ARTICLE FIRST PUBLISHED IN Business Weekly, Guest blog: 15 May 2020

China’s appetite for UK health technology has never been greater. Investment capital awaits us in China if we could only access it, and the vast and growing Chinese market offers us the opportunity to generate the best form of company financing of all – revenue. But have travel quarantines and personal prejudice now extinguished any lingering aspirations to re-engage?

I think not.

There is a way forward, building on what we have learned. But let’s start with that polarisation of opinion:

• “Stop eating bats”; “confess to errors made”; “China has shown its true, dark and foreboding colours”; “leave well alone” say some.
• “China’s turn to lead”; “America’s loss is Britain’s gain”; “strong central government has some merit”; “Come to China” say others.

Both sides are broadcasting their messages with equal vigour, whilst the Dangerous Oaf blunders on, frightening scientists and others with his unending stream of self-promotion at the expense of all else (Dangerous Oaf? What a beautifully succinct moniker that is for America’s 45th President, as coined by Business Weekly’s own editor Tony Quested).

Board opinion of China has polarised too, depending on how a particular company has traded with China in the past:

• Companies that engaged with ‘old’ China as a sub-contract manufacturing base treat the crisis as a catalyst for change. Worried that too much manufacturing power was concentrated in one geography, many Boards had been considering whether to spread manufacturing capacity more widely. The crisis galvanises these fears into action and we will see many companies moving manufacturing to different locations. Interestingly one potentially attractive option that is apparently being considered by many, due to its low labour costs and an increasingly stable environment, is Mexico. I can almost hear the President’s reaction from here.
• But companies linked to the innovation economy see the crisis as a catalyst for change in the opposite direction. It is time to take the growth opportunities unique to the Chinese market. Take healthcare, for example, to understand the opportunity. Only around 15% of the Chinese population currently accesses Western Medicine, whilst the majority still rely on Traditional Chinese Medicine. The Chinese government has set a target of 80% access to Western Meds as an important commitment of government policy. With a population of around 1.5bn this provides an extraordinary opportunity for our pharma and life sciences companies. Imagine, then, if the world goes into a deep recession. Where will new revenue come from? With the statistics above, China will represent one of the few growth opportunities globally, even if China’s GDP goes backwards.

Personally, I come from the ‘Its China’s turn’ camp and have a happily biased view. We held the baton of world leadership once. America took it from us. China is stepping up to run the next leg – and of course the US is resisting handing it over. But new China will surpass US GDP before long and whilst I don’t expect a world dominated by one superpower I do believe that China will be the strongest force in years to come – whether we like it or not.

Much of my China experience has been centred around the now-famous city of Wuhan in Central China. I had never heard of Wuhan before my first visit there but was shown round by a friend at a Chinese contract research firm that I was talking to and he and his colleagues helped me participate in a major local funding competition called the 3551 Talent Program. We didn’t win in the first year, but in the second year we did – generating hundreds of thousands of pounds of what the Chinese call ‘free money’ ie non-dilutive funding from Chinese government sources designed to attract companies to a particular location.

As it happens I was in Wuhan – a City that I have been visiting every two months or so for the last eight years – on the 14th January this year, then flew up to Beijing for meetings with Chinese government ministers before flying back to the UK on 17th Jan, as the crisis took hold. Friends in Wuhan and across China have been giving me a running commentary on the crisis and China’s response since then. In Wuhan right now one’s degree of Lockdown depends on the incidence of Covid-19 in your community – the group of apartment blocks in the gated community you live in. Those with high incidence continue to have strict Lockdown measures in place. Meanwhile Beijing – where Lockdown measures were almost as stringent as those in Wuhan – travel and quarantine restrictions for those travelling within China have at last been lifted. International visitors flying in to Beijing still need to spend 14 days in quarantine, but visitors arriving in Beijing from within China do not. Life is slowly returning to normal.
But here is the problem.

As any China enthusiast can tell you, doing business in China is all about personal relationships and these must be developed face-to-face. It seems that Zoom might come to the rescue, however. Many of us have been re-trained to make initial contacts by video conference over these last few weeks. Just today I have met a tech team on Zoom to discuss use of their cloud service, had a team meeting that would normally have been held in Nottingham UK and had a 1:1 Zoom update with a friend in Wuhan whom I have always previously met face-to-face. He tells me that Zoom and WeChat video conferencing are being embraced but we are yet to prove that the Chinese will accept their use for first meetings once the dust has settled.

But I believe that the promise is there. More importantly we have confirmation that UK companies can participate in upcoming funding events in Wuhan by video conference. This would be genuinely useful and valuable.

