Ruihua Pharma: As Original Innovation Grows Harder, China Finds a Path Forward Through Formulation Technology

Policy reforms such as the “Two-Invoice System,” consistency evaluation, centralized procurement, and adjustments to the National Reimbursement Drug List are driving China’s pharmaceutical industry toward high-quality, innovation-led development, with original research initiatives like first-in-class drugs gaining increasing momentum.

The wave of innovation is not only driving the development of Class 1 innovative drugs but also serving as a major catalyst for the rapid advancement of formulation technologies. This has led to the emergence of high-complexity novel dosage forms on the market, such as aripiprazole oral dissolving films, paclitaxel liposomes, leuprorelin microspheres, salbutamol sulfate controlled-release tablets, and ibuprofen suspensions.

Although significant progress has been made in formulation technology and drug delivery systems in recent years, China’s pharmaceutical industry has long prioritized active pharmaceutical ingredients (APIs) over finished dosage forms. Formulation technology remains poorly understood and undervalued by investors, with few domestic enterprises engaging in its innovation; consequently, the sector is still in its nascent stage.

However, Tian Jialei, CEO of Oryza Pharmaceuticals, stated: “Formulation technology will become an independent and robust pillar of innovation in China, representing a key direction for the country’s participation in global innovation.”

Ruihua Pharmaceuticals, established in 2016, is a pharmaceutical company specializing in high-end drug formulations. It is dedicated to the research, development, and production of modified new drugs and generics characterized by high market value, complex formulation processes, and sustained- or controlled-release properties. Its products are primarily marketed in China and the United States.

Recently, VCBeat’s New Medicine channel conducted an exclusive interview with Tian Jialei to discuss the future direction of pharmaceutical innovation in China and the development prospects of formulation technologies.

Oryza Pharmaceuticals was co-founded by Tian Dacheng, Dr. Xu Bangqian, and Dr. Li Jing. All three founders had previously worked at major pharmaceutical companies in the United States, each accumulating over two decades of experience. Consequently, Oryza Pharmaceuticals initially focused its operations, R&D, and sales in the U.S. market.

In 2017, major reforms in the pharmaceutical sector, such as the Quality and Efficacy Consistency Evaluation for Generic Drugs and the Two-Invoice System, began to be implemented. Oryza Pharmaceuticals judged that if the state adhered to the overarching direction of healthcare reform,China’s pharmaceutical industry will evolve into an innovation-driven landscape, with formulation technology emerging as a key area for China’s participation in global innovation.

Seeing market opportunities in China and invited by domestic experts, Oryza Pharmaceuticals relocated its headquarters to Shenzhen in 2017.

VCBeat New Medicine: Why Did Oryza Pharmaceuticals Choose the Field of Formulation Technology Innovation?

Tian Jialei:The timeline and value chain of drug innovation are extensive. Our founders have witnessed nearly two innovation cycles in the pharmaceutical industries of Europe and the United States. Pharmaceutical innovation has evolved from original ingredient discovery to generic drugs, then shifted toward improved new drugs, and has now returned to a model centered on pharmacoeconomics, integrating generic and innovative approaches with advanced formulation technologies.

Now, countries in Europe and the United States have begun to use high-tech methods such as AI and quantum physics computing for drug screening, because the cost of original innovation becomes higher and more difficult in the later stages.

New does not necessarily mean best. After experiencing and closely observing the characteristics of various development cycles in Europe and the United States, our founder discovered that there is actually another type of innovation—Technological Innovation. In fact, many existing drugs have not reached their full therapeutic potential; the core of technological innovation lies in optimizing what is already available.

Therefore, when the company faced the choice of developing modified new drugs, pure generic drugs, or leveraging technological innovation to create products with strong market demand that address critical clinical unmet needs, we chose the latter.We aim to maximize the clinical efficacy of existing drug ingredients through innovations in formulation technology.

VCBeat New Medicine: How do you understand the relationship between modified new drugs involving dosage form changes and innovations in formulation technology?

Tian Jialei:A mere change in dosage form does not necessarily constitute an improved new drug. Under China’s industry policies, changing the dosage form is one of the approaches to developing improved new drugs, a method that entails considerable technical challenges.

China’s volume-based procurement (VBP) has reduced profit margins for high-volume products with multiple suppliers, thereby incentivizing investment in the research and development of high-tech pharmaceuticals. Consequently, many pharmaceutical companies are striving to avoid low-margin, technologically simple products, focusing instead on those with high technological content and greater value potential, among which improved new drugs represent a key category.

VCBeat: As we enter a capital winter, is your company facing any challenges in fundraising?

Tian Jialei:Cyclicality in the capital market is inevitable, and so are capital winters. In our view, what we are experiencing now is merely the trough of a natural cycle. Changes in the broader macroeconomic environment will undoubtedly influence investors’ attitudes toward investment.However, once this cycle passes, I believe the entire market will return to a normal and rational trajectory.

