The Administrative Regulations of the PRC on Human Genetic Resources (the “HGR Regulations”) promulgated by the State Council of the PRC, has been in effect for more than three years. The HGR Regulations scrutinize all activities in connection with the human genetic resources (the “HGR”) within the territory of the PRC from upstream collection of HGR materials to downstream exploitation and sharing of the HGR materials and the information derived therefrom. On 4 March 2022 and 15 April 2022, the Ministry of Science and Technology of the PRC (the “MOST”), which is the authorized governmental authority to supervise and administer the HGR practice in China, published two notices (the “Q&A Notices”) summarizing its official responses to certain questions on practical issues regarding the filing/approval applications under the HGR Regulations. We summarized some key takeaways of the HGR filing/application practice in China from our experience under the HGR Regulations and the Q&A Notices in two separate articles. This Part A mainly focuses on how to identify the related parties (especially the foreign entities) which may be involved in the Chinese HGR activities, while Part B of this series will focus on how to identify HGR materials under the HGR Regulations.
1. Who will be regarded as the Foreign Entity?
The HGR Regulations prohibit foreign entities and foreign individuals from collecting or storing Chinese HGR in China, or transferring the Chinese HGR abroad; besides, any foreign entity’s use of Chinese HGR should be subject to the approval from or filing with the Human Genetic Resources Administration of China (the “HGRAC”, which is the internal office of the MOST and authorized to handle the filing and approval matters of HGR) under the condition that such foreign entity shall always cooperate with Chinese entities for such utilization. According to the HGR Regulations, “Foreign Entities” include (i) the foreign organizations and (ii) the Chinese entities established or actually controlled by foreign organizations or individuals.
As far as we know, in practice as long as there is any foreign capital within the shareholder structure of a company (no matter whether such foreign capital is directly or indirectly held by a foreign shareholder), such company will be deemed as a Foreign Entity in the eye of the HGRAC. Furthermore, a domestic company actually controlled by foreign entities through a VIE structure will also be considered as a Foreign Entity.
On 21 March 2022, the MOST published the Implementation Rules for the HGR Regulations (Draft for Public Comments) (the “Draft HGR Rules”). The Draft HGR Rules intend to contribute on implementing the HGR Regulations. Among other details, it is worth noting that the Draft HGR Rules further specify the scope of Foreign Entities by elaborating the meaning of “actual control”. According to the Draft HGR Rules, any of the following circumstance shall be deemed as constituting the “actual control”: (i) where foreign entities or individuals, either directly or indirectly, holding more than 50% of equity, voting power or similar rights; (ii) where foreign entities or individuals may have major influence over the decision making or internal management of an entity even if the foreign shareholding percentage falls below 50%; (iii) where foreign entities or individuals may have major influences via contractual or other arrangement; and (iv) other scenarios that the MOST may determine. It seems that a Chinese entity with less than 50% foreign capital and without any foreign shareholder (directly or indirectly holding the shares) participating in the management of such Chinese entity or a Chinese entity with only or majority ultimate Chinese owner(s) (though it may has foreign entities in-between for various corporate structure reasons), will no longer be subject to the restrictions otherwise applicable to the Foreign Entities under the HGR Regulations. However, as the Draft HGR Rules have not become effective yet, it is advisable to keep a close eye on the legislative process as well as the MOST’s practice in actual applications.
2. Provision of Sample/Study Report to Affiliates
It is not uncommon that the foreign-invested pharmaceutical companies may have various affiliates with different functions within the PRC. In practice, such foreign-invested companies may have a need to share the samples (i.e. Chinese HGR materials) or study report (i.e. Chinese HGR information) of certain clinical trials to its affiliates who may also fall into the scope of the Foreign Entities for future studies. If such affiliates have not been recorded as the relevant cooperative parties or other third parties listed in the application documents of the approved/filed international cooperative scientific research project (typically a clinic trial), an application to change the approved/filed project should be submitted and the relevant approval/filing should be obtained for provision of such samples/study report to the affiliates who are Foreign Entities.
3. Whether the Provision of SAE Report to Foreign Licensor should be filed with the HGRAC
In many pharmaceutical license-in/out deals, it is a regular requirement from the licensor to the licensee to obtain the report and relevant information of any SAE (Serious Adverse Effect) occurred in the licensee’s territory, in order to comply with the pharmacovigilance requirements in the licensor’s jurisdiction. If the SAE report contains any HGR information, such provision should be filed with the HGRAC. However, as far as we know, the current practice may show the opposite that only few companies have actually submitted the filing application for the provision of such SAE.
Nevertheless, according to the Q&A Notice published on 15 April 2022, provision of clinical image data (e.g. image data generated by B-mode ultrasound scan, CT and NMR) and clinical data that do not involve population genetic research (e.g. data from blood routine examination, urine routine examination, liver and kidney function examination, blood biochemistry examination and other general laboratory testing information) may not need to file with the HGRAC. Such practical guideline is in line with the scope of the HGR data narrowed down by the Draft HGR Rules, which only includes the human genes and genome data and other data generated by utilization of HGR materials (compared to “data generated by utilization of HGR materials” provided under the HGR Regulations). Therefore, if the current version of the Draft HGR Rules come into effect, provision of most SAE reports will not be subject to such filing requirement.
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