[Big read] China has the drugs. Can it build the next Pfizer?

(Edited and refined by Josephine Hong, with the assistance of AI translation.)

How fierce has China’s innovative drug race become? In recent months, an unusual indicator has offered an answer: laboratories are running out of monkeys.

As a critical resource for preclinical safety assessments, lab monkeys are likened by the industry to the “computing power” of innovative drug development. A surge in drug development programmes has triggered a shortage of lab monkeys, with the price of a monkey recently soaring to 200,000 RMB (US$29,550), raising concerns about delays in drug development.

The ‘new new three’

The monkey shortage is a vivid illustration of the rapid expansion of China’s innovative drug sector. After nearly a decade of regulatory reforms, along with growing capital investment and research and development (R&D) capabilities, China’s innovative drug development and overseas expansion reached a turning point around 2024. Out-licensing deals surged, and China gradually shifted from being an important sales market for global pharmaceutical companies to a major source of new drugs for the world.

As of the end of last year, China had 4,751 innovative drugs under development, accounting for 33.7% of the global total and surpassing the US to become the country with the largest number of innovative drugs in development worldwide.

In recent months, Chinese officials have also grouped innovative drugs alongside artificial intelligence (AI) and robotics as the “new new three” growth engines for foreign trade. Behind this latest rise are the strengths of China’s innovative drug industry. The next challenge for Chinese pharmaceutical companies, however, is moving beyond developing good drugs to building world-class pharmaceutical companies.

Where does China’s innovative drug industry currently stand? Kang Xiaoqiang, founder of Nanjing-based biotechnology company Leads Biolabs, told Lianhe Zaobao (LHZB) that China’s drug development history can be divided into three stages. Initially, the industry focused primarily on generic drugs. It then entered a “fast follower” phase, improving on drugs based on existing targets. China has now entered a third stage that places greater emphasis on innovation, with breakthroughs involving new targets as well as areas such as antibody-drug conjugates (ADCs) and bispecific antibodies.

ADCs have been dubbed the “biological missiles” of cancer treatment because they can precisely deliver cytotoxic compounds to tumour cells. Bispecific antibodies, meanwhile, can recognise two different targets and have gained significance in treating cancer and a broader range of diseases.

Behind this rapid growth is the combination of multiple advantages in China’s drug development ecosystem, particularly its vast patient population, which provides a natural advantage for clinical trials.

Kang explained that the core competitiveness of China’s innovative drug development lies in efficiency and cost. From preclinical research to clinical trials, the overall process is at least twice as fast as in the US, but at a third of the cost.

“Capital will inevitably flow to where efficiency is highest,” he said.

Chinese government policies have also continued to provide support. During the 14th Five-Year Plan period from 2021 to 2025, China identified innovation and transformation in the biopharmaceutical sector as a key priority. The 15th Five-Year Plan for 2026 to 2030 goes further, setting a target for China’s first-in-class innovative drugs to account for more than 25% of the global total by 2030.

Collaboration with big pharma overseas

Unlike conventional export goods, Chinese innovative drugs currently tend to use what is broadly known as the “borrowing a boat” model to expand overseas. Under this approach, Chinese companies grant foreign pharmaceutical companies the rights to develop or commercialise their drugs overseas, leveraging the latter’s clinical and sales networks to enter international markets. In return, Chinese pharmaceutical companies can receive upfront payments, milestone payments and other forms of income.

These deals are mainly done in the US and Europe, but also extend to Southeast Asia, the Middle East and other regions.

Last year, the total value of China’s out-licensing deals for innovative drugs exceeded US$130 billion, with more than 150 licensing transactions, setting a record high.

The surge in licensing deals is also driven by an urgent need among major pharmaceutical companies in the US and Europe to replenish their drug pipelines.

Emeritus professor Ong Choon Nam of the National University of Singapore (NUS)’s Saw Swee Hock School of Public Health explained that many Western pharmaceutical companies will face a “patent cliff” in the coming years and must find new drugs to replenish their pipelines. In the past, US pharmaceutical companies acquired new drug assets by buying local biotech start-ups. But as the cost of acquiring high-quality companies continues to rise, partnerships with Chinese pharmaceutical companies have gained traction.

The large number of innovative drugs now available for licensing in China would not have been possible without the domestic biopharmaceutical clusters that have gradually taken shape over the past decade.

China’s innovative drug companies are concentrated mainly in Jiangsu, Guangdong, Shanghai and Beijing. The Suzhou Industrial Park in Jiangsu, a Singapore-China government-to-government cooperation project, is one of the country’s major hubs for innovative drug R&D.

