Introduction
In 2024, China’s pharmaceutical industry made headlines. To some extent – it was one of the biggest shocks of last year. Once known primarily for generic drugs and contract manufacturing, China is now producing innovative therapies, attracting major investments, and striking high-profile deals with Western pharma – something few expected only a decade ago would happen.
To put in perspective where we are now, consider the following numbers & figures:
Market value: The market capitalization of Chinese biopharma innovators surged from just $3 billion in 2016 to over $380 billion by mid-2021. Chinese biotech firms have led global IPO charts – 7 of the world’s 10 largest biopharma IPOs from 2018–2020 were by China-based companies. In 2020 alone, 23 Chinese biotechs went public.
R&D pipeline: China’s share of the global drug innovation pipeline jumped from 4.1% in 2015 to 13.9% in 2020. By 2023, China became the world’s top location for new clinical trials, with 39% of all trials initiated that year including a site in China.
Major licensing deals: Chinese companies are now regularly out-licensing novel drug candidates to big pharma. The number of such deals more than doubled from 15 in 2019 to 33 in 2023.
Blockbuster drugs & FDA approvals: A decade ago, China had few if any globally marketed novel drugs; now Chinese-origin medicines are achieving blockbuster status.
I’ve observed two parallel threads underlying this surprising ascent of China’s pharma ecosystem––on one hand are the slow-burning trends – changes that took years or even decades to bear fruit:
A pattern of “reverse brain drain” that has brought experienced scientific talent back to China
An ambitious and highly coordinated national-industrial strategy that has gradually shifted the country’s involvement in the drug development chain from generic drugs to high-value innovation
On the other are the fast-moving trends – recent accelerants that have rapidly propelled China’s capabilities to new heights, which include:
A drastic regulatory overhaul that accelerated drug approvals and aligned standards with global norms
Macro-level economic circumstances which incentivized larger-than-average amounts of deal-making between Chinese and Western companies
Main takeaway: China’s pharmaceutical sector from 2015 to 2025 has transitioned from a supporting player to a major leader in drug innovation. The country now hosts world-class R&D hubs, produces novel drugs approved internationally, and is partnering with – or competing against – Western pharma giants.
Needless to say, global pharma companies can no longer ignore China’s innovation capabilities and market potential; and before we know it, we could very well be hearing in earnings calls,
“What’s your China strategy?”
Slow Trends
1. A 7,000-mile-long boomerang: the problem of “reverse brain drain”
For decades, the flow of scientific talent followed a predictable pattern—China’s brightest students pursued graduate education in the U.S., often staying to build careers in academia, biotech, and pharma.
But that dynamic has flipped. According to China’s Ministry of Education, since 1978, 86% of the 6.6 million Chinese students who studied abroad have returned home. The life sciences sector illustrates this shift clearly. In 2000, fewer than 10 US-based Chinese life sciences professionals repatriated to China; by 2021, that number had grown to approximately 600.
So, what’s behind this change?
Two forces are pulling in opposite directions:
1. The U.S. has raised geopolitical and regulatory barriers—visa restrictions, IP crackdowns, and growing suspicion around Chinese scientists in American labs.
2. China has aggressively rolled out incentives—offering top-tier salaries, well-funded research, and leadership roles in its booming biotech and pharmaceutical sectors.
The result? Many of these professionals are choosing to boomerang back home to build their futures in China rather than remaining in the US; as Professor Emeritus at HKUST David Zweig details in a 66-page dossier published last year, the Chinese government has systematically cultivated policies to attract overseas talent while the U.S. has implemented measures that discourage their retention. Zweig highlights that the growing restrictions on Chinese researchers in the U.S., coupled with the expansion of China’s state-backed talent recruitment programs, have accelerated this trend.
1a. How U.S. geopolitical barriers sent Chinese talent packing
Like any compelling story, this one involves espionage—or at least the fear of it. As American foreign policy hardened against Chinese intellectual property theft throughout the 2010s, Chinese scientists working in the U.S. found themselves caught in the crossfire.
Concerns over China-sponsored trade secret theft culminated in the Trump administration’s China Initiative, a Department of Justice-led campaign aimed at identifying, prosecuting, and imprisoning researchers suspected of economic espionage. While the program officially targeted illicit technology transfers, it disproportionately impacted Chinese and Chinese-American scientists, leading to heightened scrutiny, career disruptions, and widespread fear within the academic and research communities.