Meeting China’s Prime Minister again – Premier Li Keqiang – 17 Jan 2020. Luckily, having just flown up to Beijing from Wuhan, I didn’t give him anything except a copy of my book

Meanwhile the most frustrating consequence of the crisis for my colleague Richard Leaver and me is that we have been forced to put our new growth capital fund on hold. It will come back, but we have decided to develop Team Kapital – our Advisory Division - to lead the way in the short term, with our new colleague and former listed company broker Nicholas Malins-Smith, which will run alongside the fund once it is back on stream. The Dynastybio advisory business is helping UK companies access China, it is using our local teams in China to make the local connections and it is making maximum use of Zoom et al. We are already in discussion with a number of listed and private life science companies who want to lean on our personal networks in China and our first virtual-delegation will be ready soon.

The louder the Dangerous Oaf complains, the stronger the relationship between China and Britain becomes. Grant funding, equity funding, subsidiary set up, market access, accelerated clinical trials and industry partnering are all on offer for our biotech, medtech and pharma companies prepared to make the effort. It is time for empathy, virtual engagement, humility and basic common sense on all sides. Much of that will be difficult for some world leaders. We have to ensure that we are not among them, start looking ahead and preparing for the next big issue of antibiotic resistance, allow ourselves to generate real benefit for UK companies and technologies by re-engaging with new China, and hope that the market realities post Covid-19 help us deliver on the promise of the UK-China relationship.

Wuhan Biolake, two hours flight time west of Shanghai, runs an annual funding competition called ‘The 3551 Scheme for Talents’, providing ‘free money’ to enterprises that bring high quality technology and technical knowledge to Wuhan.

The 3551 competition is a fantastically successful program and is worth entering, if anyone is interested. Winners gain up to £500k in cash for use as you see fit in your proposed project, plus the opportunity to gain a similar additional amount through investment. I haven’t seen the statistics for this year yet, but last year 602 teams applied (very few from the UK), of which 231 were successful in competing for RMB 285,000,000 (about £30m).

My pitch is done: a 10 minute presentation (timed by the officials – warned at 8 minutes and stopped precisely on 10 minutes) in front of a panel of 8 judges.

Over the last 12 to 18 months I have been fortunate enough to gain significant profile in Wuhan thanks to the help of Yangtze River Daily journalist Mrs Xiao and the local Talent Office. The Talent office – a government agency charged with bringing new skilled individuals to Wuhan – has helped us significantly by promoting our participation in the initial application at the start of the year and with advice during the preparation for the pitch. The Talent Office and our local Chinese Contract Research Partner (CRO) were extremely positive about the chances of success. “As long as you don’t make some dramatic error in the presentation, and you show enthusiasm for the competition, your project and Wuhan, then the chance of success is 100%” they assured me.

Of course a ‘sure thing’ seldom is.

The pitch was scheduled for 5pm on Saturday. As is usual in China, this had been changed at the last minute and brought forward by a day. Luckily I am getting quite familiar with the way of doing business here and my team and I had prepared the final documents well in advance. One can never resist tweaking a Powerpoint slide or two right up to the last minute of course, but the pitch was ready and so was the accompanying 2cm-thick, bound A4 book of completed forms and technical descriptions.

I am applying as an entrepreneur, rather than as a technologist, so the submitted information and presentation had to be biased towards descriptions of my experience of innovation and China connections to date rather than on the technical aspects of the Alzheimer’s Diagnostic that we are developing.

At 4:45pm my local Chinese colleague and I are instructed to proceed to the waiting area next to the presentation room: three chairs, in an empty corridor, filled only with reminiscences of waiting outside the Headmaster’s office to be scolded for some misdemeanour. Our mobile phones are ‘confiscated’ – placed in a brown envelope, as instructed, and handed to the stern attendant.

Tension mounts …

Having just flown in from Vancouver, my body clock was challenged. It felt like it was 2am in the middle of the night, my UK cell phone said it was 10am in the morning but my watch told me it was indeed just before 5pm in the evening here in China.

At 5pm the door opened and we were instructed to deliver the so-called Oral Defence of our proposal. My newly appointed colleague Nicole was with me to act as interpreter. “No need for interpreter” stated the leading judge as we entered. “We all speak English here.” It was a ‘brisk’ welcome.

The presentation itself was unremarkable. I am used to the polite but impassive attitude of Chinese professionals when listening to a presentation. Little emotion and little movement is shown. The pitch fitted exactly in to the 10 minute slot as planned – and as strongly advised by the Talent Office.

As soon as the questions started however it became clear that the judges didn’t have the Talent Office’s view of a ‘sure thing’. They dismissed 50% of the presentation with a curt “we all know about you”. Perhaps all the publicity in the local and national newspapers was getting a bit much. “But where is the technical information and research papers?” they asked. “You don’t have biology training” said another “… so how can you possibly undertake this work without a team?” And so on.

