Sinphar Pharmaceutical Co.
Old Pharma Shifts to New Cancer Drugs
No longer content producing low-end remedies, Sinphar is moving away from contract manufacturing toward brand-name products. Chairman Tim Lee is seizing the initiative in developing new breast cancer drugs.
Old Pharma Shifts to New Cancer DrugsBy Whitney Huang
From CommonWealth Magazine (vol. 526 )
For 31 consecutive years, cancer has topped Taiwan's list of 10 most common causes of death. Each year, an additional 80,000 people in Taiwan are diagnosed with cancer. Specialized chemotherapy drugs for the treatment of cancer have become a paramount public health concern worldwide and a primary battleground for the captains of big pharma.
Amidst the fray, Sinphar, a small local pharmaceuticals maker, has begun to shine. Of the 110,000 doses of the chemotherapy drug paclitaxel sold in Taiwan last year, 70,000 were produced by Sinphar.
A veteran producer of generic drug ointments and liquid preparations for the treatment of athlete's foot and eczema founded 36 years ago, Sinphar posted outstanding performance during the first half of this year, despite a sluggish economy, with earnings per share of NT$0.81, besting its performance for all of last year, one of the few biotechnology companies to buck the trend and show growth.
Looking Abroad amidst Growth
Sinphar's breakout in the intensely competitive biotech sector is largely attributable to two new drug patents, for both the raw materials and extracts used in the manufacture of "Tian-Li Memoregain" (cistanche tubulosa glycoside capsules), an anti-dementia drug the company spent years developing, which its China subsidiary, Sinphar Tian-Li, has sold to various pharmaceutical companies in the China market, reaping 55 million renminbi in royalties.
Aside from new drug development, Sinphar has begun casting its eye abroad.
In late May, SynCore Biotechnology Co., Ltd., a Sinphar subsidiary founded less than five years ago, acquired a roughly six percent stake in MediGene (MG), the first German biotech research company to generate income from products on the market, becoming MediGene's single biggest shareholder in the process.
Thus Sinphar is to have representation on the MG board of directors, where it will have a voice in company decision-making while overseeing final development of MG's new breast cancer drug, currently in its third (and final) stage of global clinical trials. The deal also brings with it drug patents and rights to future production for global markets as well as rights to develop new treatments for other diseases using the drugs.
R&D Strength in New Herbal Medicines
Sinphar is now undergoing a radical transformation. Tim C.W. Lee is looking to morph Sinphar's image as a low-technology medicinal ointments and preparations brand into that of a high-end brand-name developer of new drugs.
Acquiring the stake in MG was a major first transformational step. The United States' Food and Drug Administration has granted MG approval to market two of its new drugs, one of which, used to treat sexually-transmitted genital warts, is the first new drug derived from traditional Chinese medicinal herbs to receive such approval.
Development of new drugs derived from Chinese medicinal herbs has always been an area Sinphar has aggressively pursued. With the acquisition of the MG stake, "we've made a great leap in level of experience," says Tim Lee, reckoning that Taiwan lags at least two to three decades behind Germany in its ability to develop new drugs.
Additionally, to go along with the patents and technological platform of its new breast cancer drug currently in the clinical testing phase, Sinphar will have an opportunity to apply that to the development of other cancer drugs.
"That's what I considered the most important aspect. It's a priceless gem," Lee says.
Sinphar's big moves have been a jaw-dropper for outside observers.
Sinphar isn't particularly large. In this year's CommonWealth Magazine survey of Taiwan's 2,000 largest companies, Sinphar broke into the ranks of Taiwan's top 1,000 manufacturing enterprises for the first time, checking in at number 948. Its operating revenue ranks just 17th among Taiwan's 28 pharmaceutical and biotech companies.
"Actually, they don't completely understand Sinphar," the 65 year-old Lee, clad head to toe in a jet black suit, says in a tone at once calm yet with a hint of resignation.
In fact, MG's willingness to join Sinphar in "matrimony" had much to do with the latter's technological capabilities.
Sinphar was the first Taiwanese pharmaceutical manufacturer to produce a generic version of cistanche tubulosa extract after the original patent expired. Last year, 60 percent of such drugs consumed in Taiwan were produced by Sinphar.
"Initially, nobody thought we could do it," Lee recalls. But he refused to be deterred, taking on a challenge that raised more than a few eyebrows.
Sturdy as an Elephant, Keen as an Eagle
Sinphar has provided a template for how to transform from a contract manufacturer to a brand name in the pharmaceuticals industry.
As Wu Ming-fa, CEO of the Institute for Biotechnology and Medicine Industry and an expert on Taiwan's biotech industry, observes, Sinphar started out as a sales agent for pharmaceutical products. After gaining market experience, the company built a manufacturing plant and became a cooperative partner with major international pharmaceuticals manufacturers like Roche and Pfizer. During more than a decade as an international contract manufacturer, Sinphar laid down a strong foundation for the research and development of new drugs.
