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November 4, 2002
Volume 80, Number 44
CENEAR 80 44 p. 20
ISSN 0009-2347


PROFILE

A CHINESE-AMERICAN BALANCING ACT
U.S.-based fine chemicals producer Asymchem does all its production in China

RICK MULLIN

Hao Hong, president of Asymchem, has spent seven years balancing the use of inexpensive resources in China with the need to maintain U.S. standards in manufacturing and business management. The task will soon grow more complicated and the stakes higher, he says.

The custom synthesis firm, with $3.3 million in sales last year, is investing $10 million in its first current Good Manufacturing Practice (cGMP) plant in Tianjin, where it began manufacturing intermediates in 1998. Asymchem, a U.S. company based in Research Triangle Park (RTP), N.C., currently does all its research and manufacturing in China.

Hong, who was born in Beijing and received his doctorate at the Chinese Academy of Medical Science, founded the company in 1995. He says his earliest experience in business taught him that opportunities in the pharmaceutical industry can only be pursued with proper know-how and good connections.

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Hong ASYMCHEM PHOTO

In 1993, he says, a group of investors in Singapore hired him fresh from his post-doctoral work on anticancer drugs at North Carolina State University to start a small pharmaceutical company in the U.S. "After about four or five months, I realized they did not know anything about the U.S. pharmaceutical market," Hong says.

Hong, on the other hand, already had several business contacts in the U.S., and with the promise of orders from Lancaster Synthesis and Aldrich Chemical, he started his own company in RTP focused on kilo-scale custom synthesis. Soon, Hong says, the company was getting orders from Merck and Pfizer to produce products in volumes up to 100 kg.

Unable to invest in a larger operation in North Carolina, Hong contacted friends in China and arranged a deal with a Chinese export company under which his company--then called Chirachem--would contract local firms to manufacture intermediates to be shipped by the export firm.

That didn't work. "After one year, I realized I couldn't control the quality or lead time," Hong says. "I almost screwed up the first delivery to Merck." He managed to get a $500,000 order shipped to Lancaster under this arrangement, but the turnaround time was 10 weeks and he had to be on-site managing the project. "I realized there was no way to service the U.S. market working with any Chinese company," he says.

Hong decided to set up his own company in China and launched Asymchem Laboratories Tianjin, a fully owned subsidiary of Asymchem USA, in 1998. The firm set up research and small-scale intermediates manufacturing in the Tianjin Economic & Development Area, China's largest technology park.

Hong spent $260,000 setting up business on 17,000 sq ft in Tianjin, transferring the company's U.S. manufacturing facilities in the process. Asymchem purchased much of its equipment from failed government pharmaceutical and fine chemicals manufacturing ventures, Hong says.

Asymchem moved on from custom synthesis of chiral compounds to also producing boronic acids, pyridines, and various heterocyclics for drug discovery, biotech, and pharmaceutical clients. Last year, the firm opened a raw materials facility in Fuxim to serve the Tianjin site. The new facility performs fluorochemistry, chlorination, reductions, and other classic reactions.

Asymchem also has a joint venture in Zhejiang with the Chinese industrial company Haizian to produce mercaptans. Currently, 80% of Asymchem's sales are to Europe and the U.S., with most of the rest to China.

Hong says that will soon change. Once cGMP manufacturing is in place, he says, the company will shift its focus to China with an emphasis on active pharmaceutical ingredients (APIs) for generic drugs. Eventually, he says, as much as 60% of sales will be in China.

The firm, which has grown thus far with no debt, was able to amass $10 million for its move into APIs in Tianjin through bank loans and private and government investment, Hong says. The first cGMP facility, a pilot lab, will be completed in December 2003.

A second plant will come on-line in 2005, and a commercial-scale API facility--with fermentation and enzyme resolution--is scheduled for completion in 2007. Hong says the company will begin producing APIs for the Chinese market only at a non-cGMP plant currently under construction in Fuxim at a cost of $1.5 million.

ON ANOTHER FRONT, Hong says he is beginning to conduct bioorganic screening on a compound for small-cell lung cancer that he has been developing for six years. He hopes to be into Phase II trials by the time API production comes up to speed in Tianjin in 2007. He says the compound, which is not covered by any patent, would compete with a GlaxoSmithKline drug that is not marketed in China.

For a start-up company, Asymchem has had good traction, more than doubling sales annually in the early years. Sales this year through October reached $4.5 million, Hong says, and the company projects it will hit nearly $8 million next year based on recent orders.

Hong says, however, that if the company succeeds on all fronts--launching commercial API production, ramping up generics sales, and winning approval for the anticancer compound--it may hit $40 million in sales by 2007. He admits this may require forming a joint venture for large-scale cGMP production.

In the short term, Hong, who received U.S. citizenship four years ago, hopes to resume research in the U.S. "In two or three years, when I have enough money, I will rebuild my old lab," says Hong, who currently spends half the year in North Carolina, and half in China, alternating monthly. "I'll recruit 10 to 20 Ph.D.s and start doing pharmaceutical research in the U.S."

Hong's paramount concern is that Asymchem continue to grow as a U.S. company, even as marketing efforts shift to China. "I would not feel comfortable setting up a headquarters in China," he says. "After living 20 years in the U.S., I couldn't put roots down there."



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