Why Chinese biotech is attracting more global attention

A spate of large licensing and acquisition deals with big multinational players has brought China’s maturing biotechnology sector to the foreground. A decade after major regulatory reforms, the country’s biotechnology sector is the source of 23% of drug candidates in development globally, second only to the US, according to a recent report from the analytics company Clarivate. And though recent years have brought financial setbacks, analysts say the growth is poised to continue.

The Chinese pharmaceutical industry has a reputation abroad as a supplier of active pharmaceutical ingredients invented elsewhere, but that is changing. “Before 2015, China’s pharma industry was more focused on the generics,” says Alice Zeng, a senior solution consultant at Clarivate who led the team behind the recent report. But while precursor and generics manufacture still happens, Zeng says, increasing investment and regulatory changes have accelerated the invention and development of new drugs in the country. The year 2015 was a landmark for the Chinese pharmaceutical industry. The National Medical Products Administration undertook reforms that aligned Chinese standards for new-drug approvals with global standards. Chinese regulators also lowered prices on generic drugs, which is where most companies had focused, to make medicines more affordable and incentivize new development. These changes led some generics-focused companies to expand into drug discovery, and many biotech companies have advanced molecules to the clinic.

The Clarivate report also credits regulators’ streamlined review process for the changes in the industry. The NMPA’s turnaround time for investigational new drug applications—a company’s formal request to test a molecule in humans—dropped from almost 2 years in 2014 to closer to 3 months today. New drug applications, which seek permission to sell a drug to patients, take roughly half the time they did a decade ago.

China now spends more on all domestic research and development than the European Union and is approaching parity with the US. Its pharmaceutical industry’s R&D spending is a smaller share of global totals, according to November 2024 figures from the European Federation of Pharmaceutical Industries and Associations, but growing rapidly. “It is a hub of innovation, and you know, pharmaceutical companies, that’s their lifeblood,” says Zeng’s colleague Michael Ward, who heads a thought-leadership group in life sciences for Clarivate and collaborated on translating the report.

New drugs are increasingly being developed in China, and many are then licensed by companies based in other countries. In 2023, drug-licensing deals totaled more than $35 billion, and Zeng says the trend has grown in 2024 because the end of pandemic-era financing has left some Chinese companies looking for other funding sources to survive.

In November, for example, Merck & Co. licensed a bispecific antibody against the cancer target proteins PD-1 and VEGF from LaNova Medicines for $588 million up front. The deal was the second international licensure for LaNova, an oncology biotech focused on antibodies and related modalities. Last year, the company licensed an antibody-drug conjugate for multiple myeloma to AstraZeneca for $55 million.

In an even bigger deal, German firm BioNTech agreed to buy Biotheus and its bispecific antibody targeting PD-L1 and VEGFA, which is in clinical development. The deal is expected to close in January 2025 and is worth $800 million to Biotheus shareholders, with the potential for more in contingent payments.

The many companies lining up shots on the PD1/VEGF combination therapy goal illuminate a few broader currents mentioned in Clarivate’s report, including an interest in cancer targets and biologics as compared to small molecules. Zeng adds that Chinese companies have shifted from “me-too” drugs that go after a proven target to using combinatorial innovation to make molecules that hit a pair of targets—like PD1, or its ligand, and VEGF. According to Zeng, the sector has tended to focus on well-validated targets rather than going after developing first-in-class treatments.

But Ward says that he expects that to change in the coming years. China is “on that trajectory. There is the political will. There is the finance to support it. Whereas, if you look in other places . . . there are concerns that science is, might not be, as popular as it once was,” he says.

“When I’m talking to pharmaceutical executives, when they talk about China and Chinese research, they are overwhelmed by the speed and the energy,” Ward adds.

Looking ahead, both Ward and Zeng predict more deals in 2025. Partnerships between companies in Europe and China may be especially attractive ways for Chinese firms to reach international markets as uncertainties around the Biosecure Act may make it tougher to close deals with American companies, Ward says.