Xu Ting, founder Alphamab Oncology, a pharmaceutical company currently focused on cancer treatment and based in Suzhou Industrial Park, said that after years of development, the park has built a complete industry chain covering contract R&D, innovative drug development, commercialisation and logistics. The continuity of government policies over the years has also created a strong “siphoning effect” for talent and capital.

Xu believes that as China’s overall drug development capabilities expand, the overseas expansion of Chinese biotech and pharmaceutical companies is inevitable. Competition in the domestic market is particularly intense.

He said, “In a single ADC field, you can have dozens of similar products. The excess capacity in R&D and manufacturing means companies inevitably have to go overseas.”

‘Building the boat’ for better commercial value

As “borrowing a boat” to go overseas becomes increasingly common, the globalisation of China’s innovative drug industry is entering a more challenging stage — one focused on “building” the boat instead.

Some industry insiders believe that while out-licensing makes commercial sense, it is akin to “having a good drug but handing it off to a major pharmaceutical company”, which then controls the commercial value of the drug.

By contrast, “building the boat” by establishing their own overseas clinical development, regulatory and commercialisation capabilities allows Chinese pharmaceutical companies to retain greater control. BeOne Medicines, a biotechnology giant that sells its cancer drugs directly in the US, is a pioneer of this model.

For most small and medium-sized pharmaceutical companies, however, the barriers to this model remain high. They need international talent as well as the ability to manage operations across countries.

Leads Biolabs’ Kang said, “Moving from being passive, to semi-active and then to being proactive takes time.”

He explained that out-licensing is a relatively passive route. More active models include establishing a NewCo — an overseas company in which the Chinese parent company retains an equity stake — as well as profit-sharing joint-development models. The next step involves a pharmaceutical company conducting clinical trials and sales overseas entirely on its own.

Leads Biolabs, which focuses on next-generation cancer immunotherapies, currently relies mainly on out-licensing and the NewCo model.

In August this year, Alphamab Oncology partnered with US AI biotech company Pathos AI, granting the latter overseas rights to a proprietary bispecific ADC drug. The deal includes an upfront payment of US$125 million.

Founder Xu Ting said the company hopes to leverage Pathos’s big data and large-scale models to find a faster route into the US market. In the future, Alphamab Oncology plans to independently advance global clinical development of its core products and realise their commercial value, while continuing to rely on partnerships, including out-licensing and joint development, for other projects.

However, even after “building the boat”, companies must contend with another hurdle: political realities.

Leon Tang, founder of InScienceWeTrust (ISWT) BioAdvisory, a consultancy facilitating cooperation between China and the international biopharmaceutical industry, told LHZB that the US accounts for about 55% of global pharmaceutical sales, while its contribution to industry profits is estimated at at least 70%, making it the world’s most important market.

“If you want to become the next Pfizer, you have to enter the US market and capture its sales and profits,” he said.

Tang candidly pointed out, “Here’s the problem. You need a sales team in the US to sell your drugs there directly. Will the US government allow that? You may say you are building a boat to go overseas, but the US port may not even let you dock.”

Heavy investments to go global

Against the challenges of strengthening global commercialisation capabilities and navigating geopolitical risks, the industry is keeping an eye on when China will produce a multinational pharmaceutical company capable of rivalling established Western giants in terms of revenue and brand influence.

Leads Biolabs’ Kang believes it is “only a matter of time” before China produces well-known multinational pharmaceutical companies. “Chinese people are quite strong in R&D. In fact, there are many Chinese people working in the laboratories of multinational pharmaceutical companies in the US,” he said. But R&D capabilities alone are not enough. Pharmaceutical companies must also build up their capabilities in international clinical trials, manufacturing and sales.

He estimated that based on a timeline involving the establishment of international centres, the conduct of clinical trials, obtaining regulatory approvals and then building sales networks, well-known Chinese multinational pharmaceutical companies could emerge within the next seven or eight years.

However, NUS’s Ong cautioned that Western pharmaceutical giants have spent five to six decades developing their presence in global markets. It will not be easy for Chinese pharmaceutical companies to break into markets dominated by these established players.

Taking US pharmaceutical giant Eli Lilly as an example, he pointed out that the company has a market capitalisation of about US$1 trillion, compared with the tens of billions of dollars commanded by China’s leading pharmaceutical companies.

Ong said, “Aside from closing the significant gap in technology, Chinese pharmaceutical companies also need to invest heavily in expanding their market scale.”

Deeper corporate ties means stronger political headwinds

China’s rapid rise in innovative drugs has attracted more multinational pharmaceutical companies seeking partnerships. At the same time, however, it has created a paradox: Chinese and US pharmaceutical companies increasingly need each other commercially, even as strategic distrust between the two sides continues to deepen.