David Zweig, Professor Emeritus at HKUST, describes the chilling effect this had:
“In part, due to the U.S. Department of Justice’s China Initiative, talent is flowing back to China even as collaboration across the Pacific is declining. Thus, the percentage of Chinese Ph.D.’s in science and engineering who remain in the United States five years after graduation has decreased significantly—from the low 90s in 2012 to 74.0 percent in 2022.”
Beyond direct prosecutions, the China Initiative created an environment of uncertainty, pushing many Chinese researchers to reconsider their future in the U.S. A survey conducted by the University of Arizona and the Committee of 100 in late 2021 captured this growing unease. Of the 1,949 valid responses from scientists and professors:
50.7% of Chinese-descent researchers reported feeling considerable fear or anxiety that they were under U.S. government surveillance, compared to 11.7% of non-Chinese-descent researchers
42.1% of non-U.S. citizen researchers of Chinese descent indicated that FBI investigations and/or the China Initiative influenced their decision to leave the U.S
42.2% of Chinese-descent scientists believed they were being racially profiled by the U.S. government, while only 8.6% of non-Chinese-descent scientists felt the same
Zweig highlights the real-world consequences of this climate of suspicion, writing:
“A Chinese American professor of genetics voiced the greatest concerns: ‘The China Initiative has a significant impact on my research and personal life. I assume all my electronic communications are potentially monitored by the U.S. government. I decided not to collaborate with researchers in China and other foreign countries due to perceived conflicts of interest. I even decline outside research consulting.’”
For many, the calculus became simple: Stay in a country where you’re under suspicion, or return to China, where you’re actively being recruited, welcomed, and funded?
1b. China’s talent recruitment machine has kicked into high gear
As the U.S. put up barriers, China rolled out the red carpet: over the past two decades, the Chinese government has been engineering an aggressive, structured, and highly organized campaign to bring its top-tier talent back home.
At the center of this effort is the Thousand Talents Plan (TTP)—a government initiative launched in 2008 to recruit elite scientists, particularly those with experience in the U.S. and Europe. The program offers:
Direct financial bonuses to relocate back to China
Substantial funding and lab space
Faster career progression
Ability to lead major national projects
The Chinese government’s carrot-and-stick have been abundant to ensure the program’s success—entire cities were pressured to hit recruitment quotas. Zweig describes the level of mobilization:
“Cities throughout China were pressured to commit publicly to a target number of highly talented returnees they would recruit. Beijing promised to deliver 500 new talents from abroad within a 5-year period, while Guangzhou promised to bring home 300 China-born scientists, academics, and businesspeople.”
While the Thousand Talents Plan is China’s flagship recruitment effort, it is far from the only one. Over the past two decades, China has launched multiple highly structured foreign outreach programs aimed at different categories of overseas Chinese professionals, from academic researchers to industry executives.
Here’s a snapshot of some of the key programs:
Notice that each of these programs targets a different slice of the overseas Chinese professional population—ensuring that talent is lured back at all career stages.
And why wouldn’t they return? The benefits extend far beyond funding; a study from the Chinese Academy of Sciences (CAS) tracked career progression among returnees vs. local scientists from 2001 to 2004:
Simply put: returnees rise faster.
China’s pharma industry now has its own brain trust
China’s biggest biotech companies today are stacked with U.S.-trained leaders. A 2020 Boston Consulting Group (BCG) report found that 75% of China’s top biotech talent has at least five years of overseas experience.
When you zoom in on the founders of China’s most valuable biopharma firms, the trend is even clearer:
BeiGene → Founded by Xiaodong Wang (PhD, University of Texas, former U.S. oncology exec).
WuXi AppTec → Co-founded by Ge Li (PhD, Columbia, ex-U.S. biotech).
Hutchison MediPharma → Co-founded by Samantha Du (PhD, University of Cincinnati, ex-Pfizer).
In short: the rapid rise of China’s biotech and pharmaceutical industries is, in part, a direct consequence of reverse brain drain. U.S.-trained scientists and executives now drive China’s most innovative biotech firms––leveraging their Western education and industry experience to build world-class enterprises at home.
