For discussion FCR(96-97)42
on 12 July 1996
ITEM FOR FINANCE COMMITTEE
HEAD 73 - INDUSTRY DEPARTMENT
Subhead 840 Industrial support (block vote)
Members are invited to approve a commitment of $36,265,000 for the Hong Kong Institute of Biotechnology to establish a Manufacturing Technology Centre for Human Vaccines and Pharmaceuticals.
The local pharmaceutical industry is unable to manufacture high value-added pharmaceutical products unless there is adequate infrastructure to provide technological support and to facilitate compliance with international manufacturing standards.
2. We recommend the allocation of $36,265,000 from Head 73 Industry Department Subhead 840 Industrial support (block vote) for the Hong Kong Institute of Biotechnology (HKIB) to establish a Manufacturing Technology Centre for Human Vaccines and Pharmaceuticals (the Centre). The Centre will provide support for the local pharmaceutical industry in setting up new manufacturing processes to comply with the Hong Kong Good Manufacturing Practices (GMP) Guidelines for Pharmaceutical Products1 and to expand its product line to include high value-added pharmaceutical products.
3. In recent years, the manufacturing sector in Hong Kong has been moving from low-skilled production to high value-added manufacturing. In the pharmaceutical industry, biopharmaceutical products2 and new vaccines are the potential niches for Hong Kong since they are high value-added and their production processes are neither labour- nor land-intensive. However, the local industry has not been able to produce these new products because it lacks the technology and the necessary facilities on GMP. Its major rivals in the Asia-Pacific region are already producing such products or are actively preparing for entry into this business. To be able to compete for a market share in this area, the local industry must acquire the relevant technology and develop the necessary facilities to meet GMP requirements.
4. In addition, more and more large foreign pharmaceutical companies are setting up manufacturing plants in South East Asia to conduct clinical trials and to manufacture new drugs, biopharmaceuticals and vaccines, particularly when the companies target their products at the Asian population. When deciding where to set up their manufacturing plants in Asia, these multinationals look at, among other things, the availability of local facilities to produce and supply them with GMP level test materials. Again, due to the lack of technological know-how and the necessary GMP manufacturing facilities, Hong Kong is currently unable to meet this requirement. Failure to improve the situation would mean losing these investors to our neighbouring countries.
5. The majority of our pharmaceutical manufacturers are small to medium sized3. As stated in paragraphs 3 and 4 above, they do not have the technology or human resources to develop the necessary GMP facilities, documentation or procedures to move to high value-added manufacturing. The establishment of the Centre will provide local manufacturers with the expertise and technology to develop the required GMP facilities. The support services available would include pre-production technical advice on standards and operating procedures, pilot or experimental production of new products, quality control testing and analysis, supply of clinical materials as well as transfer of new manufacturing technology.
6. Another advantage of setting up this Centre is the help it can extend to local researchers in commercialising their products. Local tertiary institutions are actively engaged in the research of new pharmaceutical products which they target at the Asian population. However, there is no facility for the second stage development work such as manufacturing process formulation and scaled-up pilot production. The Centre will provide this much needed support for the research efforts of the tertiary institutions.
7. Furthermore, the setting up of new GMP facilities will enable local pharmaceutical companies to produce high value-added products. As there will be a need for constant research and new product development work, there will be enhanced job opportunities for university graduates and researchers in this discipline.
8. The HKIB, an independent and non-profit making research institute established with a grant from the Hong Kong Jockey Club, is the most appropriate body to implement the proposal, taking into account its track record of research activities and expertise in biotechnology areas and close working relationship with the pharmaceutical industry, as well as local and overseas higher education institutions. The establishment of the Centre requires sophisticated interior design outfitting and equipment. The HKIB will make use of its existing bioprocessing unit and upgrade it to GMP standards.
9. The HKIB has recently won a contract4 from the World Health Organisation (WHO) to produce a malaria transmission blocking vaccine based on technology developed by the Malaria Vaccine Section of the National Institute of Health (NIH) in the United States. With the technology transfer from the NIH and the training provided by WHO, the HKIB will be able to further strengthen its technological know-how in setting up GMP manufacturing lines for producing vaccines and biopharmaceuticals. Without this collaboration with WHO and NIH, we could only obtain the technology through consultancies from overseas experts at relatively high costs. Apart from technology transfer and training of local personnel, this arrangement with WHO and NIH will also help to boost the image of the pharmaceutical industry in Hong Kong as the Centre will be one of the few facilities in Asia capable of producing bio-engineered vaccines and human injectable biopharmaceutical products.
10. The Industry and Technology Development Council, which advises the Director-General of Industry (DG of I) on applications for grants from the Industrial Support Block Vote, strongly supports this proposal. Members of the pharmaceutical industry also welcome the proposal as it would help them expand their product line and move to high value-added and technology-intensive manufacturing.
