China’s position as one of the leading global sources and recipients of biopharmaceutical innovation is inarguable. However, in the new Year of the Snake, geopolitical and economic uncertainties are swirling, calling some to question the role that the country can continue to play in global health. Despite these challenging times, leading Chinese life sciences stakeholders remain undimmed in their commitment to the country and the myriad opportunities to bring breakthroughs to patients, both within China’s borders and beyond. This long read is an extract from the latest Healthcare & Life Sciences Review China.
Megamarket intact
The shaky performance of China’s economy, post-pandemic, has created many uncertainties for international and local businesses alike. With the country enduring its longest spell of deflation since the Asian crisis over a quarter of a century ago, and an epic stock market rout in late 2022 that has seen investors lose over USD 2 trillion, it is hardly surprising that some prospective market entrants have begun to doubt whether the world’s second largest economy can still provide them with a reliable engine of growth.
Within the life science sector, however, attitudes are far more sanguine and unflappable. After all, the guiding market fundamentals that make China ‘too big to ignore’ for pharmaceutical and medtech developers continue intact and unaltered.
“China very much remains an incredibly influential and relevant market for any life science entity with global ambitions: both in terms of its value and its volume,” affirms Olivier Dessajan, co-president of the French Healthcare Alliance, representing the diversity of French life science entities operative in the country. “It’s strategically imperative for global companies, especially in the pharmaceutical and healthcare sectors, to establish a presence here, because the market is already vast, and only headed in one direction with consumer demand for high-quality products steadily increasing,” he explains.
Indeed, considering the country’s ever ageing demographics, rising per capita disposable income, and increasing prevalence of chronic disease, it is difficult to contemplate any alternative growth trajectory. Against the backdrop of relentless economic development and urbanisation, the per capita disposable income in China is forecast to grow at a CAGR of 7.5 percent from RMB 36,883 (USD 5,070) in 2022 to RMB 52,851 (USD 7,265) in 2027, translating to a considerable increase in purchasing power for the country’s burgeoning middle class. Meanwhile the percentage of healthcare expenditure in relation to chronic diseases to total healthcare expenditure in China increased from 57.3 percent in 2018 to 69.9 percent in 2022 and is predicted to further grow to approximately 75.1 percent by 2027.
“We’re talking about the second largest economy on the planet valued at USD 18 trillion and a megamarket with a vast population of 1.4 billion, of which the share of over 65-year-olds will account for 19 percent by 2027,” points out Jenny Zheng, senior vice president and general manager of Greater China at Illumina, a Californian-headquartered biotech dedicated to unlocking the power of the genome through the development of integrated systems for the analysis of genetic variation. “So, integrating China into our global strategy represents not just very sound business logic, but is actually fundamental and essential to advancing our mission,” she insists.
Meanwhile, partly thanks to favourable government policy and partially down to the sheer engrained momentum and dynamics of the sector, Frost & Sullivan calculates that the retail sales value of China’s pharmaceutical market should advance at a CAGR of 4.1 percent from RMB 1.9 trillion (USD 261 billion) in 2022 to RMB 2.4 trillion (USD 330 billion) in 2027. Little wonder then, that Big Pharma’s enthusiasm for China remains undimmed, a sentiment underscored by the fact that all but one of the top 10 players in the market – Hengrui – constitute big-brand foreign multinationals.
“We view this market as full of frankly unmissable opportunities and that’s why we have no hesitation in committing to pump USD 1 billion dollars into our Chinese operations over the coming five-year period,” boldly declared Pfizer’s China President Christophe Pointeau in November 2024.
“To anyone doubting the underlying momentum of healthcare and life sciences in China, I would urge them to visit to gain first-hand insight into substantial unmet medical needs, the governments positive policy direction, and the rapid evolution of the market. Whatever the prevailing macro-economic climate, these are the realities on the ground and translate to an abundance of potential for a long time to come,” argues Jim Jin, vice president, and general manager at Gilead Sciences.
Decisive Policy Shifts
That is not to downplay, however, the clear and profound changes that have been taking place within China’s healthcare and life science sector in recent years. For a start, the Chinese government has been radically refocusing its energies towards improving healthcare with its flagship ‘Healthy China 2030’ (HC 2030) vision, the most significant leadership policy in public health governance in the country for many decades.
Enacted in 2019, following a previous directive from the Central Committee of the Communist Party and State Council, HC 2030 represents the first ever medium-to-long-term strategic policy for health at the national level and includes 15 major actions geared towards guiding the populace to better health and enhancing care provision.
“It’s essentially a ten-year work plan mapping out nationwide priorities and goals for health within the overall process of China’s socio-economic development and has important ramifications for the entirety of the life science industry,” explains Song Ruilin, chairman of the China Pharmaceutical Innovation & Research Development Association (PhIRDA), an interest group for the country’s homegrown pharma innovators.
“It’s actually a tremendously serious endeavour on the part of the State,” concurs Renaud Gabay, managing director of the R&D-Based Pharmaceutical Association Committee (RDPAC) of the Association of Enterprises with Foreign Investment (CAEFI). “The plan comes with highly specific and tangible KPIs, particularly around leading indicators like life expectancy and disease areas such as cancer. The government then closely monitors progress through a dedicated agency that tracks the realization of performance goals every two or three years,” he elaborates.
What’s more, it is being backed by substantial financial firepower and resources. For instance, the country has recently upgraded its healthcare infrastructure with the construction of over 15,343 new hospitals and enhancements to over 90 percent of the existing primary care apparatus according to Frost & Sullivan, with the volume of primary healthcare institutions now advancing at a CAGR of 1.3 percent and set to exceed 1,064,000 in 2026.
Concurrently, tangible steps are being pursued to expand the envelope of private care in an effort to broaden the spectrum of health services and reinforce care provision structures. In September 2024, a joint circular from the Ministry of Commerce, National Health Commission and the National Medical Products Administration (NMPA) unveiled plans to allow foreign investors to run hospitals in Beijing, Tianjin, Shanghai, Nanjing, Suzhou, Fuzhou, Guangzhou, and Shenzhen, as well as the whole island of Hainan, for the first time. Actual foreign ownership of hospitals will, however, remain prohibited.
“We perceive for the first time a genuine drive on the part of the authorities to implement a multi-layered health security system, including basic medical insurance, supplemented by commercial health insurance, and other forms of coverage all with a view to successfully achieving the KPIs and eliciting a positive step change in the nation’s health,” notes Gabay.
In addition to developing the domestic healthcare system and deepening medical services, HC 2030 explicitly seeks to shift the emphasis from passive ‘medical treatment’ to proactive ‘disease prevention.’ “Ever since the global pandemic, the authorities have been pushing hard for greater action on preventative healthcare, and especially the mitigation of infectious diseases, and many companies are now reassembling their portfolios to better align with these directives,” says Song.
Sumitomo Pharma represents a case in point. “We’re constantly reorientating our offering to reflect the priorities and needs of the country as much as possible: currently we’re dedicating half of our 400 in-country sales representatives to the infectious disease space primarily targeting key physicians in grade III hospitals,” says the Japanese company’s chairman and CEO in China, Yoshitaka Koketsu. “As soon as it became evident that the authorities were pushing for greater effort on combatting antimicrobial resistance within the 2030 framework, we moved to support that because this aligns neatly with Sumitomo’s capabilities and expertise in the infectious disease space and the promotion of responsible antibiotics.”
“We’ve actually witnessed our customer base skyrocket since the State started pursuing greater antimicrobial stewardship and we are now serving over 4,000 hospitals spread across the country,” recounts Vincent Chan, general manager of Greater China at French diagnostic specialist, bioMérieux. “As part of HC 2030’s objectives around combatting AMR, the authorities have implemented several measures to prioritize microbiology testing and reduce antibiotic overuse. One key initiative has been the inclusion of microbiology diagnostics in the KPIs for physicians and hospitals, with physicians evaluated on their ability to reduce antibiotic prescriptions, and hospitals are assessed on the percentage of antibiotic prescriptions that are based on microbiology testing results. Naturally this has generated a real upswell in demand for our services,” he acknowledges.