2. China has leveraged its manufacturing might on the world stage - to major success
There’s a simple, almost embarrassingly obvious reason why China has catapulted itself to near-parity with the U.S. in drug development: it controls the beating heart of global pharmaceutical manufacturing. China has clearly played the long game here––leveraging its dominance in pharmaceutical ingredient production to bankroll its way up the value chain.
2a. Lessons from China’s manufacturing moat
It’s no secret that the Chinese government has played a monumental role in economically buoying certain domestic industries––no less ones of critical national interest.
Investments in infrastructure have been key
Infrastructure comes first, of course: the Chinese government has invested heavily in infrastructure such as industrial parks and incubators dedicated to pharma. Dozens of “biomedicine industrial parks” across China provide turnkey facilities, shared equipment, and favorable leasing terms to manufacturers; and state-backed investment funds have poured capital into pharma companies – for instance, the China State Pharmaceutical Investment Fund and various provincial funds invest in capacity expansion projects. In recent years, local governments in major hubs (Shanghai, Beijing, Guangzhou, etc.) have set up multi-billion-yuan funds to support biotech startups and help build manufacturing plants.
Many Chinese production facilities are large, newly built plants that take advantage of economies of scale and the latest equipment. It’s common for companies to run multiple production lines in parallel and operate round-the-clock with rotating shifts, maximizing output from each plant. Plus, construction and capital costs for factories are lower in China, allowing installation of state-of-the-art machinery at a fraction of the expense in Western countries.
When possible, do everything in-house
Chinese firms manufacture roughly 1,650 API varieties, accounting for about 30% of global API output. This means Chinese drug manufacturers effectively have local access to nearly all key raw materials and intermediates without relying on slow or expensive imports. Having API suppliers next door shortens lead times for materials delivery and allows just-in-time manufacturing; it also gives companies bargaining power to get cheaper input prices due to the abundance of suppliers.
In practice - a Chinese generic drug factory can source its chemicals, packaging, and other inputs from domestic producers in a coordinated, efficient manner––slashing the time and cost required to procure inputs. By contrast, a U.S. manufacturer might need to import APIs or components from abroad (often from China itself), adding shipping delays and expense. China’s logistics network further amplifies this advantage – with extensive highways, railways, and major ports, domestic freight is fast and relatively low-cost.
China’s pharmaceutical manufacturing sector employs ~725,000 workers (vs. ~627,000 in the U.S. ), giving firms flexibility to expand production lines or add new facilities rapidly. This large labor supply––combined with lower wages––lets Chinese manufacturers increase output speed without a linear rise in labor cost; in essence, China can throw more manpower at a project to accelerate timelines and still remain cost-efficient.
A nation going all-in on subsidizing R&D
Tax incentives are also important: China’s tax code allows super deductions for R&D expenses (currently 200% deduction for eligible R&D, meaning companies can double-count R&D costs to reduce taxable income), which many pharma companies utilize.
Pharmaceutical manufacturing enterprises that qualify as “High and New Technology Enterprises” enjoy a reduced 15% corporate income tax rate (versus the standard 25%). There are also VAT rebates or exemptions for certain drug sales and for exported pharmaceuticals.
In addition, local governments might provide free or discounted land, utilities discounts, or cash rebates for building new manufacturing facilities in their jurisdictions. For example: to attract a major vaccine plant, a city might cover part of the construction cost or offer rent-free space for initial years; these incentives lower the capital and operating costs for Chinese manufacturers, effectively acting as indirect subsidies that boost competitiveness.
2b. The “Teva effect” - from generic drugs to innovative ones
The way China’s pharmaceutical industry is undergoing strategic pivoting bears resemblance to the corporate arc of Teva Pharmaceuticals – the world’s largest generic drug company – which over the past two decades attempted to transform from a pure generics manufacturer into a developer of novel, patented drugs.
This “Teva effect” refers to the evolution from low-margin generic business to high-value innovation. For Chinese pharma companies, many of which built their fortunes on generics, the 2015–2025 period has been marked by a similar push to invest in R&D, create proprietary medicines, and reduce reliance on commoditized generic sales.
Wait… what even is the Teva effect?!