In June this year, bipartisan members of the US Congress introduced the Biotech Investment National Security Act (BINSA), seeking to bring biotechnology under the US framework for screening outbound investment and to strengthen scrutiny of biotech transactions involving Chinese entities.

This has raised concerns among some industry insiders that biotechnology could become the next frontier of the China-US tech rivalry, with both sides potentially tightening restrictions on cross-border business transactions involving pharmaceutical companies.

Nevertheless, most interviewees believe that while policy changes could have a negative impact in the short term, they are unlikely to halt cooperation between Chinese and US pharmaceutical companies in the long run.

ISWT BioAdvisory’s Tang said, “Large US pharmaceutical companies and specialised healthcare investment institutions are currently very receptive to deeper ties with China. At least from the investors’ perspective, no one is opposed to working with China.”

Tang assessed that the BINSA bill is unlikely to pass in its current draft form, because it would cause more damage than benefits for the US pharmaceutical industry. He believes the legislation could ultimately serve more as a means of protecting US biotech companies in their early stages, rather than effectively shutting Chinese biotech companies out of the US market.

Leads Biolabs’ Kang also believes there remains a practical need for cooperation between Chinese and US pharmaceutical companies. He said, “Drug development is different from other fields. It is about saving lives. Human life overrides everything. From that perspective, pharmaceuticals are different from industries that simply sell products. There is still a need for greater cooperation.”

Kang added, “We are still far from solving the problem of disease. Cancer, for example, remains extremely widespread, with 20 million new cases every year and large numbers of patients dying. There are also relatively few treatment options. Our goal is still to turn it into a manageable chronic disease. At present, there is a huge unmet clinical need.”

He believes that the innovative drug industry, now regarded as one of China’s “new new three” growth engines for exports, “does not have excess capacity; it only suffers from undercapacity”.

No third pole beside China and US

Alphamab Oncology’s Xu sees the global competition in innovative drugs in stark terms: there is no third pole beyond China and the US.

He explained that innovative drug development requires a very strong scientific research foundation and substantial investment. China’s ability to catch up in this round stems largely from a shift in the nature of drug development: moving from biological mechanisms towards a form of engineering involving complex technologies and supply-chain coordination.

“It is now a competition between two poles — China and the US,” Xu said. “I don’t think there will be a clear winner for some time, because the two sides have very different paths, markets and growth models.”

Leading in next-generation cell therapies

Can Parkinson’s disease be treated with a new therapy that “turns back the clock” on cells?

Beyond relatively mature conventional drugs and surgical treatments, China is stepping up efforts to develop cutting-edge biotechnologies, including entirely new forms of cell therapy. Induced pluripotent stem cell (iPSC) therapy is one of the most closely watched fields.

Put simply, iPSC technology reprogrammes somatic cells, effectively “rejuvenating” them to a pluripotent state similar to that of embryonic stem cells. These cells can then be differentiated into specific cell types or tissues for use in regenerative medicine and disease treatment.

Hefei-based Nuwacell Biotech is one of China’s leading iPSC companies. Its cell therapy product NCR201, developed to treat Parkinson’s disease, is among its most advanced pipelines and is currently in Phase II clinical trials at multiple neurological disease centres in China. The company said that the therapy has demonstrated good safety and tolerability, as well as preliminary efficacy.

Yu Junying, founder and chief scientist of Nuwacell Biotech, told LHZB that compared with antibody drugs, China’s cell therapy industry got off to a later start.

After the company was founded in 2016, it spent five to six years developing multiple manufacturing processes for cell preparation and building a platform for cell drug R&D and production.

At the time, China lagged behind the US, Japan and other countries in iPSC R&D. But the gap narrowed rapidly during the clinical development stage.

“Everyone knows where China’s advantage lies — in clinical trials,” Yu said.

Chinese clinical data still need international recognition

Yu said that after the company’s cell therapy products entered the application stage in 2022, clinical development accelerated significantly.

Taking its Parkinson’s treatment as an example, the number of clinical cases has now surpassed those of comparable programmes in the US and Japan.

“Clinical development may have started later, but we are now roughly on par with them,” she said.

Although it is still too early to talk about internationalisation, Yu believes it will be relatively difficult for cell therapy products manufactured in China to enter international markets directly. A more viable path in the future could be to establish production facilities overseas.

Yu acknowledged that Chinese innovative therapies, including iPSC treatments, still face several obstacles when expanding overseas. “There is still a certain degree of mistrust of Chinese clinical data overseas,” she said.

She attributed this to a combination of historical factors and the current geopolitical climate. To overcome it, Chinese companies must continue building robust clinical data to earn the trust and recognition of the biopharmaceutical industries in Europe, the US and around the world.

This article was first published in Lianhe Zaobao as “全球化从“借船出海”到自己“造船” 中国创新药准备破浪远航”.

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