I provided all the information that I could. I reiterated the support we have from Professor Graham Ball and Professor Bob Rees, specialists in the relevant fields. I provided details of the CRO partnership that enables me to galvanise a large workforce here in China. And I outlined the extraordinary technical simplicity and elegance of the technology itself. Repeatedly. One of the judges confirmed her own bias – that bioinformatics companies are “just about some numbers, but without ‘real science’”  – whilst another judge clearly had diagnostics knowledge and provided positive feedback when I replied to his highly relevant questions.

But the overall tenor of the questioning was tough, sceptical and unrelenting from a very smart group.

Lively debate was halted abruptly on the stroke of 5:20 – 10 minutes presentation, 10 minutes questions. The head judge said “Thank you” and the judges disengaged. Clearly there was no room for comment or contribution. Our allotted time was up. Nicole and I left the panel to decide our fate, and went to re-claim our phones.

We won’t know the outcome of the panel’s deliberations for almost a month. We shall see. Strangely my prediction is still positive – because I know that we have the relevant data if follow-up questions need to be answered and because I know that what we are doing is extremely popular with the local Talent Office. The Talent Office gets to make the final decision so I hope they really do like what we are doing.

Next year will be the 10^th 3551 competition here in Wuhan. If you want to know more about it for your company and to learn from our experience, then give me a call. I am absolutely delighted to help anyone who wants to access this valuable funding source, to bring a company to Wuhan Biolake or indeed to engage with China in any way.

But be warned: free money is never a sure thing.

Wuhan Biolake after dark

When in China, many government-sponsored science parks vie for your attention and investment.

In my first China trip of 2014 I visited the new science and innovation park in Benxi, just South of Shenyang in the North East of China and only around 100 miles north of Dandong/Sinuiju on the North Korean border, where we sought to engage with the local cluster. Luckily we brought along two products that gained immediate buy-in from the local technologists and we also had significant support from the dynamic Mayor Mr. Hongbin GAO. As a result, we had an extremely successful trip and expect to raise significant funding for development of our European products in Benxi. Is this where I should base all my China business?

Well having come back this week-end from my second China trip of the year – a gruelling twelve-and-a half thousand mile round trip to four locations in 5 days – I would also add Wuhan and Qingdao to the ‘most valuable partner’ list of target locations for UK firms.

From the top:
Benxi, Qingdao and Wuhan

So how do you decide where to locate your business, and how do you go about developing the necessary relationships to make it work – in a country where relationships matter more than pretty-much anything else? The two are closely linked.

The first step is easy to define, but harder to execute: first, be successful in China! Turning up in China and pitching for multi-million pound funding without first showing commitment to the commercialisation of IP in China is unlikely to produce a positive result, or an engaged relationship. Too many Western firms have taken Chinese money and benefits in the past only to depart soon afterwards (without generating anything of lasting value in the local economy) for Chinese investors to put big money up before you demonstrate commitment. So … start small. Demonstrate commitment. Create some short term successes – confirmed partnerships supported by revenue, confirmed collaborations with the local industry, hospitals or public health, or evident progress towards manufacturing of your product – and you will be amazed by how fast the rapport is developed, and how much support you receive.

Many UK firms will be disappointed by this need for upfront commitment (what do you expect when seeking multi-million pound non-dilutive funding from China?) and will be even more disappointed by the next essential: make sure you have China-ready as well as China-relevant products.

• ‘China-relevant’ is easy: this includes any product that addresses issues specific to the Chinese market, ideally referenced by inclusion in the current 5 Year Plan.  As China experiences increased incidence of all the typical ‘Western’ diseases like cancer or diabetes, there is seldom any difficulty in confirming European products as China-relevant.
• ‘China-ready’ is harder but basically means ‘later-stage products’ – focus first on therapies already in the clinic (or devices at least at confirmed prototype stage) if you want Chinese commitment in the form of funding. Once success is established with later-stage products you MIGHT be able to partner earlier-stage technologies. But don’t rely on it. I have seen too many brilliant pre-clinical projects rejected by Chinese investors in favour of super-generics or similar to think that discovery-stage assets fit well with Chinese investors.

Go it alone or spend valuable time finding a partner?

Developing effective Chinese relationships requires the help of a trusted local partner. It has taken nearly three years for us to find such a partner and establish the necessary bonds of trust, but we are now able to connect through our partner with the top Chinese political influencers, mayors, government officials and business leaders on a regular basis. Trusted partners have given us access to Regional Directors and it is through these relationships that the long term regional partnerships have been cemented. You could presumably do this without a local partner but it would take far more time and you would certainly need well connected, dedicated, Mandarin-speaking staff members on your team. For the vast majority of UK entities, working through a trusted partner is the way to go.