Let me explain:
Teva grew to prominence by manufacturing generic drugs at scale, becoming a global leader in off-patent medicines. However, Teva also had a taste of innovation success – most notably with the drug Copaxone (glatiramer acetate) for multiple sclerosis, a novel drug it launched in 1996 that became a blockbuster. Encouraged by this, Teva over time sought to expand its innovative portfolio through acquisitions and internal R&D.
Around the early 2010s, facing intense price competition in generics and anticipating patent cliffs, Teva’s management began to emphasize a pivot to “specialty” and innovative drugs. In 2011, Teva acquired Cephalon (bringing products and pipelines in oncology and CNS) and later invested in biologics and neurology (developing fremanezumab for migraine, for example); and in 2023, Teva’s new CEO announced a renewed strategy explicitly reallocating resources from generics towards innovative medicines and high-value products. In short: as the company evolved over time, Teva has gradually been able to leverage its global scale and core R&D areas to drive growth––acknowledging that pure generics alone no longer suffice.
This arc: from booming generics, to growing pains, – to refocusing on innovation – provides a roadmap that many Chinese companies are now following, albeit on a compressed timeline.
Some Chinese examples of the Teva effect
Historically, China’s domestic pharma companies predominantly produced generic copies of Western drugs (often for the local market). However, the Chinese government’s centralized drug procurement program (launched in 2018, also known as “4+7” policy) began sharply undercutting prices of generics via nationwide tendering––effectively eroding profit margins by up to 90%. This volume-based procurement created an existential threat for purely generic-focused companies; they had to innovate, otherwise they would die.
In effect, they needed to execute their own Teva-like shift, moving up the value chain to become originators, not just copycats. Let’s examine a few leading Chinese companies as case studies:
Jiangsu Hengrui Pharmaceuticals
Hengrui is often cited as a bellwether for China’s pharma innovation drive. Traditionally a maker of cancer generics and anesthesia products, Hengrui began heavily investing in R&D in the 2000s. It received its first innovative drug approval in 2011 (a novel anti-cancer agent), marking the start of a new era. Since then, Hengrui has poured extraordinary resources into drug discovery – over $5 billion invested in R&D cumulatively.
Financially, the strategy is paying off: Hengrui’s revenue from innovative products now eclipses revenue from generics.
Jiangsu Hansoh Pharmaceuticals
Over the course of its existence, Hansoh has followed a similar trajectory to Hengrui; originally known for psychiatric and diabetes generics, Hansoh ramped up R&D around 2015, developing new drugs for oncology and diabetes. The impact is evident in its financials: in 2019, only ~19% of Hansoh’s revenue came from innovative drugs; by H1 2022, over 52% of revenue was from innovative products.
Gan & Lee Pharmaceuticals
Gan & Lee is one of China’s leading insulin manufacturers, long producing biosimilar insulins and insulin analogues (such as biosimilar glargine) for the domestic market.
But when confronted with competition and pricing pressure, Gan & Lee has made a strategic move to develop novel treatments in diabetes and related metabolic diseases––recently, they announced that three of its self-developed innovative drugs – a bi-weekly GLP-1 agonist (GZR18), a once-weekly insulin analog (GZR4), and a first-in-class dual insulin/GLP-1 combo (GZR101) – achieved positive Phase 2 results, outperforming leading international products in trials.
Projecting outwards from Teva
Just as Teva faced eroding margins in commoditized generics (especially in the U.S. after 2010), Chinese firms have been hit by margin collapse due to domestic price reforms around 2018–2019. This “survival pressure” has forced companies to seek higher-margin innovative products.
In doing so, Chinese companies have been able to step out of the purely generic exporter role (where China historically just shipped APIs or generics to other countries) and into the role of innovator-exporter. A notable example: BeiGene’s cancer drug Brukinsa––entirely discovered in China––secured approvals in the U.S., EU, and dozens of countries, with BeiGene setting up its own U.S. salesforce – a major and historical milestone for China’s pharma industry.
Fast Trends
3. Regulatory overhaul and clinical trial expansion
China’s regulatory environment for pharmaceuticals has transformed dramatically since 2015, evolving from a slow and insular system to one that is faster, more transparent, and globally aligned. This regulatory overhaul – spearheaded by the National Medical Products Administration (NMPA, formerly CFDA) – has greatly accelerated drug approval timelines and enabled an explosion of clinical trials, integrating China into global drug development.
