growth Rate Year ($ Billion) (%) 1998 1.08 --- 1999 1.02 -5.8 2000 1.14 12.1 2001 1.28 12.2 2002 1.44 12.4 2003 1.62 12.5 2004 1.83 12.7 2005 2.07 13.0 Compound Annual Growth Rate (1999-2006): 12.7% Note: All figures are rounded; the base year is 2001. Source: Frost & Sullivan CRO Market: Comparison of Current and Potential CRO Service Revenues (World) All figures are rounded; the base year is 2001. Source: Frost & Sullivan CRO Market: Percent of Revenues by Geographic Location (World), 1998-2005 Total Biotechnology Market: Revenue Forecasts (Asia Pacific), 2001-2010 Total Biotechnology Market: Revenue Forecasts (Asia Pacific), 2001-2010 Where is China 5 years from now? Quote: Going back to China is a hot topic among overseas Chinese these years. It is as hot as the topics of going aboard in the previous years（洋插队）. It is due to the booming economy in China and the big changes in the country. I have many close friends who just came back to Shanghai. This is what I heard and what I saw... Quote: Going back to China（回乡知青）…… My wife and I are both Chinese living in the U.S. We are planning to move to shanghai early next year. When I talked with my family about the move, they all said it's a very bad idea. They said to live comfortably in Shanghai you have to at least earn 500,000 RMB yearly. Also, unlike in the U.S. people in China usually work harder and with a lot of overtime. I) Is it really true that you have to earn that much? II) How does people with average income manage their life then? III) How do you think about it? ………….. The work hard and overtime part really scares me. I don't mind work hard but to be forced to work hard will be another story. Here I work as a software engineer in a small company in a small collage town. Life is really slow and peaceful. ……when do you go to work, how late will you come home, is your boss pushy, are you coworkers work abnormally hard, how do you spend you weed ends, evenings, Do you write all your post at work? Nov. 11, 2004 China Strengths Competitiveness – China can provide competition by as much as 50% or more! This has made China a very attractive location for manufacturing. A) Highly Educated Scientific Pool – China has many western educated Ph.D. level scientists Very large number of local resources Many talented chemists and researchers trained for specific areas-such as organic synthesis… B) Lots of Manufacturing Capacity – Government has privatized most manufacturing making an abundance of capacity available C) Large Low Cost Labor Pool – average $15K versa >$100K/employee China Strengths D) Manufacturing Friendly Environmental Laws – waste recycle/disposal is much cheaper! E) Business Friendly Conditions – China is encouraging growth in this area by providing tax breaks and government grants to help build plants F) Government has launched a number of incentive policies to support the Bio/Pharm Industry G) Low cost raw materials – Many of today’s raw materials come from China. By producing VAP in China, manufacturing will have additional saving on transportation, tax etc. China Weakness? Management Skill – To build biotech enterprises, individuals who combine management acumen with understanding of biotech or pharma are required. Strongly influences the market understanding- most crucial in doing business with west companies China Weakness? Lack of funding – limit the size to compete with large foreign corporations. Therefore, this leads to three areas Chinese companies have to face: Generic compounds only Receive a large contract, before the facility build up Smaller projects China Weakness? Communication – Although many people are learning English, very few people currently are fluent. So, communication is an issue. China Weakness? IPR – Weaker IP protection. Post WTO entry, China will have to adhere to international guidelines on patent protection. The country has already put in place the laws required, but has to go a long way as far as enforcement is concerned. China Weakness? Enforceability of Contract – It is very difficult to enforce a contract. Their legal system is opening up since becoming part of the WTO. Still, there are few remedies available for a westerner for breach of contract. China Weakness? Quality – cGMP is somewhat different from western GMP. In China they worry about the quality of the “final” product, not the process. This requires training to implement quality throughout the process. China Weakness? Tools - Much of the instrumentation and laboratory tools used in the west are just not sufficiently placed in China Most importantly, to get a new project accessed, some of the specialty chemicals are not readily available, therefore delay the process/project OR even lead to loss the project Catch the wagons… Set up whole owned Chinese Company Set up a US based company, then JV with another Chinese Company Present one’s IP or proprietary technology and JV with other Chinese Companies: FT commitment PT commitment Present one’s IP or proprietary technology and apply funding from Chinese government: FT commitment PT commitment Join other wagons... Executive Summary-1 • What can I accomplish? • How am I going to get it done? – FT? – PT? – NT? • What resources will make me successful? – can my wife tolerate <RMB 1.0 million life? – I had special connection so I can get free money? – ??? Executive Summary-2 • Mission • Technology • Management • Key personal • Facility • Market Executive Summary-3 • Do not engage in length discussion • Do not give up “principles” • Do not over-estimate your ability • Understand JV’s point and make own point clear early on • Make sure your new venture lasts >24months • Make sure you pick right executives and their contracts in place day 1, particularly for GM & CFO. • Make sure whom you are hiring • Attend as much company activities as possible • Make sure you set up company operation policy early on Chinese Peptide Company No. 69, 12th Street Hangzhou Economic & Technological Development Zone Hangzhou 310018, China Our Mission To develop and optimize manufacturing processes for the production of peptide related biochemical to the customers worldwide To focus on customer needs and to provide products that satisfy the distinct requirements of each client To conduct our business with honesty, integrity, and accountability at all levels To create a safe workplace where employees are compliant with all environmental laws To be the market-leader by leveraging our presence worldwide and by utilizing advanced technologies in product and process development Develop CPC peptide based therapeutics. CPC Management •CEO- Shawn Lee •President •Ph.D., M.D. Akida Univ, Japan. launched 7 drugs (including recombinant proteins, synthetic peptides) in China •CTO •Ph.D. Columbia Univ. 20+ years peptide experience in US •CFO •MBA. Trained and worked in Singapore IP position Patent Pending on its HTP Synthesis Patent Pending on Its Oncology Drug Platform Technology Proprietary Peptide Synthesis Technology Proprietary Formulation Technology Chinese Peptide Company No. 69, 12th Street Hangzhou Economic & Technological Development Zone Hangzhou 310018, China Tel: 86-571-89737011 Email: email@example.com Web: www.chinesepeptide.com We work hard… Azco Offices Wish You The Best Of Success!