As it stands I think we can now confirm Qingdao, Wuhan and Benxi as our top Chinese locations and our connections and partnerships are well established in each of them. At last I can begin to concentrate my China trips on these three. Other centres will continue to compete of course – we will always have interests in Beijing, China Medical City will continue to court us (and has real value despite its location), different conference locations will continue to make themselves known and we will continue to develop our engagement with Shanghai and in particular with the Shanghai Pilot Free Trade Zone (http://en.shftz.gov.cn/).

Regional demand is not uniform however: Like investors anywhere, each Chinese science park has its own priority list of target investments. Not all China-ready projects are attractive to all Chinese science parks. Your local partner – or Dynasty contact if you have one – will tell you who wants what. Then all you have to do is develop a Chinese-centric pitch (with slides in Mandarin PLEASE) and you are good to go.

So what else happened this trip?

I don’t have space to go in to details but many China-classic events featured in my schedule this time:

• The formulaic and formal audience with a local Director (see pic below)
• The signing ceremony, with attendant press (see pic and link)
• The TV interview with a wholly Chinese-speaking camera crew (see pic and video)
• Being ‘announced’ at the start of a conference meeting
• Helter-skelter, breath taking taxi rides (not for the faint hearted – have crashed once so far)
• Bewildering searches for specific office or restaurant locations
• Endemic, rapid staff turnover
• Silent, un-responsive and apparently neutral audiences (which can actually belie a keen interest in what you are saying!)
• Absolute frustrations with slow, intermittent Gmail. And no Twitter or Facebook – Ok the latter is an advantage, as far as I am concerned

New experiences: What is it like to be a patient in China?

Hospital registration and my digital records reference card

I also gained the opportunity to experience Chinese healthcare first hand. Luckily my only ailment was a broken tooth – sustained during a delicious lunch in one of the many restaurants found in the shadow of the Tsingtao beer factory. I was then reminded that all healthcare services in China are delivered through the hospital network, even basic dentistry.

So my long-suffering local interpreter and I headed off to the vast Qingdao Chengyang People’s Hospital (every major City has a People’s Hospital), checked with the hospital doctors in Outpatients that they were prepared to treat a foreigner, registered me with the healthcare system in the Foyer in exchange for some cash, and then headed up to the dental unit on the third floor.

‘Can’t be done’ was the young dentist’s first reaction on being presented with a dislodged ‘implant’ but, after some discussion, he was persuaded to do his best. Thirty minutes later, with my front tooth safely re-fixed but with the dentist’s warning that it was ‘Only temporary because the technology is different’ ringing in my ears, I was back to normal.

All I had to do then was to part with more cash at the front desk and return the completed paperwork to the dentist.

All in all the visit took about 90 minutes, including Registration. But how much did it cost me for this highly efficient service, you ask? Well the Registration was a massive 4.5 Yuan and the dental work cost 20 Yuan. In total that is about £2:50 in English money. Now that is an excellent service!

So I think we know Where. Final thoughts on How?

Well if you insist on turning up in China to pitch a discovery-stage asset, seeking Chinese investment that needs to be paid in to a UK bank account, perhaps even in the form of a long-term equity investment, reliant on a presentation written wholly in English and with no previous commitment to commercialising IP in China then PLEASE … stay at home and save your money.

If, on the other hand, you want to make either a long term commitment to China yourself or to partner with us to ‘borrow’ our own commitment and relationships, then please give me a call. An offer: Honestly, I am delighted to help you either way. Pro bono. Though I sometimes feel like I am playing the role of concerned potential father-in-law checking that a suitor’s intentions are honourable, I really want your marriage to work too – because it is essential to my business that we develop this channel to its fullest potential.

In my experience in China, many locations vie for your attention but each offers different opportunities. If your business deserves that attention, if you find a partner you trust and a location that suits your technology …  then the commercial opportunities are limitless.

Click here for About Us or here to contact Simon

Footnote: 1> I hope to confirm completion of successful fundraising for Dynasty projects from all three locations within the next 6 weeks. Exciting progress. Fingers crossed. 2> See this link for access to China’s 12th 5 Year Plan (Healthcare development)

 

Here are some links to our top three sites, and my own comments on each:

Wuhan Biolake: http://en.biolake.org/ The Wuhan story is another of those remarkable tales of Chinese growth. Less than 10years ago the science park area was farmland and lakes. Now the first 15 square kilometre development area bristles with young, innovative companies plus a few large players (like Pfizer and Wuxi Apptec, Bayer and Thermo Fisher). This has created a powerful cluster, enhanced each year by the extraordinary 3551 Grant event. Now in its 7^th year Wuhan has invested millions of dollars each year in companies prepared to bring IP and/or senior staff to Wuhan. (See http://www.dynastybio.com/china-beckons/ for details).