3a. Breaking the drug approval backlog
In 2015, China’s drug regulators faced a notorious backlog of drug applications (over 21,000 drug registrations pending review). Approval processes were painfully slow – a new medicine could take 5–7 years to get through Chinese trials and reviews, often lagging far behind the U.S. or EU (“drug lag”).
But beginning in August 2015, the government launched comprehensive reforms to tackle these issues. A key early step was a one-time campaign to clear the backlog, which saw regulators and companies withdraw or fast-track thousands of pending generics applications to focus resources on higher-quality and innovative drugs.
Over the next few years, NMPA hired and trained far more reviewers: the staff of the Center for Drug Evaluation (CDE) grew from only ~100 in 2015 to about 1,000 reviewers by 2020. This tenfold increase in manpower allowed the review speed to dramatically improve: by the he average CDE review time for a new drug dropped from ~900 days to ~300 days(!) by 2019. By 2020, new regulations stipulated standard review timelines of 200 working days (approx. 9 months) for normal new drug applications, with priority reviews targeted as low as 70–130 working days in certain case. For the first time––these changes made China’s drug review cycle directly comparable to that of FDA/EMA.
3b. Joining the regulatory world stage
An enormous milestone in China’s regulatory upgrade was joining the International Council for Harmonisation (ICH) in 2017. By becoming an official member of ICH, China committed to adopting international Good Clinical Practice (GCP) and technical guidelines; bringing China in line with U.S., EU, and Japan norms. Deputy Commissioner Xu Jinghe noted in 2021 that China had “accelerated the integration of its drug regulatory policies… with international rules and practices,” emphasizing science-based regulation and keeping up with ICH’s cutting-edge developments.
This global alignment not only boosts international confidence in drugs tested/approved in China but also allows Chinese trial data to be used in approvals abroad. For example––as China’s GCP became ICH-compliant––data from Chinese patient cohorts could be accepted by the FDA in multinational trials. In 2019, the FDA approved a Chinese-origin cancer drug (Brigatinib for ALK+ lung cancer) partly based on trials that included Chinese sites. Such developments were virtually unheard of prior to 2015!
The 2015-2018 era of regulatory overhaul also introduced mechanisms to encourage innovation. Notably –– in 2020, the NMPA launched a Breakthrough Therapy Designation (BTD) system akin to the FDA’s, in order to give promising therapies enhanced support and swifter review; since then, dozens of breakthrough designations have since been granted to both foreign and domestic drugs (over 130 by 2021), particularly in oncology.
Culminating in 2021, China had approved a record number of new drugs––many of them first-in-class in China. Local innovative drugs benefited as well – e.g., China’s first homegrown PD-1 cancer immunotherapy was approved in 2018 only 9 months after its NDA filing, under priority review, at a speed that surprised many industry observers.
3c. Less regulations → more clinical trials
As regulatory barriers have fallen, China has quickly seen an explosion in clinical trial activity. The number of trials (especially for innovative drugs) grew exponentially, turning China into a global clinical research hub. According to GlobalData, China accounted for 24.7% of all clinical trials worldwide in 2020 – up from an average of ~12% over the prior decade. And this momentum kept building: between 2019 and 2023, about 31% of all new clinical trials initiated globally were in China. In absolute terms – trial starts in China rose 46% from 2019 to 2023 even as the global total declined by 7%. By 2023, China overtook the U.S. in number of trial initiations; nearly 4 in 10 new trials globally had a site in China that year. This is a remarkable change from a decade ago when China was an afterthought in most multinational studies.
Several factors contributed to this trial boom:
Regulatory encouragement of local trials
The 2015 reforms removed bottlenecks for trial approval; the NMPA abolished a long-standing requirement that each trial had to get a specific approval letter (“implicit approval” was introduced – if regulators don’t object within 60 days, a trial can proceed). This 60-day IND approval mechanism, adopted in 2017, vastly speeded up trial starts. Consequently, the number of domestic trial initiations surged. In 2023, the CDE (Center for Drug Evaluation) accepted 2,244 new investigational drug (IND) applications for innovative drugs and vaccines – a 32% increase over the prior year.