Daiichi Sankyo, another major Japanese drug developer, has also been tweaking its in-country strategy to mirror HC 2030 focus areas. “Initially our in-country business was mainly concentrated towards primary care products such as those dealing with pain management, but now we’re also taking the bold step of introducing our innovative oncology portfolio so as to tie-in with the country’s determination to improve cancer survival rates. This is a transformative shift because it positions us more as a strategic partner to the country, while simultaneously neatly reflecting our broader global ambitions,” details Yoshio Uchida, the company’s president in China.
Chiesi, meanwhile, noting the authorities’ sustained emphasis on enhancing chronic disease management, has spotted a niche where it too can greatly contribute to the realization of the broader health agenda. “Conscious of the reality that chronic obstructive pulmonary disease (COPD) represents a massive public health problem, affecting more than 100 million Chinese patients, we’ve introduced a triple combination inhaler treatment that addresses critical patient needs while cementing our role as a valued partner in advancing healthcare solutions,” recounts the company’s recently installed President and General Manager Deng Haoqing.
“In a highly complex, vast and dynamically evolving marketplace like this, I am convinced that a combination of close alignment with national imperatives, offering a properly differentiated product, and making strategic use of the state mechanisms represents the most effective way to fully capitalize on the immense market potential out there” she adds.
Regulatory Maturity
There have been far reaching structural changes too with China’s regulatory apparatus coming of age as the government successfully pursues measures to speed up drug review and approvals and bring them into harmony with Western norms. These wide-reaching reforms have included greater recognition of foreign clinical trial results, upgraded intellectual property and data protection standards, and recognition that a ‘new drug’ does not necessarily have to be a new drug in China to secure special designation.
“Over the past few years, we have witnessed the lag time between the first global approval and approval in China shorten considerably with the NMPA making demonstrable progress in streamlining drug approval and enhancing the speed to market and efficiency of the approval process,” enthuses Takeda China President Sean Shan. “This has even included admirably progressive policies such as accepting global clinical trial data for rare diseases and establishing expedited channels for breakthrough therapies and paediatric drugs,” he adds.
Moreover, whichever way you look at it, the national statistics make for promising reading. In 2023, the NMPA broke a new record by approving the highest number of new drugs ever in China within a single year: 104 new entities compared to a mere 77 the previous year, of which more than a quarter comprised biologics including two CAR-T products and couple of vaccines.
All of this has, of course, been resoundingly applauded by originator drug developers. “Since first establishing our affiliate in China back in 2017, we’ve already been able to introduce a respectable 11 new innovative medicines to the market – eight of which received nationwide reimbursement – across a wide range of therapeutic areas from treatments for HIV and viral hepatitis to therapies for invasive fungal disease, and cancer with transformative outcomes for countless patients,” proudly reveals Gilead’s Jim Jin.
Ipsen’s general manager, Guillaume Delmotte, is equally optimistic. “Frankly speaking the regulatory environment in China nowadays is broadly comparable to that of Europe or the US. As long as you possess a compelling proposition, comply with the rules, and offer reasonable trade-offs, there is absolutely no reason why Chinese regulators won’t be receptive or why you wouldn’t be able to bring your product speedily and impactfully to market,” he confides.
Nor is the welcome mat being put out exclusively for innovative pharmaceuticals. Next generation medtech is also being enthusiastically courted. For instance, the authorities recently established two pioneer zones – in Hainan and the Guangdong-Hong Kong-Macao Greater Bay Area respectively – to accelerate the entry of urgently needed medical devices into the Chinese market, and efforts to deregulate the segment are already in the making.
“A new law under consultation details that China may soon accept multinational data from global multi-centre clinical trials, provided that one of the trial centres is based in China,” recounts bioMérieux’s Vincent Chan. “This development mirrors what has already occurred in the pharmaceutical sector and would represent a significant step forward for the in vitro diagnostics field,” he says.
Meanwhile the regulatory modernizations have extended to embracing international standards and norms through China’s active participation in global committees including the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH), the International Coalition of Medicines Regulatory Authorities (ICMRA), and the International Medical Device Regulators Forum (IMDRF).
“The cumulative effect of all of this has been to dramatically shorten the length of time taken to secure clinical trial approvals: condensing the average time frame from over 10 months to only 60 days,” observes RDPAC’s Renaud Gabay. “Lately the NMPA is even piloting 30 days clinical trial approvals in major cities like Beijing and Shanghai which will go a long way towards positioning the country as a competitive clinical hub globally,” he adds.
What’s more, according to the latest RDPAC survey, thanks to regulatory streamlining, the average time taken from clinical trial protocol finalization to the first patient visit has dropped from 35.9 weeks in 2020 to only 22.1 weeks in 2023.
Most MNCs and homegrown drug developers alike have been hugely impressed by the improvements. “I have to say the accommodating posture of the NMPA in supporting new drug research in China has been really quite significant for businesses such as ours, and now closely mirrors the FDA’s involvement in the United States,” recounts Yinxiang Wang chairman and CEO of the Cayman Islands-incorporated Jacobio Pharma, an R&D-focused outfit most known for their advanced proprietary Induced Allosteric Drug Discovery and Immunostimulatory Antibody Drug Conjugate platforms.
“We’ve found that, upon filing an Investigational New Drug (IND) application, the NMPA typically responds within 60 working days, which is approximately two months slower than the US FDA’s response time. Other than that, the reaction speeds have been commendable, and we’ve never encountered significant delays in the past several years while navigated no fewer than nine products through various clinical stages,” he elaborates.
“The ease of doing business has improved with significant strides characterised by greater transparency and efficiency of processes,” agrees Li Chen, the founder, executive director, and CEO of Hua Medicine, a Shanghai-based innovative drug development and commercialization company whose cornerstone product is an oral hypoglycaemic drug that can be used for patients with Type 2 diabetes exhibiting renal function impairment.
“For our glucokinase allosteric activator project, it took eight months for approval, during which we completed 18 clinical studies, four of which were actually conducted out in the United States,” he details.
Reimbursement Reconfigured
Another change with far-reaching consequences has been a revised system to finance public health and broad access to medical innovation. Since 2017, China has been overhauling its health-care system with the introduction of Volume-based Procurement (VBP) and a National Reimbursement Drug List (NRDL) aim at providing the population with broader access to quality drugs in a financially sustainable manner.
Under this arrangement, global and domestic drug producers are compelled to compete to sell their products in bulk to public hospitals. By winning a bulk purchase bid, drug makers accept substantial sales price cuts, which though, at first glance, might appear to squeeze their profit margins, simultaneously rewards them with a major share of the Chinese market and high-sales volume opportunities. At the same time, VBP is designed to slash prices for older off-patent meds.
“The Chinese government’s highest interest is in maintaining social stability throughout the country and its system, and one of the main building blocks to achieving this is delivering the best healthcare to the largest portion of the population at the most affordable cost,” explains Jens Ewert, life science & health care industry leader at Deloitte.
“The Chinese authorities have astutely benchmarked themselves against many different reimbursement systems across the globe and made a deliberate choice not to follow the US model, where healthcare expenditure as a percentage of GDP is exorbitant, while still spending more than other emerging economies, such as India. Their calculation is ultimately to stand somewhere in the middle as they believe this is the most promising formula for providing the best healthcare to the largest portion of the population at the most affordable cost, with a clear focus on early adoption of the latest breakthrough innovative medicines,” he resumes.
For many market insiders, such a step is not just understandable but frankly inevitable. “We must not forget that China is battling profound democratic shifts. The country has an aging population and a declining birth rate, necessitating a transition in both economic and social models so sticking to the status quo was never a viable option,” reminds Ipsen’s Guillaume Delmotte.