Qingdao: http://english.shandongbusiness.gov.cn/public/area/qingdao/ My engagement with Qingdao has been galvanised by connection with Mr Chen, the driving force behind its development. Mr Chen’s vision is to combine science with creativity in the region – a thesis that I have advocated elsewhere for some time. Others will think of Qingdao as the location of the sailing contests in the Olympics, or the home town of Tsingtao beer (no one seems quite clear as to why the beer and the City don’t quite have the same spelling but it is apparently something to do with translation in to German). But for me this is the location where innovation and artistry meet. And med devices find a welcome home here. http://lanmu.qtv.com.cn/system/2014/03/29/011271502.shtml

Benxi: Benxi is probably the young upstart of the three (though Qingdao is new on the scene too). Up until recently the technology development in the former heavy industry region of Liaoning Province was concentrated around Shenyang. However, following a change of leadership, the technology spotlight has now settled on nearby Benxi. Some still remember the region, sometimes without much fondness, as the home of state-owned, lumbering iron and steel companies. This past probably helps explain why Benxi seeks the manufacturing end of the life sciences sector as its new tenants but there is some appetite for a broad mix of commercialise-able healthcare businesses here.

Signing ceremony: Qingdao National High-tech Industrial Development Zone

The Qingdao hospital: faultless service

Formal meeting with the Qingdao director.

Benxi Mayor Mr GAO with the Vice-Mayor and Jun REN CEO of NSB, inspects the new NSB office – nearing completion.
Future Dynasty Centre?

Meeting the Wuhan leadership: Executive Vice Director Mr YAN

Meeting the Qingdao Hospital director Prof. Sean Qu and team

Dynasty Biotechnology is pleased to announce commencement of a major partnership with Cambridge-based Nuformix in a long term, multi-product agreement.

The Nuformix biobetter products fit perfectly within the Dynasty portfolio of China-relevant assets to be developed and commercialised in China and rolled out to non-China markets. “We are delighted to be working with Nuformix and to come to agreement on the first set of assets,” commented Dynasty CEO Dr Simon Haworth. “We look forward to a long and fruitful partnership – between the Nuformix cocrystal technology and Dynasty’s China access and dedicated funding stream.”

Following market testing Dynasty Biotechnology is open for business and looks forward to engaging with other UK biotechs seeking access to this unique funding source. UK-based funding is now rare for development of products past the initial research phases, through to IND and beyond and Dynasty’s Chinese funding model opens up a whole new opportunity for the UK to use its world-leading innovation capability to address key global healthcare issues.

“Many have speculated about the potential for application of Chinese funding. Fortunately for UK biotech, we have now found a model that works for both sides” commented Dr Haworth.

Contact:
Dynasty Biotechnology is a Team Kapital investment: www.teamkapital.com
Dr Simon Haworth, Dynasty Biotechnology: simon.haworth@dynastybio.com 020 7060 4260
/ends

This China trip is part of what appears to be my Grant Application Month. First there was the BioCatalyst and European grant applications for my Nottingham spinout, then the long slog of the RGF Round 4 application for the China-UK-China business and now the 3551 Talent Grant application in Wuhan for our Chinese subsidiary (our Chinese operating license was FINALLY received on 13^th March, just 9 short months after we started the company setup process – a process that would take around 24 hours in the UK).

The 3551 application takes place on the Wuhan Biolake Science Park, Hubei Province some two hours flight time West of Shanghai. The park itself appears to be something of a miracle to UK eyes. Prior to first breaking ground in Nov 2008 it was a greenfield site (and lake). Now it houses over 400 companies in a 15 square kilometre area, developing interconnected parks for startups, bio-pharma, med-devices and agricultural biotech and generating around £4bn per annum in revenue. Not bad for its first five years of existence. http://en.biolake.org

The annual 3551 Talent Grant is in its 6^th application year now and the process is pretty slick. After a written submission is assessed, around 100 lucky applicants get invited to the famed Oral Defence. You don’t get much notice so UK applicants need to have visas ready! The Oral Defence is a highly regimented pitch involving a 10 minute presentation (strictly timed, with a buzzer to stop any academic daft enough to try to actually explain his or her technology in that time), with slides formally submitted in advance and a 10 minute question and answer session. Mobile phones are confiscated by officials before one enters the room and the judges’ names and identities are withheld. Unlike in the rest of Chinese business, giving gifts to the judges is forbidden. No golfing hats this time.