Opening to global sponsors
China made it easier for foreign companies to include China in global trials or run trials directly. After joining ICH, many global pharma companies began adding Chinese sites to Phase III trials for major drugs, knowing the data could support simultaneous China approval. By 2022–2023, virtually every multinational pharma had dozens of trials in China, often in partnership with local biotech or hospitals. That said, Chinese sponsors still dominate; one analysis notes that while domestic companies run the majority of trials in China, the top 20 big pharmas still tend to include Chinese sites in a minority of their trials (likely for strategic assets in oncology, etc.).
Patient population and speed of enrollment
China offers the world’s largest pool of treatment-naïve patients, which can make recruitment for trials faster, especially in oncology or rare genetic diseases where Western pools are saturated or slow. Companies have been able to enroll Chinese cohorts very rapidly for certain cancer trials. This has led to situations where Chinese trial data has been pivotal in global filings (e.g., Zai Lab’s tumor drug niraparib included substantial Chinese clinical trial data for FDA approval). By contributing patients, China is becoming a “must-have” in trial strategy to accelerate timelines. An IQVIA report in 2023 highlighted China’s shorter patient enrollment durations compared to global averages in many indications – an attractive factor for sponsors.
4. Facing an economic downturn, Chinese pharma companies have needed to do deals to survive
Over the past three years, China’s economy has experienced a marked slowdown and several financial headwinds. GDP growth decelerated sharply – for example, 2021’s post-pandemic rebound of 8.4% gave way to only 3.0% growth in 2022, one of the weakest performances in decades. This slowdown was driven by stringent zero-COVID policies (and their abrupt end), a property sector slump, and weakened consumer spending, which together created a bumpy economic environment.
Interestingly - a notable consequence of the capital crunch is a surge in licensing and M&A deals in the Chinese pharmaceutical sector: unable to rely on frothy stock markets, many pharma and biotech firms have now turned to business development transactions to generate cash and sustain R&D. In 2023, China saw an unprecedented wave of deal-making: approximately 240 life-science licensing deals were reported, an increase of almost 50% compared to 2021. This includes around 70 outbound licensing agreements where Chinese companies licensed out drug candidates or technologies to foreign partners, with disclosed aggregate deal values exceeding $35 billion (including milestone payments). In fact––for the first time ever––Chinese biopharma companies raised more capital via such partnering deals than through IPOs; initial license fees alone totaled about ¥26.8 billion (~$3.7 billion) in 2023, far surpassing IPO proceeds in the sector.
Below are some of the most notable deals from 2023–2025:
GSK and Hansoh Pharma (2023)
British pharma giant GlaxoSmithKline struck two major licensing deals with Jiangsu Hansoh in late 2023 to bolster its oncology pipeline with antibody-drug conjugates (ADCs) discovered in China.
In October 2023, GSK licensed Hansoh’s B7-H4 ADC (HS-20089) for a reported $85 million upfront and up to ~$1.06 billion in milestones. Just two months later, in December 2023, GSK inked a second agreement for Hansoh’s B7-H3 ADC (HS-20093), paying $185 million upfront and committing to up to $1.525 billion in milestone payments. These deals (total potential ~$2.7B) give GSK ex-China rights to promising cancer therapies developed by Hansoh.
Merck and Hansoh Pharma (2024)
In Dec 2024, Merck & Co. entered a global license with Hansoh for HS-10535, an oral GLP-1 receptor agonist for metabolic diseases. Merck paid $112 million upfront, and Hansoh is eligible for up to $1.9 billion in development and commercialization milestones.
AstraZeneca and Eccogene (2023)
In November 2023, AstraZeneca raised the stakes in the obesity drug race by licensing an experimental oral GLP-1 agonist from Shanghai-based Eccogene. AZ agreed to pay $185 million upfront and up to $1.825 billion in milestones for global rights to Eccogene’s molecule (known as ECC5004).
Roche and Carmot (2023)
In a blockbuster move in Dec 2023, Roche acquired Carmot Therapeutics for $2.7 billion upfront. Carmot was a U.S. based company, but it had China ties (its lead asset CT-388 for obesity is a GLP-1/GIP dual agonist and it collaborated with Chinese researchers).