PhIRDA’s Song Ruilin concurs. “With a population of 1.4 billion, China has now covered more than 95 percent under basic medical insurance, which is a terrific achievement. However, due to the large population and significant healthcare demands, China’s health expenditure as a percentage of GDP has soared from four percent to over seven percent in just under a decade. This near doubling is unimaginable in other countries so it was given that certain mechanisms would need to be established to keep costs in check,” he muses.
While VBP and the NRDL undoubtedly entail substantial revisions to their market strategies, most innovative drugmakers appear relatively satisfied with the results and the inherent trade-offs. “Previously there was almost no reimbursement for innovative products, and regular updates to the reimbursement list were rare. Under the new rules of the game,
the situation began to improve substantially year-on-year with the introduction of more frequent and transparent updates to the NRDL,” recalls Vivian Zhang, general manager at Merck Healthcare.
“Moreover, most recently, the evaluation process has become much more scientific, that is the assessments are getting more evidence-based and more reflective of the true value of innovation,” she perceives. “This aspect is tremendously important to companies like Ipsen because a large part of our focus is dedicated towards patient-centricity and improving the quality of life of patients and the user experience of our therapies,” insists Delmotte.
“For instance, we are aiming to be a leader in prostate cancer by offering innovative treatments that reduce the need for monthly injections to once every six months thus minimising hospital visits and providing a much more patient-friendly care pathway. This added value thus needs to be properly taken into consideration and reflected in the price,” he argues, noting that he is convinced that “this is an administration that is genuinely focused upon raising quality and value for life, rather than merely value for money.”
“We’ve found the prices awarded to be favourable when compared to other Chinese generic medicines. For instance, our Bruton Tyrosine Kinase (BTK) inhibitor is priced at approximately RMB 130,000 (USD 17,850) per year per patient, following negotiations,” ventures Jasmine Cui, founder and CEO of Innocare, a Beijing-based biotech striving to address the huge unmet needs in autoimmune disease and cancer. “These negotiations occur periodically, with our most recent one in 2023 resulting in a maintained price. Real-world evidence plays a pivotal role in these negotiations, demonstrating the effectiveness of our treatments in clinical settings which we think is a fair way of adjudication,” she notes.
“As an industry, we have been working hard in engaging with the State to ensure that reimbursement negotiations are increasingly clinical value-based: including assessing clinical efficacy, addressing unmet needs, improving quality of life, and even considering surrogate endpoints like less re-hospitalisation or prolonging life,” reveals RDPAC’s Renaud Gabay. “While there is still room for improvement on this front, and especially in bringing prices closer to international reference price levels, the progress has been undoubtedly significant and demonstrable,” he acknowledges.
China’s national statistics also tend to bear this out. Nowadays multinational originator drug developers possess a 28 percent share of the total Chinese pharmaceutical market. Meanwhile the proportion of patented drugs in the market has risen from around 5 percent back in 2018 to eight percent today.
“This progress underscores the government’s strong support for genuine innovation. While the percentage improvements may appear small, given the size and complexity of China’s healthcare system, even a one percent market share increase represents a substantial impact,” reminds Gabay. Meanwhile, the average time taken for drugs to be awarded national reimbursement has been radically reduced from 7.8 years on average in 2017 to well within the year of approval thanks to the greatly appreciated introduction of annual updates.
Indeed, there is plenty of evidence to suggest that the reforms are encouraging foreign entities to bring more of their breakthrough innovations to market. “We pretty swiftly recognized that the shifting regulatory landscape, particularly the introduction of VBP and Generic Quality Consistency Evaluation (GQCE) was redrawing the rules of the game. To adapt, we made a decisive move to refine our portfolio, spinning off mature cardiovascular and metabolic brands in favour of high-growth, high value-add, differentiated therapeutic areas like oncology, gastroenterology, neuroscience, and rare diseases,” confides Takeda’s Sean Shan. “This shift has been remarkably effective, with our newly launched products now contributing north of 80 percent of our revenue in China, far surpassing the global average of 54 percent,” he adds.
Conversely, few foreign pharma companies bother to pursue NRDL coverage for drugs in oversaturated segments where a plethora of local me-too alternatives abound. None of the major PD-1/L1 inhibitors are currently on the NRDL, and foreign pharma firm’s antibody-drug conjugates (ADCs) often don’t make the cut either.
Without a doubt, however, these structural reforms have been requiring substantial modifications to the way life science companies go about approaching the Chinese market. “When I first arrived in China, it was a vastly different landscape. It is no longer the sort of market where you can enter lightly and expect easy access or success just by virtue of the volume of customers. It has developed into a powerhouse with immense potential but equally high demands. You need to actively compete with both foreign and domestic players in what is a highly competitive and complex arena,” warns Mark Lotter, the South African founder and CEO of Nuance Pharma, a specialty care biopharma boasting a differentiated matrix of commercial products and innovative pipeline across, among others, respiratory, emergency care, anaemia, and pain management.
Indeed, because the NRDL presents a trade-off between sharp discounts and a large patient base, precise calculations around revenue, profitability and commercial investment will determine whether a drug is better off staying outside of the program. “To properly assess this is expensive, and requires a highly focused approach, clarity of purpose and a pragmatic mindset. From my experience, emotional decisions rarely align well in such a market environment. Just as you would not enter the US market without a solid plan and experienced team, the same level of preparation and commitment is now necessary for China,” counsels Lotter.
Allen Li, country president of Cytiva, a Danaher company and global leader in bioprocessing technologies, reinforces that opinion. “Formerly, simply offering a superior product in China may have been enough to attract customers, but now, with a fast-maturing and evermore competitive local industry, increasingly discerning Chinese consumers, and a sophisticated regulatory framework involving a myriad of different actors, multinational companies must demonstrate their value through technology, services, and expertise,” he observes. “This necessitates undertaking in-depth market research and developing significant capabilities well beyond just sales to make any kind of success out of this dynamic market,” he believes.
“One option is to go with what we call a market-based price, where the company sets its own price. However, if you choose this path, you are essentially targeting a niche market — patients who are willing to self-pay for the drug out-of-pocket. While this segment is, in itself, not insignificant, as it represents a mere 1.5 percent of the total pharmaceutical market in China and still relatively small compared to the broader market. On the other hand, being on the NRDL gives you access to a much larger market—about 18 percent of the pharmaceutical market. So, while going the market-based route is possible, the NRDL offers a more secure and expansive path to reaching a larger patient base,” details Gabay.
Even after winning national coverage, drugs aren’t necessarily guaranteed commercial success under NRDL. While national insurance might open up broader market access, effort still needs to be expended to get listed in each individual hospital’s formulary, educate physicians, and ensure reimbursement implementation in local jurisdictions. Therefore, a company typically needs to ramp up marketing investment to be able to reap the full benefits of the NRDL.
“Entering the Chinese market demands serious investment and detailed feasibility studies. Companies must understand the local market dynamics and be prepared to commit the necessary resources. This includes time and sufficient capital not only for building infrastructure but also for implementing an effective marketing strategy to grow your presence,” advises Olivier Dessajan.
“One mustn’t overlook the importance of cascading discussions to regional and local levels for effective implementation,” agrees Gilead’s Jim Jin. “This decentralized approach necessitates significant coordination and resources, a fully-fledged marketing operation, deep understanding of the regulatory nuances, and proactive engagement with a broad array of stakeholders,” he reflects.
This also holds especially true of those entities that might be looking to go it alone and eschew the NDRL. Japanese ophthalmology speciality outfit Santen serves as a case in point.