In China, the importance of formulation technology and its role in driving pharmaceutical innovation have only recently begun to be recognized and appreciated. The late start was not due to a lack of capability, but rather because societal development had not yet reached a stage where the rational definition of value required consideration of formulation technology as a driver of value creation. Since 2017, after the government implemented consistency evaluations and multiple rounds of centralized procurement over a period of five to seven years, the industry and capital markets began to pay attention to the concept of formulation technology.

Therefore, for Oryza Pharmaceuticals,"We have not felt the impact of the capital winter, because the delivery technology innovation we focus on has actually never been well understood by the public."

From the outset, Oryza Pharmaceuticals’ investors fell into two categories: those with deep familiarity with the team’s overseas experience and R&D capabilities, and those who truly understood formulation technology and believed in its potential to drive future pharmaceutical innovation. Regardless of whether capital markets were overheated or in a downturn, the conviction of these two groups remained unwavering.

Oryza Pharmaceuticals possesses over 50 drug delivery technologies. Its founding team has completed more than 2,000 clinical and bioequivalence (BE) trials, integrating these experiences with design cases, active pharmaceutical ingredients (APIs), and excipients to successfully establish four major formulation platforms: oral sustained- and controlled-release delivery, transdermal patch, long-acting injectable, and nanocarrier systems. By leveraging the most appropriate delivery methods to maximize drug efficacy in the human body, the company has achieved true large-scale industrialization.

Silently supporting the R&D of high-end drugs behind these four major dosage form platforms is Oryza Pharmaceuticals’ delivery technology platform, which encompasses seven key delivery technologies, including reverse engineering technology, solubilization technology for poorly soluble drugs, a database of sustained- and controlled-release materials and delivery technologies, and abuse-deterrent technologies for controlled substances.

Tian Jialei, who holds a degree in finance and later joined an investment bank, is well aware that a company may not necessarily succeed even if it boasts strong R&D personnel and advanced technology.The implementation of relatively new concepts or cutting-edge technologies is inseparable from commercial operations.

Oryza Pharmaceuticals adheres to a prudent and conservative strategy, placing significant emphasis on market demand from its inception, while particularly prioritizing self-sustaining viability to enhance cash flow.

Over the long term, Oryza Pharmaceuticals is committed to becoming an innovation-driven enterprise centered on delivery technologies.

VBInsight: How Does Oryza Pharmaceuticals Strategically Layout Its Product Portfolio?

Tian Jialei:Our company’s product portfolio is built around a single core principle: establishing clear connections across the spectrum, from simple to complex.

Oryza Pharmaceuticals has been an internationally oriented enterprise from its inception, adhering to international standards in regulatory compliance, procurement and payment practices, and quality management systems. Consequently, in addition to R&D, a series of indicators such as quality stability and post-market surveillance are of paramount importance.

Therefore, in the initial stage, we selected certain generic drugs that involve relatively simple formulation technologies yet present specific barriers to entry. For instance, although the R&D of a Schedule II controlled substance already marketed by our company in the United States is not particularly challenging, obtaining the necessary qualifications for its production and distribution is extremely difficult. Regulatory authorities not only assess a company’s R&D capabilities but also impose stringent requirements on long-term sustainability, rigorously evaluating factors such as team background, management and operational capabilities, quality control processes, and the rationality of the product pipeline layout.

Therefore, we aim to rapidly launch products with moderate formulation technical complexity at the outset, leveraging high regulatory barriers to drive the company’s swift upgrade to international standards and streamline the entire system of Oryza Pharmaceuticals.

Currently, this phase has concluded. We have launched two generic drug products in the U.S. market, with additional generics under development or regulatory submission. Future efforts will focus on high-complexity products, such as modified new drugs and advanced sustained- and controlled-release formulations.

VCBeat New Medicine: What is the company's business model?

Tian Jialei:80%–90% of our company’s business is dedicated to the research and development (R&D) and sales of pharmaceuticals. In China, we collaborate with high-quality partners to jointly develop and promote products, fostering complementary cooperation across R&D, raw materials, manufacturing, and sales in both China and the United States. We have established our own sales team in the U.S. and launched our proprietary brand label, Oryza.

Establishing an independent overseas sales system entails prohibitively high costs and requires in-depth knowledge of local sales processes, pharmaceutical markets, regulatory policies, after-sales management, and risk management, making it an exceptionally challenging endeavor. Leveraging its extensive experience, Oryza Pharmaceuticals will utilize its proprietary brand, Oryza, to assist enterprises seeking to expand their finished dosage form exports by facilitating product sales. This represents Oryza Pharmaceuticals’ contribution to advancing the global expansion of China’s finished dosage forms. Revenue from this segment will account for no more than 20% of the company’s total business.

VCBeat: “Going global” is a hot topic at the moment. Your company has successfully achieved commercialization in the United States. Could you share some advice on international expansion?