Most of the judges, of which there are 10 arranged in a wide arc in-front of the applicant, are strictly Chinese speaking so an interpreter is essential (actually you get 5 extra minutes of presenting time as a result). Interestingly the focus really is on the talent – if we don’t get through (there is a 50% hit rate) then it will be because I didn’t bring one of our Professors with me. The Chinese love Professors. The judges expect that any successful applicant will spend at least half their time in Wuhan – though the term ‘in Wuhan’ seemed to be interpreted pretty liberally by the handful of hopeful non-China-based companies in attendance.

China supports its winners, whilst in the UK we all too often seek to prop up the losers and least able.

The 3551 series has been extremely successful for the Park in bringing biotech talent to the region. Not surprising when the grants on offer are what the Chinese call “Free Money” ie money with very few conditions attached (and certainly no equity requirements). The Wuhan officials will offer further grants if a company is successful, with increasing sums on offer. In effect, a 3551 grant is your intro. After that Wuhan will support you every time you can show that you are successful. This again is a difference between China and the UK. China supports its winners, whilst in the UK we all too often seek to prop up the losers and least able.

But if the pitching process was slick, the rest of the trip was anything but – a typically Chinese smoky blur of private, alcohol-fuelled round-table dinners, running for rearranged flights after enduring helter skelter (cheap) taxi rides hooting our way over the pot-holed motorways, late nights, early mornings and chilli with everything in Wuhan, Spicy Food Capital of China. With an Indian-born wife I am pretty familiar with spicy food. But at breakfast too?

On one’s own when in China one tends to live in a private bubble, separated from the world by your lack of language skills. Whilst travelling, this can merely be disconcerting. Whilst trying to understand the banter between judges during questions in the 3551 pitch, or when being asked to sign a bank document placing a signature next to a few Chinese characters that are your Chinese company name and director title, the language barrier is immense.

in China we must go fast. All the time.
There is no time to consider

I don’t like being in the bubble one bit but what can I do about it? I have decided that language is the first step so the Chinese lessons are underway. They haven’t gone far just yet – I aspire to one day speaking Chinese as well as my two year old currently speaks English – but I will persist with the weekly one-to-one lessons with Leila in Shanghai via Skype, and have promised my team that I will present in Chinese at the end of our two year product development schedule. The natural Anglo Saxon reaction to the Chinese love of chaos meanwhile is to try to cure it with some organisation. This appears futile. “Oh we wish we had time to go slowly” groaned a Chinese colleague, with both pride and despair “but in China we must go fast. All the time. There is no time to consider.” If you are clever enough to find a local partner whom you trust as your eyes and ears in China, then be prepared for a hectic ride each time you visit.

My trip to China this time was incredibly short – arrived on Sunday and flew out again on Tuesday – so the only other activity of note that I managed to do in addition to the grant pitch was to set up a bank account for our new Chinese subsidiary. This process is different too (of course). We wanted to set up the account with HSBC whom we bank with elsewhere in the world but this is not as easy as it sounds because the Chinese entity is entirely separate from the UK bank, and subject to different rules and regulations. Some Chinese advisors would say that we should instead set up with a local bank more accountable to local partners but my Board are cautious of Bank of China or similar.

Bizarrely HSBC’s office in Wuhan is set up in a business facility within one of the local hotels. We needed to set up both a Capital Account for transactions to and from the UK and a local Renminbi RMB account. We can control each account via the internet BUT any transfer between the capital and local account need to be evidenced with an original copy of the company ‘chop’. This is like the old wax stamp that we used to have in the UK, but is a red ink printed stamp (or one of four alternative stamps) used to evidence company ‘signatures’. I also needed to confirm my identify by passport, and to make the usual specimen signatures. In China you have to do this under the eagle eye of a digital video camera (actually the local HSBC representative then had to act out a farcical ‘passport check’ for the benefit of the cameras too). Banks have additional responsibilities in China – including the reporting of transactions to the local tax administrators. But the outcome is: we have a new Chinese subsidiary, new Wuhan bank account and we might just get some local funding to accelerate our product development.

So what else did I learn this trip?

Firstly, I had forgotten about the famed One Child policy first applied in 1979 and applicable to families living in cities. This policy fines city-dwelling parents that have more than one child (most rural families can apply to have a second child if their first-born is a daughter). Implications, apart from some reduction in population growth rate as targeted by the measure, are only now starting to be understood. In the UK we worry about the age distribution of our population and the burden of an aging population on those in employment. In China the issue is already extreme: the one child policy has resulted in a marked imbalance in population. The spoiled Little Emperors of the one child policy, used to getting everything they desire from their two dedicated parents and four dedicated grandparents, are now growing up to realise that they will need to support up to 6 dependent relatives each – the so-called “4-2-1 Problem”. This will result in an inevitable welfare crisis. As a result the policy has been relaxed a little – parents who are both single children themselves are now permitted to have a second child – and the policy may be dropped altogether before long. But some estimates suggest that by 2020 China will have a higher proportion of elderly dependents than any other country. Tough to cope with, even with 7% or 8% annual growth rates.