“While the majority of multinational drug developers tend to pursue a strategy that depends heavily upon tapping into the hospital channel – especially tier III and II institutions which represent the large, general hospitals with the highest grade of treatment and the mid-sized regional ones respectively – the niche conditions that we cater to such as dry eye and myopia often see patients taking a more active role in their treatment decisions, creating substantial opportunities in retail, e-commerce, and over-the-counter channels. This distinct landscape thus permits us to venture beyond the conventional hospital-focused approach, opening up new avenues for growth and patient engagement,” explains Shawn Xiang, Santen’s corporate officer and China head.
“However, to do so often requires substantial commitment to building up networks on the ground equating to a steep learning curve and associated costs — commonly and informally referred to as ‘tuition fees.’ These investments are a pre-requisite to exploring new opportunities and must be approached thoughtfully as success in these areas depends heavily upon forging the right partnerships and alliances based on trust, compliance, and needs,” he opines.
Economic & Geopolitical Headwinds
By far the biggest disruptor to the Chinese life science market as we know it has been from external factors: namely a souring of the overall investment climate in the country combined with rising protectionism globally, and a long-running geopolitical standoff between China and the United States. This threatens to somewhat decouple the world’s two biggest economies when it comes to scientific collaboration and the trade of cutting-edge technologies.
The latter reached altogether new heights in September 2024, when the US House of Representatives adopted the so-called ‘Biosecure Act’ aimed at hobbling China’s capabilities in certain ‘foundational’ technologies in the guise of protecting national security. The bill explicitly identifies Chinese CDMO giants WuXi AppTec and WuXi Bio as well as the genomics firms BGI Group, MGI and Complete Genomics as ‘foreign adversary biotech companies’ and seeks to prohibit federal agencies from contracting these companies and their subsidiaries as well as any suppliers that use their equipment or services.
“This act, which is still under revision, could have significant implications for Chinese companies,” concedes Simon Hua, chairman of the Shanghai-based novel drug development service company, BioMetas. “Under its current version, Chinese companies on the list are granted an eight-year waiver, which reflects a recognition of the crucial role Chinese CROs play in accelerating the development of intellectual property. Without access to these services, US biotech companies may experience delays in reaching their R&D milestones, as Chinese CROs are known for their efficiency in moving pipelines forward quickly.”
Hua believes that, even in the event that the bill eventually passes it would be unlikely to halt the collaboration between US companies and Chinese service providers entirely, particularly for smaller biotech firms that are not reliant on government funding
Meanwhile the more immediate and pressing concern is perhaps more about what steps like this mean for investor sentiment at a juncture when lenders have been taking money out of China at a record pace.
Indeed, overall foreign direct investment (FDI) into China slumped to minus USD 14.8bn in the second quarter of 2024, the worst figure with on record with a stampede to sell stakes, collect loan repayments and repatriate earnings. While Big Pharma’s investments continue unabated and unscathed, the same can certainly not be said for international venture capitalist firms that had, up until recently, largely sponsored the rise of China’s homegrown biotechs.
“Even now, when economic conditions are rough, there are forces at play trying to break apart the global market that used to be whole. Consequently, China’s biotech sector has faced a severe capital freeze,” bemoans PhIRDA’s Song.
Less than five years ago, China’s biotech sector has been highly popular in both local and international capital markets, but a constellation of factors encompassing rising global interest rates, Silicon Bank collapses, declining investor appetite for risk, capital crunches at home and abroad, domestic economic issues in China, and the changing geopolitical relationship with the West have all been making capital raisings for Chinese life science companies considerably more difficult.
“Over the last three years, we’ve experienced a significant downturn in the financial cycle globally, which naturally impacted the financial and stock markets. From last year onwards, we witnessed a sharp decline in overall investment in China’s biotech sector: so dramatic, in fact, that we’re travelled back in time to investment levels akin to those of 2015!” exclaims Biometas’ Hua.
The biggest risk is that some biotechs might now be sucked into a kind of death spiral where difficulty in fundraising makes them less attractive to investors and so on. Those most adversely impacted appear to be healthcare and life science firms listed on Hong Kong’s Hang Seng Index. This includes a host of pre-revenue biotechs, predominantly from mainland China, which had been able to launch initial public offerings (IPOs) on the exchange under the ‘Chapter 18A’ mechanism since 2018. The upshot is that many are now left wondering whether the traditional innovation exit route of a HKEX listing is now irredeemably blocked. After all, the Hang Seng-listed Biotech Index lost a full 24 percent of its value in 2023, and the Chinese island entrepôt even suffered the ignominy in early 2024 of having India briefly overtake it in terms of stock market capitalisation.
“Not only is the liquidity of the Hong Kong Stock Exchange 18A running dry, and US funds have offloaded their Chinese investments, but the specialty funds that drive growth in pre-clinical drug discovery are almost exclusively based in the US, and the lion’s share of the liquidity previously derived from them,” explains Ting Xu, Founder and Chairman of Alphamab Oncology. “Moreover, due to the long shadow of the COVID-19 pandemic and associated supply chain issues, the overall financial situation in China remains underwhelming and therefore is in little state to offer much relief,” he reflects.
Some entities like Abbisko Pharmaceuticals may enjoy the luxury of sitting tight and trying to ride out the storm. “Our IPO in September 2021 unfortunately coincided with the pivotal turning point in the global biotech market where the landscape started to see a substantial slowdown in market support. This led to negative price impacts and lower trading volumes for almost all the HKEX-listed biotech companies. The concern now lies in how a weak stock market impacts our ability to raise funds for our ongoing programmes,” recounts Yao-Chang Xu, the company’s founder & CEO, who interprets the current scenario as partly down to natural market cycles, albeit one that is lasting longer than normal.
Fortunately, Abbisko still remains financially strong. “We currently have over USD 300 million in cash reserves and expect to see some cash from our partnerships, enabling operational runway for multiple years,” he reveals.
Those in a potentially tighter spot are already enacting changes to better reflect the prevailing market realities. For a start, the stock market crash has compelled certain Chinese biotechs to reconsider their internationalisation strategies. The more established financing routes followed by Chinese biotech since 2018 are no longer a given, as Nisa Leung, formerly of Qiming Venture Partners, a pioneer in China that has backed over 530 fast-growth companies, notes.
“Over the past few years, Chinese biotechs tended to initiate clinical trials in China, and would list under Chapter 18A in Hong Kong once they had phase II clinical data,” she explains. “Those who raised more funds would also start clinical trials in US in parallel. Now companies prefer to start engaging international investors early on. Companies that are doing this, if truly innovative, can then choose to go public in either Hong Kong or the US.”
Transcenta, one HKEX-listed biotech that has advanced its first-line gastric cancer treatment into phase III trials, is an such example of how the funding bottleneck is now forcing firms to look beyond Hong Kong. “We are considering a dual-listing strategy for the long-term benefit of the company,” says CEO and Co-Founder Xueming Qian. “This approach allows us to appeal to both Asian and US investors, leveraging our robust pipeline. For instance, clinical trials for an osteoporosis treatment we licensed from Eli Lilly have shown promising results, but the Chinese market, focusing on near-term profitability, has not fully recognized its potential yet. On the other hand, in the US, investors typically recognise and appreciate the potential of innovative drugs like ours.”
“Concurrently we are advancing our pipeline towards commercialization so as to resonate better with investors in Hong Kong and China… as ultimately it is all about aligning ourselves where our value can best be understood,” he confides.
Chengbin Wu, founder and CEO of EpimAb Biotheraputics, a clinical stage biopharma company specializing in the development of multispecific antibodies, is meanwhile contemplating taking the IP abroad with a view to the establishment of a fresh company from zero while harnessing China as a backyard for R&D.
“One specific style of partnership we are exploring would involve US-based venture capitalist companies that are interested in incubating or developing new companies in the US. In these collaborations, we might retain the rights to develop the product in China while the VC-backed company focuses on the US market. This co-development approach would allow the VC to fund the project to a point where its value significantly increases, making it more attractive for a later-stage partnership with a big pharma company,” he reasons.