11. We estimate that the setting up of the Centre will incur an expenditure of $45,115,000 over four years from 1996-97, broken down as follows-
|
(a) Staffing
|
15,618,000
|
|
(b) Capital equipment
|
20,448,000
|
|
(c) Operating costs
|
8,070,000
|
|
(d) Utilities and rates
|
979,000
|
|
Total
|
45,115,000
|
12. As regards paragraph 11(a), $15,618,000 is the cost of manpower. Of the amount, $450,000 is for non-recurrent expert consultant cost for GMP implementation, and $15,168,000 is for recurrent cost of 10 staff of the Centre.
13. As regards paragraph 11(b), $14,542,000 is for purchase of GMP equipment and $5,906,000 for Quality Control Equipment. Examples of the equipment include fermentors, a biowaste treatment system, portable cleanrooms, airlocks, autoclaves and protein purification systems.
14. As regards paragraph 11(c), $8,070,000 is for operation of the Centre, including staff training, GMP audits, equipment maintenance, clinical grade chemicals, test materials, reagents and consumables.
15. As regards paragraph 11(d), $979,000 is for government rates and utility charges.
16. Taking into account the total projected income of $8,850,000, HKIB will require an amount of $36,265,000 in setting up the Centre. HKIB expects the Centre to become self-financing in its fifth year of operation. A breakdown of the estimated expenditure and income and the cashflow requirements for 1996-97 to 2000-2001 is at the Enclosure.
17. The Industry Department will undertake some additional work to monitor the progress of the Centre. The department will absorb this increase in workload through internal redeployment of resources.
18. The purpose of the project is to provide local pharmaceutical industry with technological support for moving to high value-added manufacturing. It would have no impact on fees and charges for services provided by the Industry Department.
19. On 26 November 1993, Members approved the creation of Subhead 840 Industrial support (block vote) under Head 73 Industry Department and delegated to the DG of I the authority to approve projects costing up to the same ceiling as Category D projects in the Public Works Programme, currently $15 million. DG of I has to submit projects costing above that ceiling to Members for approval. The provision under this subhead in the 1996-97 Estimates is $250 million.
Trade and Industry Branch
July 1996
1 -- In December 1995, the Pharmacy and Poisons Board announced the Hong Kong GMP Guidellines for Pharmaceutical Products. These Guidelines follow the World Health Organization Guidelines, which are the world-wide minimum requirements for prooducing pharmaceutical products. They stipulate a quality of pharmaceutical products by setting guidelines on areas such as the construction and maintenance of premises, as well as the handling of equipment and raw materials. According to the timetable set down by the Pharmacy and Poisons Board, local pharmaceutical companies must fully comply with the requirements by the year 2000. The HKIB is separatel helping pharmaceutical companies to upgrade their existing production lines on low value-added products to meet Phase I of the GMP requirements by giving advice on GMP documentation and procedures.
2 -- Biopharmaceutical products are biolobical materials used as pharmaceuticals. Examples are insulin and growth hormones.
3 -- There are currently 83 pharmaceutical companies in Hong Kong. The number of employed staff ranges from 5 to 130. The annual sales turnover ranges from $6.5 million to $60 million.
4 -- The contract is conditional upon the successful establishment of the Center.
Enclosure to FCR (96-97)42
| $'000
|
|---|
|
|
|
|
|
Total
|
|
|
Expenditure
|
1996-97
|
1997-98
|
1998-99
|
1999-2000
|
1996-2000
|
2000-01
|
|
(a) Staffing
|
1,299
|
3,778
|
5,154
|
5,387
|
15,618
|
5,854
|
|
(b) Capital equipment
|
18,085
|
1,485
|
708
|
170
|
20,448
|
170
|
|
(c) Operating costs
|
1,150
|
2,321
|
2,499
|
2,100
|
8,070
|
2,230
|
|
(d) Utilities and rates
|
0
|
|
0
|
979
|
979
|
979
|
|
Sub-total
|
20,534
|
7,584
|
8,361
|
8,636
|
45,115
|
9,233
|
|
Less Income from
|
|
|
(e) QC test fees
|
0
|
0
|
100
|
400
|
500
|
500
|
|
(f) GMP manufacturing fees
|
0
|
0
|
250
|
900
|
1,150
|
2,000
|
|
(g) Microbial services
|
0
|
0
|
0
|
450
|
450
|
700
|
|
(h) Cell culture services
|
0
|
0
|
0
|
350
|
350
|
500
|
|
(i) WHO funds
|
0
|
750
|
750
|
900
|
2,400
|
1,100
|
|
(j) Research services
|
0
|
0
|
0
|
500
|
500
|
1,000
|
|
(k) Other contracts
|
0
|
0
|
0
|
3,500
|
3,500
|
3,500
|
|
Sub-total
|
0
|
750
|
1,100
|
7,000
|
8,850
|
9,300
|
|
|
|
|
|
|
|
|
|
Net expenditure
(Cashflow requirement)
|
20,534
|
6,834
|
7,261
|
1,636
|
36,265
|
|
|
Net income
|
|
|
|
|
|
67 |
Last Updated on 2 December 1998
