From pipelines to partners: how to assess the innovative edge of Chinese biopharma

Having reviewed extensive literature and engaged in discussions with industry peers across the U.S., Europe, and the Middle East, I would like to share my perspectives, drawing on over 11 years of experience covering and analyzing the evolution of China's biopharmaceutical sector.

A key metric reported by many global institutions is China's share of worldwide innovative drug licensing deals over the past two years. By 2025, this share had exceeded 30%, with some reports suggesting figures close to 40%. This clearly indicates that China's innovative drug pipeline has taken a prominent position on the global stage.

Our own China Innovative Drug White Paper from last year supports this data. More importantly, it highlights that the quantity, quality, and progress of China's clinical pipelines are now among the best in the world.

However, when it comes to the global commercialization of novel drugs, China's biopharma sector is still in the early stages of development. The majority of China's innovative drug business development (BD) deals involve licensing assets to multinational corporations. Currently, only a handful of Chinese companies are capable of independent global commercialization. The next phase may see more BD transactions evolve into co-development and co-commercialization partnerships.

This topic is widely discussed, and in last year's China Innovative Drug White Paper, we summarized these advantages with four key attributes: Volume, Speed, Quality, and Cost-Effectiveness.

China boasts a large number of innovative companies, an extensive pipeline of drug candidates, and a vast pool of scientists and engineers—likely ranking among the highest globally in each category. Conversations I've had with numerous business development professionals from multinational corporations indicate that, when scouting globally for innovative drug pipelines, China offers the most extensive and diverse options, second only to the United States.

Speed is not just about cultural acceptance of overtime or diligence; it is a function of the innovative ecosystem. This includes:

The emergence of China's innovative drug sector has been supported by a wealth of international talent and adherence to global standards. The vast majority of founders of Chinese innovative drug companies have educational backgrounds in the United States or Europe, along with professional experience at multinational corporations. Throughout the drug R&D process, they strictly adhere to international standards. Many projects are initiated simultaneously in China and the U.S., ensuring the reliability of research quality. Regulatory bodies, including the FDA, are increasingly recognizing the quality of Chinese research data. This growing trust is a key reason why multinational corporations are actively acquiring innovative drug pipelines from China.

While China's cost advantage is well-known, a significant portion of this benefit arises from structural cost reductions enabled by the innovative ecosystem, rather than just lower labor costs.

Additionally, it's important to emphasize that China's biopharmaceutical innovation ecosystem is evolving into an engineered innovation system. This approach—applying engineering principles, intelligence, and systematization to R&D—highlights China's proven capabilities in research and development as well as manufacturing across various industries.

I have observed extensive discussions regarding the progress of China's biopharmaceutical sector. However, from a global perspective, China's biopharma industry is still in its early stages and is transitioning toward a mid-term phase, facing several challenges:

China's national reimbursement system has entered a stringent cost-control phase, which has made it difficult for many newly launched drugs to achieve profitability. Currently, regulatory and reimbursement authorities in China are adjusting mechanisms to create more opportunities for innovative drugs.

On a global scale, the sector is impacted by geopolitical tensions and a prevailing trend of drug price reductions, particularly in the U.S. These factors constrain the global commercial potential of Chinese innovative drug companies and adversely affect their valuations.

There are blocked international financing channels. Over the past decade, U.S. dollar-denominated funds have been one of the primary financing avenues for Chinese innovative drug companies. However, accessing this funding has become significantly more complicated, leading to the emergence of new financing models, such as the "New CRO" model.

Challenges also exist within the domestic financing mechanism. While an increase in state-owned capital presents a new source of investment, its risk tolerance has notably decreased.

Business development (BD) deals have been on the rise. Although large licensing agreements with multinational corporations (MNCs) in recent years have filled a funding gap for Chinese innovations, they have also somewhat limited the long-term growth potential and valuation upside for these companies. Moreover, such BD deals tend to benefit only a select few companies and their pipelines.

As China's innovative drugs move toward globalization, the influence of geopolitics and cultural differences becomes significant. The interplay of political risk and trust deficits increases the difficulties faced. Geopolitical tensions, in particular, have complicated previously smooth international collaborations involving talent acquisition, U.S. dollar funding, and partnerships with multinational corporations. Only multinational enterprises with stronger resources and integration capabilities can formulate effective countermeasures.

Regarding the future outlook, I have several perspectives I'd like to share for discussion.

The Grand Vision: Reimagining the innovative drug R&D system and commercialization logic. I often wonder: Is the current global pharmaceutical R&D and commercialization (pricing) system sustainable? Is change possible, and what role can China play? In my interviews with numerous Chinese companies and investors, this question is frequently raised. Many believe that the decades-old pharmaceutical paradigm established around the U.S. is unassailable, but I have my doubts, especially given the shifting global landscape.

This plan represents the existing system—characterized by high R&D costs, high quality, and high prices. A large portion of China's out-licensed innovative drug pipelines fit this model: developing top-tier products, commercializing some independently, and selling most to multinational corporations (MNCs) to secure high-value returns.

This alternative path involves significantly lowering R&D costs while achieving near-equivalent quality, offering lower prices, and capturing a larger market share. China's volume-based procurement system objectively guides this trend. Furthermore, China's engineered innovation system and the integration of AI suggest a move towards more efficient and lower-cost drug discovery. After all, reducing drug prices is a global phenomenon.

The Most Likely Path Forward: Financing will remain essential. Beyond domestic Chinese capital, there will be continued collaboration with U.S., European, and Middle Eastern investment funds. China maintains an open attitude towards these partnerships. The key will be selecting optimal strategies within the context of geopolitics and culture. Representatives from U.S.-based funds, already familiar with the investment landscape in China, will continue to play a crucial bridging role.

Co-development will also persist. Chinese biopharma companies will continue to engage in joint development with global partners. This includes establishing more R&D labs and building manufacturing facilities worldwide to adapt to the new global environment.

The rapid growth of China's biopharmaceutical sector is closely linked to global collaboration and innovation within the ecosystem. Despite the shifting dynamics of global geopolitics, the overall direction of this sector is unlikely to change, although strategic adjustments will be necessary. What deserves significant attention is whether there will be a major transformation in the global landscape of pharmaceutical research and development (R&D) and commercialization. Ultimately, whether concerning China's biopharma industry or the global sector as a whole, the primary goal remains consistent: to produce better new medicines for humanity.