“This is because big pharma tend to be risk-adverse and cautious, especially in oncology, where they often want to see extensive data before committing. They might wait until a product reaches a later stage, like phase two, before getting involved, which requires significant additional funding,” he argues. “This is where VCs can play a critical role, helping to bridge that gap and advance the program to a stage where big pharma becomes interested. Once big pharma sees a promising product with clear differentiation and a well-defined strategy, they are not hesitant to make substantial investments. We have already witnessed such deals in the range of USD 800 million upfront,” he assures.
At the same time, some market insiders interpret the stage as now set for a healthier, more robust and circumspect, less hype driven Chinese biotech scene. In other words, there are hopes that a more realistic market is now emerging: one that is better placed to identify true value, unlike the bullish period of inflated valuations leading up to the outbreak of COVID-19.
“Pre-pandemic, the biotech industry in China had undeniably been experiencing a bubble-like scenario with unrealistic valuations and euphoric venture capital activities. In the biosimilar wave, we built the infrastructure but did not generate enough return on investment, while in the immune oncology wave, we had around 20 products on the market, but most of that did not become profitable, so the time is probably ripe for a bit of a correction,” recalls Alphamab Oncology’s Xu Ting.
“Traditionally, the focus had been on oncology and immunology, with numerous companies targeting Chapter 18A filings on the Hong Kong Stock Exchange and fetching strong valuations. However, as the market became saturated in these areas, forward-looking investors naturally started looking for new narratives and current normalisation phase reflects a rebalancing of risk and reward,” agrees Nuance Pharma’s Mark Lotter.
“I actually believe the cyclic nature of the industry isn’t necessarily negative, as it tends to weed out weaker players and strengthen the overall ecosystem,” adds Cytiva’s Allen Li. “This underscores the importance of resilience and adaptability among biotech companies. Moving forward, it’s crucial for biotech firms to focus on their core programs and demonstrate strong clinical outcomes. Those able to showcase robust clinical results are more likely to attract investment and sustain their operations amidst financial challenges.”
“Though there has been something of a shakeout, I think we are witnessing a definite transformation within Chinese biotech for the better. Historically, many Chinese biotechs were led by returnee scientists pursuing ‘me-too’ projects inspired by trends in Western markets. However, there is now a growing shift towards more innovative, homegrown ideas driven by real clinical needs. Increasingly, Chinese biotechs are developing original solutions using existing technologies, signalling a maturation of the sector,” confidently asserts BioMetas’ Simon Hua.
George Chen, co-founder, chairman and CEO of D3 Bio – a local oncology player with ambitious goals to launch two cancer therapies in the US within the next five years – readily concurs. “Contrary to many of the prevailing perceptions about China’s biotech sector, I firmly believe that China is not only investable but also a critical player in the global biotech landscape and that genuine differentiated innovation is still highly prized,” he affirms.
Others point to the fact that this moment represents the first real downturn cycle in the region and that building a robust biotech community realistically takes time, especially in attracting specialised investors who understand the nuances of the industry. For them, now presents an opportunity for the Chinese investment community to finally start to come of age.
“Many of our counterparts that also listed via Chapter 18A are understandably feeling somewhat disillusioned seeing the poor valuations. However, I believe it was a prudent decision by the Hong Kong Exchange to introduce a biotech board catering to non-profit or early-stage companies and just unfortunate that this move just happened to coincide with a significant withdrawal of Western capital,” argues James Xue, founder, chairman and CEO of CANbridge Pharmaceuticals.
Nonetheless he believes that China’s biotech sector cannot indefinitely rely on subsidies from global markets. “Entrepreneurs evaluating whether to establish companies in the US versus China face significant disparities in investment returns. Achieving equilibrium in these dynamics is crucial for sustained industry growth,” he argues
“Hong Kong’s financial industry, which is primarily retail-oriented, might excels in conventional metrics like revenue and profit, but still largely lacks expertise in niche scientific fields and the moment has come to individually and collectively change this and make up the gap so as set Chinese biotech on a more sustainable long-term trajectory,” he posits.
Sustained Innovation Intensity
One thing for certain is that, irrespective of any present funding tribulations being experienced by individual Chapter 18A Hong Kong-listed biotechs, China’s life science R&D prowess is set to endure.
“During the prevailing slightly uncertain economic climate, we’d do well not to lose sight of the continuing high regard that the Chinese State professes for innovation in biopharma,” urges PhIRDA’s Song Ruilin, drawing attention to how the government has explicitly flagged up the sector as an ‘emerging industry of high strategic importance’ in its 2021 Scientific Development Plan.
“This implies that the true focus of authorities is less upon the immediate, short-term vagaries of right now, and instead geared towards charting a course for the strategic long-term future of the sector in which China can compete scientifically on the world stage at the very highest level,” he argues.
Such strategic intent is also apparent from the government work report delivered by the Chinese Premier at the two sessions of the 14th National People’s Congress which committed to adopting proactive measures to invigorate the holistic development of the country’s biopharma industry through a mix of massive capital allocation, aggressive technology adoption, and fresh infrastructure for talent cultivation.
“In essence, this is about building a comprehensive enabling ecosystem aimed at rapidly escalating the levels of innovation intensity right across the pharma, medtech and healthcare value chains, as opposed to targeting specific, individual companies. It’s a scale of ambition that knows few limits,” affirms Olivier Dessajan of the French Healthcare Alliance.
In real terms, China’s spending on research and development (R&D) has already skyrocketed 16-fold since the turn of the millennium, with OECD statistics suggesting that although China still lags behind America on overall R&D spending – splashing out USD 668 billion annually, compared with USD 806 billion for America at purchasing-power parity – the country has now inched ahead of the US in terms of the envelope of spending by universities and government institutions. Nor is there any indication the spending spree will be relenting any time soon: in 2024, the state allocation of funding for science and tech increased again by 10 percent.
Assembling world-beating universities and institutes for applied research has also been a fundamental plank of China’s scientific development plan. According to the Leiden Ranking of the volume of scientific research output, six of the world’s top ten institutions are now Chinese, seven according to Nature Index. Then there has been the sheer proliferation of new biotech islands and parks in places like Guangzhou, Beijing, and Pudong, and of local innovation clusters in Bohai, Yangtze River Delta and Greater Bay, as the country goes all out to forge its own centres of excellence in emerging disciplines such as synthetic biology, molecular diagnostics, and genomics.
What is increasingly apparent is that China’s ambition to cement itself as a scientific superpower transcends economic imperatives and involves a geo-strategic agenda as well. “Ultimately China’s policymakers not only aspire for their country to compete for the leadership of life science innovation, but to do so on their own terms,” explains Deloitte’s Jens Ewert. “One of the government’s overriding priorities right now is to lessen dependency on foreign imported innovation by ensuring that a greater proportion can be translated, created domestically, or co-developed.”
“They are looking to see that domestic companies become credible market players and competitors that can stand proud in the international arena. And, with regards to the recent biotech boom, China has decided that, instead of gambling on the often-ephemeral pursuit of multi-billion blockbuster molecules, biotechs should be focused on targeting faster, more precise solutions to practical problems,” he surmises.
In short, an important differentiating characteristic of the China’s biopharma sector is its emphasis on developing therapeutically comparable molecules at lower price points. According to the Economist, China now produces more patents than any other country, although many are for incremental tweaks to designs, as opposed to truly original inventions.
There are many examples of this in action. COVID-19 therapies represent one such illustration. “In the prevention and control of the epidemic, China’s self-developed vaccines, which received WHO certification, were introduced affordably to dozens of countries around the world in a fine example of South-South relations. American entities such as Pfizer and Merck, were at the forefront of developing original medications, but prominent Chinese developers, such as Junshi Pharma and Simcere picked up the baton swiftly localizing these mechanisms to develop their own highly effective COVID-19 therapeutic drugs at scale with the same targets,” recalls Song Ruilin.