Secondly, I forgot how little coffee is consumed in China, unless one is in one of the Western hotels. After a couple of days, the caffeine levels drop and the headaches remind you that even Starbucks would be welcome (actually you can now find most of the big coffee brands, as well as shops badged with logos remarkably similar to US brands, in all the main centres but I just never get round to frequenting them when I have so much traditional fayre on offer).

Thirdly, the gift tradition starts to rub off on you. Having arrived in China suitably laden with golfing hats from Scotland, scarves from Burberry, red wine from France and cook books from England I find it hard to return empty handed, even from such a short trip. So … teas, Chinese shawls, beautiful kites, red jewellery and a particular Chinese snack beloved by my eldest son as a result of his recent three month Internship in Shanghai all have to be stacked in to the overhead locker on the plane. But I do love the relationship culture and gift giving.

this article’s simple message can be summarised in three words …

And finally? Well re-reading what I have written I began to worry about the rambling content of this piece and to wonder what the real message was that I wanted to get across when I started. An offer to help others access Chinese funding is certainly part of it. But most of all I think that, beneath the meandering account, the simple message can be summarised in three words: “Come to China”.

So I arrived back in the UK last night, and back to Grant Application-like activities as I summarise our research work in support of our current R&D Tax Credit claim. But I fear that my heart is still elsewhere.

“This is an extraordinary step for an early stage technology company and allows us to put a significant capital sum to work,” says Chief Executive Dr Simon Haworth. “The China deal provides a shop window for how our technology can be applied in a diagnostic setting and helps us prove the viability of our technology platform to potential pharma and mid-cap partners interested in patient stratification for clinical trial purposes.”

“The nature of Chinese funding support

is creative to UK eyes”

The nature of Chinese funding support is creative to UK eyes: cash is being provided by both government and private sources on a non-dilutive basis. ‘Investors’ gain a proportion of downstream revenue from successful products sold in China, rather than equity in the company. Pace of product development is also enhanced in China with work accelerated in comparison to UK and US markets by the nature of the regulatory regime, and the willingness of major regional Science Parks to provide funding for accelerated development (for products relevant to the Chinese marketplace and regulations). Details of the CompanDX China office will be released shortly.

CompanDX expects to generate revenue from Approved products in under three years. If you are interested in raising funds in China then Simon is happy to help.

Contact: Dr Simon Haworth simon.haworth@companDX.com

Website: www.compandx.com

About CompanDX

CompanDX is a spinout from the School of Science & Technology at Nottingham Trent University and was established by Professors Ball and Rees in 2009. The company originally secured investment from the Lachesis and Mobius funds and marketed support services for research on a Fee-for-service basis. In 2012 the team re-focussed the business beyond oncology to wider applications in the fast-growing field of personalised medicine through drug re-development and trial involvement for all major indications.

The Management Team includes Dave Tapolczay, Chairman (CEO of MRCt), Dr Simon Haworth CEO (Founder of Team Kapital and Team Ventures), plus Prof. Graham Ball (Director) and Prof. Robert Rees (Director) of the J van Geest Cancer Research Centre in Nottingham.

CompanDX is located at BioCity Nottingham and the new Stevenage BioScience Catalyst.

China is a heady drug for anyone involved in biotech, cleantech or IT, representing a massive potential market, a source of significant funding – both in terms of grant and investment – and offering the potential for rapid product development. It is also a frightening, challenging, bureaucratic, unknown business environment with alien culture and, at first sight, inpenetrable language.

This series of blogs will chart my progress or otherwise in China. It won’t quite be an Asian version of ‘A year in Provence’, the famous 1985 autobiographical novel by Peter Mayle, because family commitments prevent me from actually moving out to Wuhan but this series will, I hope, give you a flavour of the journey and perhaps even provide a few useful hints along the way. So what else is it not? Well, despite the title, it is not I hope about an accelerating chase towards an unachievable perfect high. I hope not, that is, but time will tell. Also, it is not about the ‘why’ but is more about the ‘how’.

So first of all let’s recap on the place itself. China in 2012:

• Where is it?
• Who lives there?
• How do I get started?

China today: Where is it?

This sounds like a daft question. But go look at the map and the link below and you will probably have a surprise or two. Check out the North East boundary with Russia through to the South Western boundary with India and Pakistan. Singapore, off the map south of Thailand but firmly in Asia to a western eye, is actually some 5 hours flight time away from Beijing, in the North East – a similar flight time for London to Boston. North Korea, South Korea and Japan are apparently minor limbs projected from the North Eastern shores. (see here for a wider picture of where China fits: http://ow.ly/9ZhcL)

China today: Who lives there?