Tian Jialei:“Going global” requires the accumulation of experience. Prior to the current wave of biopharmaceutical companies expanding overseas, a number of outstanding traditional (generic drug) enterprises in our country had already attempted to export finished dosage forms. These companies made significant efforts toward internationalization and incurred substantial costs in the process. Our initial successes today have also benefited from their experiences.

We believe that, at present, there are two core aspects to going global.

First is product initiation and selection.Many partner companies seeking Oryza Pharmaceuticals’ assistance with international expansion actually select products based on the logic of the Chinese market. We typically encounter two scenarios: one is that significant differences in medication practices between China and the United States result in limited market potential abroad for drugs that enjoy strong sales or widespread application in China; the other involves products with high demand in both the Chinese and U.S. markets and low formulation technical barriers, but which face intense competition from multiple drug approval holders in the United States. The core challenge in global expansion lies in selecting suitable products based on overseas market conditions and establishing diversified competitive barriers.

Second is the payment system.The domestic payment system differs significantly from overseas payment systems. Many pharmaceutical companies expanding globally adhere to domestic operational philosophies, replicating their Chinese sales and management models in international markets. In reality, the Chinese and U.S. markets are largely incomparable in this regard.

In addition, particular attention should be paid to quality and the stability of drug supply.Overseas sales contracts include penalty clauses for supply disruptions. If your pharmaceutical products are not delivered on schedule, the compensation payable may amount to three to five times the regular price, posing a significant risk of incurring losses rather than generating profits.

For pharmaceutical companies expanding into overseas markets, U.S. regulatory authorities evaluate not only their capabilities in research and development, regulatory submission, and manufacturing, but also assess their overall strength across the entire value chain, including quality management, supply chain management, after-sales service, and regulatory compliance.

VBInsight: Where is Oryza Pharmaceuticals’ market oriented, and why has it established its headquarters in China?

Tian Jialei:Oryza Pharmaceuticals’ current primary markets are China and the United States. However, we have not focused on any single country; since our inception, we have operated as an international enterprise.

In the realm of public health and pharmaceutical innovation, demands are highly diversified and require multi-party collaboration. No single country can necessarily dominate all aspects of innovation simply by possessing the most cutting-edge technologies.Application and accessibility are of paramount importance.

We have established our headquarters in China because, since its inception, Oryza Pharmaceuticals has been committed to promoting the widespread application of advanced drug formulation technologies in China. While pursuing long-term independent original innovation, we leverage innovations in formulation technology to continuously deliver high-tech, highly accessible products to patients.

Secondly, China has an exceptionally large population base and extensive demand.It is the optimal market for exploring upgrades in applied technologies.In China, we can achieve iterative upgrades in formulation technology through a continuous stream of real-world application feedback.

Moreover, China boasts robust manufacturing capabilities and raw material advantages, with overall manufacturing quality fully competitive on the global stage. It possesses many of the key attributes necessary to emerge as a pharmaceutical powerhouse in the future. Being a pharmaceutical powerhouse does not merely mean leading at the technological frontier; rather, it signifies strength across the entire industrial chain.

VBInsight: What changes do you think are taking place in China’s pharmaceutical sector?

Tian Jialei:China’s pharmaceutical industry is currently entering a new phase of “rational” definition.

The purpose of taking medication is to improve quality of life, which lies at the heart of the biopharmaceutical industry’s operations and serves as a key metric for national evaluation of drug development.

Therefore, “rationality” is closely linked to a country’s overall development and is influenced by factors such as the economy, education, medical diagnostic systems, and payment capacity. Its definition varies across different stages of development, which in turn shapes the direction of the pharmaceutical industry’s growth.

In the early stages, we had limited pharmaceutical options, and mere availability of drugs constituted a basic need. Later, as fundamental medication needs were met and diagnostic and treatment systems became better coordinated, drug diversification emerged as the new definition of “rationality.” Consequently, over the past decade or so, we have imported numerous innovative foreign drugs, linking “novelty” with “high cost.”

China has now moved past the two stages of simply needing medicines and needing a diverse range of pharmaceutical products, entering a new phase focused on “what truly constitutes a high-quality drug.” This shift lies at the heart of the transformation in the pharmaceutical industry.

This new phase is primarily defined by two core pillars.The first is technological innovation.Core national policies, including centralized procurement, the two-invoice system, and dynamic adjustments to the National Reimbursement Drug List, are all designed to guide pharmaceutical companies toward orderly competition, with a focus on technology and quality, thereby achieving the substitution of domestically produced drugs for originator products.The second is accessibility, meaning that patients can afford it.The “new” and “expensive” that are unaffordable are unreasonable.

Therefore, in this new phase of redefining “rationality,” we believe that formulation technology will emerge as an independent and robust pillar of Chinese innovation, representing a key direction for China’s participation in global innovation.