“Moreover, they then pushed on further to create COVID-19 therapeutic drugs, a relatively rare occurrence on a global scale. No patent disputes arose during this development process. So, from this perspective, China’s pharmaceutical industry has made significant contributions to global disease prevention and containment,” he continues.
“We are proud to have successfully developed the world’s first COVID-19 mucosal vaccination through inhalation,” confirms Yu Xuefeng, CEO and Chairman of the Tianjin-based biopharma, CanSinoBIO. “This innovative platform was initially created for a TB vaccine, which we started almost 12 years ago, to provide the best immunization approach for TB by inducing a local mucosal immune response in the respiratory tract and lungs, the first layer of defence against airborne TB bacteria. Interestingly, this inhalation vaccination technology has also proven effective against COVID-19, a respiratory disease,” he continues.
Their vaccine induces three mechanisms of protection: humoral and cellular immune responses systematically, and a local mucosal immune response. “Using only 20 percent of the injectable dose, it provides an equivalent or better immune response, plus the added benefit of mucosal immunity. It has been more effective, safer, and demonstrates significantly fewer side effects,” he details. Indeed, to date, almost 10 million people have been vaccinated using this approach not just across China, but also Morocco and Indonesia, among other developing countries.
Meanwhile, CanSinoBIO’s ongoing development work to mature mRNA technology may also prove absolutely game-changing for patients. “While the initial excitement around mRNA vaccines was due to their high efficacy against COVID-19, we believe there is still considerable room for improvement in terms of stability and side effects. Our goal is to make mRNA vaccines more convenient and acceptable for routine use,” says Yu.
“Our approach with mRNA technology has been to make it more suitable for vaccine use, rather than simply copying existing methods. For instance, one of the major challenges with mRNA vaccines is their storage and stability requirements. Most current mRNA vaccines need to be stored at very low temperatures, around minus 20 degrees Celsius, which is not feasible for many emerging markets that lack the necessary infrastructure. Additionally, the typical distribution and usage cycle for vaccines can lead to significant waste if they have a short shelf life,” he reflects.
To address these issues, CanSinoBIO has been working on developing an mRNA vaccine that is stable at standard refrigeration temperatures – 2 to 8 degrees Celsius – which would make it much more practical for widespread use, especially in regions with limited cold chain capabilities. “We are additionally exploring formulations that reduce reactogenicity, as the current generation of mRNA vaccines can cause side effects like fever and local reactions, which are not well-received by many people,” he elaborates.
Another especially promising area where Chinese entities are currently excelling is antibody-drug conjugates (ADCs) which involves assembling different parts into a novel molecule. “Driven in part by the success of Daiichi Sankyo’s Enhertu, ADCs, alongside other innovative approaches like targeted protein degradation (ProTag), mRNA therapeutics, small RNA agents, and cell and gene therapies, have sparked renewed excitement in preclinical research and Chinese drugmakers like Dongyao have swiftly moved to dominate this scene,” affirms Dr Yingjia Zhang, President of Biometas. “The relatively lower cost of preclinical research for ADCs allows these firms to progress quickly to the Investigational New Drug stage, bypassing much of the typical R&D hurdles. This efficiency has made China the global leader in ADC licensing deals, with 80 percent of the top ten deals in this category originating from China,” she notes.
“With a population of 1.4 billion, there’s certainly a perception that if a product exists elsewhere, it can be replicated and catered to the Chinese market and the rest of the developing world. For instance, if there’s a successful product like PD-1, the mindset is often, ‘Let’s develop our own PD-1, and do it even better.’ This has led to a wave of biotech start-ups focusing on replicating or translating global innovation and building multiple product pipelines,” reports Zhang.
Moreover, the prevailing Chinese style of very practical, applied, often incremental, innovation often plays to local strengths. Even though genuine ‘vertical disruptions’ – that is thoroughly original paradigm-shifting developments – tend to spread and be adopted slightly more slowly than in the West, China’s powerful industrial base, combined with cheap energy, means that it can quickly spin up large-scale production of physical innovations like materials.
“Today’s drug discovery industry is moving into a different phase, which is technology-driven and engineering-driven. This shift favours China, which is very good at engineering and assembling novel molecules with good properties,” argues Alphamab’s Xu Ting. “For example, China is already seen as a leader in multi-specific biologics, XDCs, CAR-Ts, RNAis and mRNA delivery, which are mainly physical and engineering problems,” he ventures.
China’s burgeoning talent pool has also been a helpful driver. Data from the OECD suggests that, since the late 2000s, more scientists have been returning to the country than leaving and that China now employs more researchers than both America and the entire EU.
“Over the past decade, Big Pharma built many R&D centres around the world staffed by thousands of scientists, a significant volume of whom were Chinese and who are now returning to the motherland to set up their own biotechs and life science businesses, attracted by the fact that China is now the second largest pharma market, and by a raft of economic incentives such as grants of up to RMB three million to get labs up and running back home,” explains Nisa Leung.
“The return of these very worldly and skilled professionals, colloquially termed ‘sea turtles,’ armed with global best practices and expert knowledge and experience, has really catalysed the momentum,” agrees Cynthia Xin Wang, head of business development for Asia at the French midcap, Servier.
Then there are also the vast new cohorts of graduates coming on stream. “China has around five million new science, technology, engineering, and mathematics (STEM) graduates every year. That represents a tremendous workforce, and they are dedicated to working very hard so there is absolutely no lack of superb home-grown talent,” assures Leung. Indeed, by the end of 2025, Chinese universities are set to be producing nearly twice as many PhD graduates in science and technology as America.
Little wonder, then, that both the quality and quantity of Chinese life science research and innovation are accelerating. According to IQVIA data, local biopharma market has experienced remarkable growth, enjoying a compound annual growth rate exceeding 15 percent over the past five years, while leading homegrown players such as Jiangsu Hengrui Medicine, BeiGene, and Chongqing Zhifei Biological Products now boast market capitalizations of USD 40.6 billion, 22.7 billion, and 14.9 billion respectively.
“China has rapidly matured into the second-largest innovation hub in the world as witnessed by the impressive growth rate of its biopharmaceutical pipeline contributions: rising from single-digit percentages to nearly 30 percent of global contributions within the space of a decade,” concedes Merck’s Vivian Zhang, pointing out that this is also “emblematic of the shift in direction of the local ecosystem away from me-too products towards developing genuinely original solutions using existing technologies driven by real clinical needs.”
R&D Launchpad & Accelerator
As China’s drug development capabilities have become ever more sophisticated, Big Pharma’s relationship with the market has evolved accordingly. “Thanks to its inherent affordability coupled with ever greater harmonization with international norms and standards, China has long been viewed as an appealing clinical trials destination country,” notes RDPAC’s Renaud Gabay, pointing out that the total volume of trial registrations actually surged by in excess of 130 percent during the period 2017 to 2022.
However, he perceives that, of late, MNCs have started to engage with the Chinese research fabric in altogether new and exciting ways. “Owing to the deepening expertise and extensive capabilities now embedded within the market, we now see many of our clients going a step further and establishing substantial proprietary R&D facilities and footprints in the country…This indicates that China is becoming important not just as a patient recruiting ground, but more fundamentally for actual trial design and the initiation of next generation drug discovery platforms,” he argues.
Certainly, there is ample evidence of life science MNCs establishing their own in-country R&D infrastructures with a view to capturing the manifold opportunities that abound. “I’m proud to say that our research centre in Beijing constitutes one of only four comprehensive R&D hubs in Merck’s entire global Healthcare business, showcasing the strategic relevance of China to our operations,” says Zhang.
“As one of the company’s few facilities with the capability to conduct first-in-human clinical trials, it provides a significant advantage by allowing us to initiate clinical studies early and gather data that can be directly applied to both local and global markets,” she adds.
