China’s Rise in Biopharma

The escalating trade tensions between the US and China dominate global headlines, often focusing on tariffs and the immediate economic impacts. But for the pharmaceutical industry, this narrative misses a critical story unfolding today: the rise of China as a leading force in biopharma innovation and the profound implications for leading global companies.

For years, the prevailing Western view of China’s pharma industry was one of a large, low-cost manufacturing base for key starting materials and generics – essentially, a source of commodity products and copycats. The speed and scale at which China could transition towards true innovation was unprecedented. The focus remained primarily on traditional research and development hubs and markets in the West. 

From “Made in China” to “Created in China”

However, the definition of success for China in this sector has fundamentally changed. There has been a clear shift from “Made in China” to “Created in China.” Success is now defined by gaining global recognition across the value chain, from their clinical research to the launch of innovative therapies. For example, China accounted for a significant 23 percent of global next-generation therapeutic candidates in 2024.¹ Further, we are seeing increasing cases of Chinese-developed drugs gaining traction internationally. This is evidenced by a surge in out-licensing deals, which overtook in-licensing deals in both number and volume from $8 billion in 2020 to $52 billion in the previous year.² Compelling cases, such as a recent early-stage clinical trial where a new monoclonal antibody drug from the Chinese company Akeso Inc. showed better results than Merck’s market leading treatment, Keytruda, make the development more tangible.³ It’s not only about monoclonal antibodies – China has further established dominance in other cutting-edge biotech areas, from technological approaches like genetic sequencing to modalities like antibody drug conjugates and CAR-T cellular therapies. Lastly, China’s progress in closing drug lag by expediting market access further underscores their success.

Several transformative factors converged to enable China’s rise in biopharma. At the forefront is strong government support and strategic prioritization of the industry. Long-term national strategies date back to 2006. A wide array of policies, like “Made in China 2025,” “Healthy China 2030,” and the “14^th Five-Year Plan for Pharma Industry Development,” have directly and indirectly targeted biopharma as a key sector for growth and innovation. This strategic push has been coupled with significant regulatory reforms, overhauling the ecosystem to expedite drug approvals. The implementation of priority review pathways, for example, has led to a 35 percent increase in the speed of review, bringing the reduced median NDA approval time to just 15.4 months between 2017 and 2021. The process for including innovative drugs in the National Reimbursement Drug List (NRDL) has also been significantly shortened, from nearly five years to just over one year.⁴

China’s overall research and development (R&D) spending now surpasses the EU’s and is rapidly catching up to the US.⁵ In fact, in biopharma alone, R&D rose from $35 million in 2015 to $15 billion in 2023.¹ China has also built a strong talent pipeline, with the highest number of top 100 universities and millions of science graduates annually. A “reverse brain drain” is reinforcing this base, with Chinese-born scientists returning in record numbers. Meanwhile, its vast domestic market – the world’s second largest – offers a rich testing ground for innovation, driven by an aging population and rising rate of chronic disease. Cost efficiencies, particularly in clinical trials, also play a role. While manufacturing costs may not be as low as they once were, the direct cost of trials are estimated to be 30-40 percent lower than in the EU and US.⁶ That, combined with easier patient recruitment and widespread advanced infrastructure in major cities, increase the attractiveness of China for research and development.

Strategic shift in perspective

To secure their future success in this transformed landscape, European and American players must adopt a strategic shift in perspective and approach. Engaging strategically within the Chinese domestic market is crucial. This entails recognizing China not merely as a market for finished products, but as an increasingly vital source of novel drug candidates, cutting-edge technologies, and scientific talent. Engaging confidently in times of geopolitical tensions requires balancing strategic agility in the short term with a clear, long-term vision for operating in this complex environment.

A critical imperative is to secure supply chains within China. This involves implementing "local for local" strategies, which include building manufacturing and sourcing capabilities within the country. This approach reduces reliance on imports and helps mitigate the impact of potential tariffs or trade restrictions. Beyond manufacturing, companies must leverage China as a dynamic innovation center. This involves actively utilizing the deep pool of local talent, particularly those with experience from multinational companies, and establishing a significant R&D presence. For instance, Roche established its first R&D center in China in 2004, followed by an Innovation Center in Shanghai in 2016.⁷ Further, Bayer has pursued deep collaboration with leading Chinese universities like Tsinghua, resulting in numerous joint research projects and the establishment of a life science incubator in Shanghai focused on cutting-edge areas like cell and gene therapies.⁸ Such investments allow international companies to tap into local expertise and accelerate their research pipelines.

Conducting clinical trials in China has also become essential. Leveraging the sheer volume of patients, harmonizing standards and regulations, and improving infrastructure allows for greater speed and efficiency in patient recruitment and trial execution, accelerating the overall drug development timeline. That’s why China is now the world’s leading trial location, with 39 percent of all trials started globally in 2023 having one or more sites in China, up from 25 percent in 2019.⁹ In fact, many companies are even launching drugs in China first to capitalize on the recent regulatory reforms and faster approval pathways. However, navigating the complex market access landscape remains a challenge with only 26 imported drugs included in the NRDL as of 2024. Securing inclusion within the Chinese economy is crucial for broad patient access and commercial success. This makes partnerships and joint ventures with local Chinese players who possess the expertise and relationships to effectively navigate the NRDL process an imperative.

Moreover, adapting to the evolving global market with an understanding of Chinese innovation is vital. International companies must prepare for intensifying competition from Chinese firms, not only within China's domestic market but also on the international stage. Chinese companies will increasingly seek international approvals and launch in traditionally Western markets.

Proactively navigating geopolitical shifts is no longer optional but a strategic necessity. This includes closely tracking and planning for rapidly evolving dynamics, including tariffs, trade tensions, and policy changes like the US Biosecure Act which seeks to restrict US government contracts with companies that rely on certain Chinese biotech firms, potentially disrupting global supply chains and accelerating localization efforts. Strategic agility in the short term must be balanced with a long-term vision for global operations and collaborations. Evaluating and strengthening global supply chains is critical. Acknowledging China's key role in supplying critical starting materials and active pharmaceutical ingredients (APIs), as well as the high-value services offered by Chinese contract development and manufacturing organizations (CDMOs), is necessary. Companies must build resilience into their sourcing strategies and consider diversifying production partners to mitigate potential disruptions.

Embracing the paradigm shift

Beyond the competitive challenge, China's innovation also presents opportunities for collaboration on a global scale. Exploring opportunities for out-licensing of Chinese innovation to international markets allows international companies to bring novel therapies developed in China to a broader global patient base. Furthermore, international companies can consider assisting in the commercialization of Chinese-developed drugs for international markets through strategic partnerships and distribution agreements, leveraging their existing global infrastructure and market expertise. This could be a valuable avenue to access innovative assets and participate in the global success of Chinese biopharma. Chinese companies like Akeso BeiGene, and Hengrui are already demonstrating success on the global stage, highlighting the potential for Chinese innovation to compete with big pharma in not only a wide array of geographies, but also modalities and indications.