The population is massive, as we all know: the current population is estimated at about 1.3bn to 1.4bn, just ahead of neighbours India. But these Chinese multitudes live in a country almost exactly the same size as the USA (slightly bigger if one includes Mongolia, but slightly smaller if not) and around half the size of Russia. The USA and Russia have respective populations of around 300m and 140m. To any biotech CEO, 1.3bn is a lot of patients. Without the famous one-child policy implemented in 1979 the population would probably have been some 300m or 400m more.

But the population spread is far from even with the majority living on the East and Coastal regions (apparently because of the historic value of access to water). Over 50% of China’s total population lives in rural areas, there are more men than women, and the population is both ageing and succumbing to ‘western’ diseases (heart disease etc). Inadequate heathcare access and the prevalence of a Chinese phenotype make application of Western medicines more difficult than one might expect. Meanwhile continued reliance on smoking (perhaps linking to the TB issue) and growing obesity and heart disease problems make reform of the healthcare system an ongoing priority.

China today: So how do I get started?

Well this is where my story really begins. I have taken on an interim CEO role for a company for whom I was raising funds. The CEO was forced by illness to step down long term and Yours Truly was asked to step up. Initial relationships and the prospect of product development for a number of diagnostics was already in the pipeline when my involvement began. But my immediate task was simple: to see if the relationships were with Chinese parties whom we could trust, and to assess what form of entity to establish in China (don’t forget: I am not revisiting the ‘why’ here).

We can ponder trust in a moment or two, but first: what about structure?

These days there are a number of possible forms of business structure in China that one can consider. The primary option, however, is either to use a joint venture or to create a Chinese subsidiary (a JV or a WOFE – Wholly Owned Foreign Enterprise). I am pondering this choice now, with the help of various UK-based Chinese intermediaries and China-based lawyers, and it seems to boil down to:

• if you plan to exploit local grant funding as your primary funding benefit then work through a joint venture, attracting grants because of the involvement of your local partner
• if you seek to raise significant equity investment from Chinese sources, then set up a company via the WOFE approach

After the reams of advise that I have been given on the topic this seems unnaturally simplistic. But it is how I see it right now, meaning that we will set up a WOFE (which takes about three months and involves a greater degree of form filling, side letter preparation, proposals to local officials and provision of signatures than one could ever imagine possible). This also throws up an interesting test: whilst we might arrogantly assume that the global language of business is English one can expect to find that all contracts are in Chinese, perhaps with English translation alongside.

Simplified diagram of how to register your new subsidiary

How do you feel about signing such documents? If you get a translation, how do you know that the translation is accurate? Furthermore Anglo Saxon contracts tend to define as many details as possible, addressing potential consequences and buttoning down all material items. Chinese contracts appear benign by comparison, incorporating positive statements but few facts.

So far we have progressed without issue. We have verified translations. We have details inserted in contracts where we wanted them. And we have the promise of investment money flowing in to accounts where and when it should. All I have to do now … is sign.

Which of course brings us to: the issue of trust.

If one goes ahead with setup of a new operation in China as a JV, a WOFE or in some other format then one is going to have local partners. These folks will be your eyes and ears on the ground, at least until you can appoint local staff. One hears many stories of an apparently trustworthy local partner suddenly revealing their true colours and disappearing with the cash/IP/products/customers etc (fill in whichever Key Asset relates to your situation). Of course many such stories are also recounted in the UK about setting up in the US in ‘the old days’. The fact of the matter is that one needs to mitigate the risks:

- IP and technology: our technology involves the analysis of large data sets but, with a bit of work, we can do this remote from the data collection. That means we can keep the technology in head office in the UK. We will need to disguise the analysis that is undertaken in China to hamper reverse engineering of the product. And we need to remember that IP is typically lost in the head of a departing employee rather than in the form of a blueprint in the pocket of an outside thief.

- Motive: we are all out to make a profit. Some seek to do so without consideration for ethics. In our case we are lucky that our Chinese partner is currently engaging in a major US deal and needs to establish exceptional credibility through its honest actions. We know that losing ‘face’ in China is important in the business culture and our partner has much to lose if they slip up on our relationship.

- relationship per se: if it feels bad but sounds good well … find another partner. In the end I have to put a considerable value on interpersonal relations. We have taken time to visit our partner and to get them over to London. We have spoken to reference sources AND listened to what they have told us. References matter (particularly if you pick the references) but I still trust my own instinct after years of team building. What else can one do?

The answer of course is: drink the wine – the clear, fiery, 50% proof distilled variety. There will be many toasts to come, I am told. More headaches. But for now I step boldly forward, pen ready. Optimistic. Very comfortable with our chosen partner. And trusting. (Phew! It is a long time since I have been so hyped in business).

China here I come.