Ipsen’s strategic calculation has been similar. “China is nowadays fully embedded within our global drug development strategy, participating in phase 1, phase 2, and phase 3 clinical trials simultaneously with the US and Europe. This synchronization means China is positioned at the vanguard of our clinical development efforts,” reveals Guillaume Delmotte.
Gilead meanwhile has been scaling up its local R&D footprint, resulting in the initiation of more than 20 clinical trials for both oncology and virology treatments. “Our long-term plan for China is essentially to leverage local innovation and capabilities to accelerate our global initiatives,” says Jim Jin.
“We increasingly view China, with its massive patient pool, as an integral part of our global R&D efforts because the country is increasingly well aligned with international norms for developing therapies, and we are fully confident in the reliability and integrity of the data generated from trials conducted within the country,” he affirms. Such sentiments are hardly unfounded. According to statistics relating to FDA inspections conducted from 2022 to the present, China now enjoys a higher pass rate in clinical trial inspections than the United States!
Cost advantages may be one part of the appeal, but are, in many cases, no longer the overriding motivator. “Running clinical trials in China has actually become increasingly expensive over the past few years, although it remains considerable cheaper than in the US. Currently, it comes in at around one-third or half of the US price tag, whereas before it was merely a fraction. Still, the true advantage of conducting trials in China is that we have a large population of patients, particularly treatment naïve ones, which is beneficial for patient recruitment, especially in specific therapeutic areas such as oncology,” claims Alphamab’s Xu Ting.
“The cost difference remains notable: chemistry scientists in China earn significantly less — around USD 40,000–45,000 annually — while biological scientists command higher salaries of approximately USD 100,000. However, it’s crucial to emphasize that while lower costs may be an attractive factor, the value of a well-informed decision is universal,” concurs Simon Hua of Biometas. “Quality decisions, especially in drug discovery, lead to long-term savings in both time and money, outweighing any initial cost reductions,” he emphasizes.
“The true value derives from a combination of factors spanning China’s vast patient pool, the excellent quality standards of the research conducted, and the pure size and advanced capabilities of its major hospitals in key cities such as Beijing, Shanghai, and Guangzhou which, taken together, offer up a unique opportunity for simultaneous drug approvals,” reasons Gabay. “By running clinical trials in parallel with the US and Europe, China provides unprecedented speed and flexibility in patient recruitment, helping to accelerate global clinical trials… If recruitment lags in one region, China can quickly ramp up, making it a key contributor to early access to innovative medicines worldwide,” he surmises.
Cytiva’s Allen Li very much agrees with this assessment. “One simple example of the increasingly conducive environment out here in China is that of CAR-T therapies, where you can witness more rapid development and implementation than in practically any other part of the world, with the number of Investigator-Initiated Trials (IITs) swiftly transitioning from double to triple digits,” he notes.
In other words, Big Pharma are increasingly tending to harness China’s unique attributes as a powerful back office and catapult for their clinical research and drug development activities. “Innovative ideas often arise from clinical needs identified in the U.S., but the actual development and refinement of those ideas—particularly in the preclinical phase—tend to be more efficiently executed in China,” concludes Hua. “By partnering with the local preclinical CROs, firms can reduce preclinical timelines by at least 30 percent, considerably enhancing the overall speed of their drug development programs,” he insists.
Certainly, the capabilities on hand to support such processes are formidable. “We are busy assembling an unparalleled end-to-end solution that empowers our customers to bring novel therapeutics to fruition with unprecedented speed and efficacy. As China continues to lead the charge in biopharmaceutical industry development, our facility not only enhances our offerings for local clientele but also positions us to effectively serve the broader international life science community,” assures Li, pointing to Cytiva’s in-county 11,000-square-meter facility comprising four GMP modules and a dedicated team of around 50 scientists. “I would even argue it’s one of the best developmental capabilities in the whole of Asia,” he enthuses.
Biometas also stands out for the sheer breadth of services and platforms offered to its clients. “So far, we’ve worked on more than 800 preclinical products. Of these, approximately 60 percent were small molecule-based, while the remaining 40 percent span a variety of modalities, including antibodies, ADCs, and newer therapeutic classes. This distribution reflects broader trends in the industry, where small molecules continue to represent most drug approvals, followed by antibodies and ADCs. What distinguishes us is our ability to work flexibly across this broad spectrum of modalities, providing versatile solutions to meet the evolving needs of our clients,” details Yingjia Zhang.
“Our role is not to make decisions for our clients but to provide the data and insights that empower them to make informed choices. We support them by conducting thorough analyses of their compounds, from small molecules to antibodies, using ex vivo and in vivo testing in both mice and monkeys. With the data we provide, clients are able to determine whether to move forward with a particular compound or explore alternative options,” clarifies Hua.
Finally, there is China’s growing prowess in next-generation discovery platforms deploying 4IR disruptive technologies to radically reinvent the clinical trials process. Often described as a ‘clinical research organization on steroids,’ XTALPI positions itself as a tech-enabled partner rather than a low-tech service provider. “Our clients, particularly big pharma, increasingly appreciate the innovation we bring through AI, quantum physics, robotics and other advanced technologies. These innovations help improve efficiency, enhance safety profiles, and increase accuracy in drug discovery. As a result, we can increasingly win deals with significant upfront payments, especially for complex therapeutic areas,” recounts the company’s Chief Financial Officer Ronald Tam.
“AI-driven drug discovery does require a more strategic, top-level commitment compared to traditional CRO services,” he concedes. “However, we in XTALPI have established a solid 10-year track record, collaborating with 16 of the World’s top 20 global pharmaceutical companies, who are keen to tap into China’s pioneering work in these frontier areas.”
Taking Chinese Innovation Global
Big Pharma’s rapidly evolving relationship vis-a-vis Chinese innovation can also be demonstrated in the surge of dealmaking that has occurred since 2023. Last year, for the first time ever in history, the number of China’s outbound deals involving rights for treatments surpassed the number of inbound deals. According to China Merchants Bank Research Institute data, Chinese biopharma companies disclosed more than 80 out-licensing deals to international partners in 2023, valued at a record USD 45 billion. This growth trend then continued to accelerate in 2024 with almost 20 transactions announced in January alone.
“What we’ve been witnessing has been a fundamental realignment in the market dynamics with a rapid switchover from the licensing-in therapies from abroad to the licensing-out of best-in-class drugs from China to global markets, which has, in turn, seen many Chinese drug developers transition over from being technology buyers to technology sellers,” reports PHIRDA’s Song Ruilin.
“It’s come as a bit of a surprise to many analysts that China was even able to develop so many best-in-class drugs fit for global markets. Given that the SPDR S&P Biotech ETF had dropped so much and the valuations of US biotechs declined, many market watchers had expected that multinationals would solely focus on US companies,” muses Nisa Leung. “In fact, owing to the faster turnaround and cost effectiveness, and inherent quality of the therapies, many multinationals feel there are significant cost benefits to licensing them. Even five years ago, we would not have imagined that this could be achieved,” she exclaims.
“In our eyes China is not just an influential marketplace for doing business, but increasingly a hugely valuable innovation source. Therefore, identifying and fostering local opportunities has become a top priority for our global business development teams and leadership,” explains Merck’s Vivian Zhang.
“Facilitating the flow of Chinese innovations to the global market, has become an increasingly important part of our affiliate’s activities,” agrees Takeda’s Sean Shan. “Some of the local biotechs possess ground-breaking therapies, and there is increasing competition for these assets. Takeda is convinced that China is now a significant player in global innovation cycle and that is reflected in the number of partnerships that we have been striking such as our agreements with HUTCHMED and Belief BioMed, and our recent expansion with Ascentage Pharma,” he declares.
