Main Subject - Business

Three primary investment forms are commonly used by foreign companies to establish a permanent presence in China -- the Sino-foreign Joint Venture, the Wholly Foreign Owned Enterprise, an

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

d the Representative Office.

Sino-Foreign Joint Ventures

This investment form requires the foreign company to team up with a Chinese partner. As Chinese companies are typically short on

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

money (particularly hard currency), the foreign partner usually provides the bulk of the funding while the Chinese partner supplies land use rights, deals with the Chinese bureaucracy, a

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

d helps recruit employees for the venture.

Sino-foreign Joint Ventures can be divided into two types -- (1) Equity Joint Ventures, and (2) Cooperative Joint Ventures (also known as Contr

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

actual Joint Ventures). In an Equity Joint Venture, the parties are obligated to divide their respective contributions to the joint venture (whether in cash or in kind) into discrete rati

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

s, which ratios must be strictly adhered to when apportioning profits both during the venture’s operation and after liquidation. In a Cooperative Joint Venture the parties need not calcul

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

ate a contribution ratio for each partner and thus may freely apportion profits according to the terms of a negotiated Joint Venture Agreement. Cooperative Joint Ventures are often used f

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

or Build-Operate-Transfer (BOT) projects.

Wholly Foreign Owned Enterprises

Known affectionately among old China hands as the WFOE (pronounced ‘woofie’), this investment form allows 100%

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

foreign ownership. It is attractive to the increasing number of foreign investors who already have business experience in China and thus don’t need to rely on a local partner to hold thei

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

r hand as they make their way through the byzantine corridors of the local market. It is also popular among less experienced investors who want to avoid the hassles of dealing with a Chin

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

se partner.

Some industries are off-limits to 100% foreign ownership (there are even a few sensitive industries in which participation by Sino-foreign joint ventures is prohibited), but

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

WFOE regulations have recently been relaxed in compliance with China’s WTO obligations -- certain restrictions have been eliminated concerning WFOE export volume and technological capabil

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

ities that once forced many investors to choose between either working with a Chinese partner or substantially modifying their business plans to conform to WFOE regulations.

Representati

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

e Offices

Although the establishment of a Representative Office (“RO”) is by far the most popular first step for foreign companies seeking a presence in China, it is not an investment ve

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

hicle per se. Strictly speaking, it is not even a company. It is barred from carrying out direct business activities -- it may not receive fees for its services, and its staff may not eve

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

sign contracts (although unfortunately, under certain circumstances it can still be taxed by the Chinese authorities). It is normally used for purposes such as market research, product s

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

ourcing, and liaison. The RO is popular among foreign investors as a way of establishing a company presence in China, and as a preliminary step aimed at learning enough about the Chinese

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

market to minimize reliance on local partners in future ventures. The main advantage of an RO is that it is relatively quick, easy, and inexpensive to establish.

The foregoing investment

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

forms are not the only options. Some companies prefer investment in or acquisition of existing Chinese companies, and various cooperative arrangements with Chinese companies (such as comp

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

ensatory trade, processing and assembling, etc.) are gaining increasing acceptance because they can spare a would-be investor from the risks of establishing a Chinese company from scratch

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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