Takeda and HUTCHMED (2023)
In January 2023, Takeda licensed ex-China rights to fruquintinib––a novel VEGFR inhibitor for colorectal cancer from Chinese pharma HUTCHMED––for $400 million upfront and up to $730 million in milestones (total $1.13 billion).
This bet paid off – in September 2023, the FDA approved fruquintinib (brand name Qinlock) for colorectal cancer, validating the drug’s global potential and making it one of the first China-discovered small molecules to be approved in the US.
Innovent/Junshi/LianBio (2020–2023)
A flurry of deals around Chinese immunotherapy:
In 2020, Eli Lilly paid $200M upfront (total >$15B) to enter a licensing agreement with Innovent on a PD-L1 antibody (sintilimab) for ex-China rights (which sadly didn’t last for long, due to an infamously scrupulous and pedantic rebuff by the FDA)
In 2021, AbbVie paid $180M upfront (total $2B) for rights to I-Mab’s CD47 monoclonal antibody (an immuno-oncology therapy)
In 2023, Bristol Myers Squibb paid $350M upfront to LianBio for rights to mavacamten (a cardiovascular drug) in China/Asia – which was interestingly a reverse-direction deal (i.e. taking Western innovation into China via a Chinese company).
Conclusion
For much of modern history, major new drugs and medical breakthroughs came from Western (or Japanese) companies and academia. China’s rapid progress is altering that balance. By contributing ~14% of the global drug pipeline by 2020 (and likely a higher percentage by EOY 2025), China has become a key source of innovation. Western pharmaceutical companies now routinely scout Chinese research for licensing opportunities, as detailed above. This means the center of gravity in drug innovation is shifting to a more multipolar world. U.S. and European firms that used to compete mainly with each other now must also compete or collaborate with rising Chinese firms.
One immediate implication is price competition and market expansion: as Chinese companies bring drugs to market (in China and abroad), they often do so at lower price points––undercutting Western drugs. For example, China’s domestic PD-1 immunotherapies are sold at a fraction of the cost of Merck’s Keytruda in China, forcing down prices and expanding access. If Chinese companies manage to get these drugs approved overseas, they could introduce more price competition in markets like Southeast Asia, Latin America, or even Europe. Consequently, Western firms will need to adapt strategies – possibly by accelerating their own innovation cycles or finding ways to differentiate their products beyond price. In some cases, Western companies have preemptively partnered––like Novartis with BeiGene on PD-1, effectively to avoid competing against this wave.
Despite the largely collaborative tone in science, the U.S.-China strategic rivalry of the 2020s does seem like it it is set to spill into biotech; just recently, Trump announced that he’ll be imposing 25% tariffs on foreign-imported pharmaceuticals, a not-so-covert way of punishing China for its manufacturing might. If relations worsen, it’s not hard to imagine a bifurcated pharmaceutical world––one where China (perhaps with allied countries) has its own parallel drug development and approval system somewhat separate from the West. In such a scenario, we might see a world not too dissimilar from our own in the past decade––Chinese companies focusing on serving China and emerging markets with innovative drugs tailored to those populations; while Western companies focus on U.S./EU/Japan. There might be less cross-licensing, with each side would commercialize its own innovations within its bloc. Patients would ultimately get access to most drugs, but possibly with delays in each direction (like Western drugs in China or Chinese drugs in the West might face barriers). Some signs of this: the FDA has yet to approve some Chinese drugs that are already proven effective in China (though slowly this is changing). If decoupling happened, that gap could widen.
However, the costs of such duplication are high: the pharmaceutical industry benefits greatly from global scale – larger trials, bigger markets to recoup R&D, and so on. A decoupled scenario could slow innovation (by reducing collaboration and cross-pollination of ideas) and raise costs (by requiring separate R&D pathways). It could also limit patients’ timely access to therapies available elsewhere. Thus, while possible if geopolitics severely deteriorate, a full decoupling in pharma is not in most stakeholders’ interest.
The hope, is of course that this won’t happen. If managed well, China’s rise in pharma could herald a new golden age of drug discovery with multi-center innovation driving down disease burdens worldwide. The next few years will be crucial in setting the tone – whether through more joint successes or through rivalry – and that will determine how the story unfolds through 2030 and beyond.