Interestingly it is not just the Big Pharma that is keen to get a slice of the action but also the mid cap multinationals. “Ipsen has even gone as far as to establish a dedicated local business development capability that continuously scouts for opportunities and collaborates closely with our global external innovation BD team,” reveals Guillaume Delmotte, while Italian specialty outfit, Chiesi recently reconfigured their global business strategy to incorporate a ‘China to Global’ focus.
“Our collaboration with Haisco Pharmaceutical Group to develop a DPP-1 inhibitor for respiratory diseases represents a real milestone as it marks the very first time a locally developed therapy is being introduced to the global pipeline and underscores the growing role of Chinese innovation in advancing Chiesi’s international objectives,” reveals Deng Haoqing, the company’s general manager.
“I think the forging of alliances with multinational companies may well become the dominant strategic approach for many local entities for the foreseeable future,” reflects Jasmine Cui Innocare. “We’ve certainly perceived a marked upswing in interest from large corporations seeking to in-license our locally derived therapies and our firm continues to attract many inquiries from multinational drug developers eager to explore collaborative opportunities,” she confirms.
Even full acquisitions are now for the first time on the agenda. In December 2023, AstraZeneca raised eyebrows by agreeing to buy out China-based clinical-stage CAR-T specialist, Gracell Biotechnologies, for USD 1.2 billion, marking the first full takeover of a Chinese biotech by a multinational drugmaker.
“This is a very positive signal, as it sets a precedent for a multinational pharmaceutical company fully taking over a Chinese pharmaceutical company, rather than just selected assets, and is indicative of the rising quality and potential of these Chinese biotech scene,” thinks Cytiva’s Allen Li. Sure enough, only ten days after the Gracell deal, Swiss pharmaceutical company Novartis acquired SanReno Therapeutics, a Chinese clinical-stage biotech company focused on kidney diseases.
Certain industry insiders have raised concerns that, given the prevailing adverse economic climate and constrained cash flows, Chinese biotechs remain at a disadvantage in negotiations with global pharmaceutical giants, often resulting in their assets being undervalued. “I certainly see this as a buyer’s market,” affirms Cynthia Xin Wang of Servier. “Cooling investment sentiments have been prompting many Chinese companies to re-evaluate and streamline their operations. With a tendency towards shedding non-core assets to refocus on core competencies and accelerate development processes. This strategic realignment, while prudent for the companies involved, has contributed to an environment where commercial assets risk being underutilized or undervalued, and this, in turn, presents unique opportunities for strategic collaborations and investments,” she evaluates.
However, many local entities interpret the recent uptick in international licensing deals as a welcome opportunity that will not only provide much-needed cash flow and lifeline for their companies to weather the downturn, but also serve as endorsements for Chinese-developed treatments and thus further invigorate the market. “We shouldn’t underestimate the significance of what is happening. In 2023, the value of licensing-out deals from Chinese companies, converted into US dollars, was approximately 2.5 times greater than the total volume capital raised by Chinese enterprises within China, so for many firms this could offer a decent pathway to financial stability and sustainability,” points out Song Ruilin.
Jacobio represents a case in point. “We have two primary strategies for revenue generation. Firstly, we continue to raise funds from the capital market, primarily in Hong Kong, despite the current downturn. Licensing agreements, however, provide us with an additional string to our bow. Our deal with AbbVie, has brought in a significant sum of USD 110 million despite not having gone to the end of the milestones. With a substantial portion of this capital in reserve, equivalent to nearly three years’ worth of operational expenses, we are now well-positioned financially,” explains Yinxiang Wang, the company’s Chairman.
Beyond financing, the new tie-ups potentially deliver a whole host of additional advantages benefitting both sides. “The surge in innovation within China’s biotech sector has created a wealth of high-quality therapies targeting diverse disease areas. However, local companies often lack the global infrastructure and financial firepower needed to bring these breakthroughs to international markets. International players like Santen can help bridge this gap by forming strategic alliances that enable these therapies to achieve global reach while simultaneously bolstering its own product offerings,” explains Santen’s Shawn Xiang.
“There is a huge domestic appetite for finding partners either for partnering and collaborating or for carrying out financial transactions,” observes Deloitte’s Jens Ewert. “Many local entities are also interested in accessing know-how and expertise, while others that have become cash-rich need to find a use for that cash and manage shareholder returns. The Amgen-BeiGene transaction is a good example of the Chinese ecosystem looking to access knowledge while allowing others to access the market. A considerable number of multinational corporations are pushing hard to get ‘local’, while Chinese enterprises are equally determined to go ‘global’ so licensing-out represents a two-way street that can benefit all parties,” he thinks.
Many of the local players agree. “Looking ahead, our company will need capital to progress, and currently, it appears that securing business development deals might be easier than raising financing,” reasons EpimAb Biotheraputics’ Chengbin Wu. “Our focus is to advance our molecules to the next stage of development, creating more value for the company. This progress will then facilitate discussions about financing or partnership deals. Big Pharma typically looks for data that supports milestones, such as Phase 2 POC, when considering deals,” he continues.
At present, EpimAb’s priority is to advance their clinical and innovative preclinical programs and to move them into the clinic and start generating data. “All these efforts are focused on creating value for the company. Patience is essential as we take one step at a time. If we secure BD deals that provide additional cash, it will be beneficial, giving us more time to create value for the company over time,” believes Wu.
For Abbisko too, such alliances appear to offer the most direct and promising route to commercialization. “For a young biotech company like Abbisko, navigating the complexities of commercialization presents formidable challenges. While we have the expertise and resources necessary to conduct research and clinical trials, building and scaling a global commercial infrastructure requires extensive capabilities and investments. Partnering with a multinational like Merck not only accelerates our ability to bring transformative therapies to market swiftly but also leverages their established global presence to maximize the commercial potential of pimicotinib. As we plan for the future, we are evaluating each product on a case-by-case basis. For instance, with our second asset focused on liver cancer, a critical therapeutic area for us, we are leaning towards commercializing this asset ourselves in China,” explains Yao-Chang Xu.
These partnerships additionally help to validate Abbisko’s discovery engine. “Such collaborations extend far beyond financial investments. They involve significant transfer of scientific knowledge and expertise. When we engage with partners like Merck, Lilly, or AstraZeneca, we also gain access to their extensive research and development histories for certain therapeutic targets. This includes insights into previous studies, technological advancements, and strategic approaches that they have employed,” he insists. “Our scientists and clinicians can then leverage this foundation to refine and tailor molecules to meet various criteria for clinical trials. Essentially, it is a collaborative effort where we absorb their previously explored methodologies, and then we integrate our capabilities and insights to drive innovation forward.”
Chinese Characteristics
Given the immense changes that have taken place within Chinese life sciences, what does the future hold for the sector and those that seek to invest in it? “Despite short-term uncertainties, geopolitical tensions and economic turbulences, it is clear that the Chinese market presents significant opportunities that will prevail long into the future,” declares Cytiva’s Allen Li.
“I would advise new market entrants not to be swayed by surface-level perceptions: to truly understand the industry’s pulse, one must immerse oneself in the country and engage with customers and local companies first hand. One must trust what one witnesses on the ground, where real value is created,” he counsels.
“First and foremost, speed and agility is paramount,” warns Takeda’s Sean Shan. “The Chinese market is fast-moving, and at times unpredictable. Staying competitive requires an ability to make swift decisions and execute efficiently so as to seize the opportunities that are unfolding and to anticipate the challenges ahead of time. Often it boils down to being alert and possessing quick reaction speeds,” he believes.
“Contemporary China is a very different setting compared to past stereotypes,” concludes Olivier Dessajan of the French Healthcare Alliance. “Success demands long-term commitment, extensive preparation, and doing your homework. Companies must be prepared for a different timeline and be patient as they work through the regulatory and market entry processes. It is a land of untold riches, but also intricately complex, and full of its own nuances, requiring hands-on management and a great deal of experience.”