At the entrance of the R&D center at Sinphar corporate headquarters sit sculptures of an elephant and an eagle brought from China's Xinjiang region. Sinphar executives say the sculptures symbolize their hopes that the company can be as sturdy as an elephant and its business acumen keen as an eagle.
In the person of Tim Lee, the characteristics of the eagle are particularly evident.
Lee, a native of Yilan and the only son of a fabric store owner, grew up with three older sisters, the oldest 11 years his senior. After losing his father at age 14, he then lost his mother while a pharmacology student at National Kaohsiung Medical University. He learned early on that he would have to be bold in trying things for himself.
By age 26, Lee was already Taiwan sales director for U.S. pharmaceutical maker Parke-Davis. When Parke-Davis was acquired by another company, the likelihood that the new bosses would send executives directly from the U.S. to replace local Taiwanese sales managers led Lee to jump ship, and start his own business around the age of 27 or 28.
At the outset, Lee's enterprise was making ointments. At the time, one tube of Taiwan-made ointment cost less than NT$10, one quarter the price of foreign-made brands, he recalls. Lee elected to go the high-end route, pricing his company's products right up with foreign goods, in some cases even higher. This was considered an extremely bold move for a Taiwanese pharmaceutical maker.
Meanwhile, he was mimicking the marketing techniques used by foreign companies for new drugs, giving away huge amounts of samples to doctors and hospitals, increasing the opportunity for doctors to give away ointment samples for patients to try. Gradually, as word of mouth spread among those patients, the orders started coming in, and the company's products began turning a profit the first year.
"When you have faith in your products, you need to be a bit bolder, and I definitely cast out the best bait I could to catch the big fish I was looking for," Lee says with pride. In its 36 years in business, Sinphar has never posted a year in the red.
Pruning Clients to Secure Sales Channels
Lee's management style also differs significantly from that of more conventional pharmaceutical makers.
"A great lake must have more than one source," Lee believes.
Thus Sinphar developed a line of more than 400 products, including medicines (accounting for 59.9 percent of operating revenue), health supplements (35.7 percent), cosmetics (3.3 percent) and other medical supplies (eye drops, 1.2 percent).
Having gotten his start on the sale end of things, Lee was even more aware of the importance of securing distribution channels. Acting on his own initiative, he began "pruning clients" and shifted toward specialized "Sinphar counters" in pharmacies.
Previously, Sinphar maintained working relationships with around half of the more than 8,000 pharmacies in Taiwan. Currently, however, it has partnership agreements with just 1,350 pharmacies, where dedicated "Sinphar counters" are maintained. Contracted pharmacies have dedicated sales staff, knowledgeable about Sinphar products and uniform pricing.
At the outset of Sinphar's sales and marketing campaign, internal corporate projections forecast a worst-case scenario of a two-thirds decline in sales through pharmacies, says Sinphar Taiwan general manager Pei Yu-liang, a 28-year veteran of the industry. To their surprise, sales ultimately remained stable, indicating the role played by each pharmacy had grown, and proving the strategy had been correct.
Gaps in Product Line, Challenges Remain
Yet there are those in the business that question the exclusive counter branding strategy. They fear that with no discernible target demographic its efficacy in attracting customers is limited. What's more, Sinphar continues to lack a true "star product," making a true sales breakthrough through the retail counters difficult. This is another challenge Tim Lee will have to confront.
In addition to distribution channel arrangements and introducing exclusive counters, Lee also delved into research and development of new drugs to spur corporate growth.
Over the past several years, Sinphar succeeded in developing in China a new plant-based drug for the treatment of vascular dementia, the primary ingredient in which was cistanche tubulosa. The company has also received U.S. FDA approval for two new drugs derived from traditional Chinese medicinal herbs for the treatment of Alzheimer's Disease and cardiovascular disease, both of which are currently in stage two clinical trials.
"Sinphar is one of a handful of biotech companies that have real strength in herbal medicines," opines Wei Yau-huei, dean of Mackay Medical College and a former head of the National Science Council's Biotechnology Section.
Yet Sinphar's new drug research is not limited to new plant-based drugs, extending also to drugs for the treatment of cancer and age-related macular degeneration.
Several pharmaceutical industry insiders, however, point out that development of new drugs is difficult, often involving huge investment with little or no return. They say it remains to be seen whether Sinphar's effort to make the jump from contract manufacturing to independent developer of new drugs can bear fruit.
But Lee's temperament will not permit him to concede defeat as he takes his next bold step for Taiwan's biotech and pharmaceutical manufacturing industry.
Translated from the Chinese by Brian Kennedy