China has witnessed a biotech boom over the past decade. Many biotech entrepreneurs felt a calling to reshape the drug industry in a country that has long relied on generics with dubious quality, where demand is growing for more innovative drugs to improve treatment outcomes that can match China’s climbing economy.
These so-called “sea turtles,” armed with top-notch training from foreign institutions and experience at large multinational biopharma companies, set up their own shops in the hope of creating the next blockbuster drugs out of China.
For anyone who wants to succeed at anything in China, government support is almost always necessary. Starting in 2015, Chinese regulators ushered in a slate of reforms, creating a more amicable environment for the biopharma industry to thrive.
They started piloting the Marketing Authorization Holder system, which allows drug innovators to use contract manufacturers rather than having to build costly in-house production or selling intellectual property to large firms. Generic drugs were required to show bioequivalence to their reference branded products in a campaign to squeeze out the many small, low-quality players. To help innovative drugs get to market faster, China’s FDA started to allow foreign clinical data to support applications and streamlined its review processes.
New drug approvals doled out by Chinese authorities surged as a result. In 2017, 42 new molecules won approval in the Chinese market, up from seven in 2016, according to data compiled by GBI Health. In 2018 and 2019, those numbers were 60 and 57, respectively.
Recent stock market rule changes in Hong Kong and on the Chinese mainland have also made it possible for young pre-revenue biotechs to raise money on public trading platforms.
The first crop just started to bear fruit. Of the seven new molecules approved in China in 2016, three were developed by domestic firms. In 2018 and 2019, Chinese biopharmas contributed 14 and 13 new drug approvals in the country, respectively, according to GBI Health. In 2015, the total number of first-time clinical trial applications from domestic companies for a new med was 79 for small-molecule drugs and 20 for therapeutic biologics; as of Nov. 1 this year, the tally was 139 for chemical drugs and 77 for biologics, GBI Health data shows.
Here, we spotlight 10 companies that we think everyone interested in China’s biotech industry should know about since they'll likely compete on the global stage one day. They've either already entered the commercial stage—including one with a drug in the U.S.—or are coming close to their first new drug approvals.
What sets these 10 companies apart is that all but one of them have attracted foreign Big Pharma companies buying into their R&D—not the other way around. BeiGene has signed on Amgen, Chi-Med has ongoing collaborations with Eli Lilly and AstraZeneca, and CStone Pharmaceuticals recently licensed China rights to its PD-L1 inhibitor to Pfizer—just to name a few.
In-licensing molecules developed elsewhere is a popular strategy among Chinese biotechs as a low-risk path to quickly starting cash flow. Some of the megafinancing rounds Chinese biotechs have pulled off has also shown that money is not necessarily an issue for them. In 2019, Chinese biopharma companies registered altogether 81 financing rounds. As of Nov. 1 this year, 133 fundraising rounds (including secondary offerings) have occurred, with total announced values estimated at around CNY 80 billion ($12 billion), according to GBI.
But compared with money, true innovation is still a rare currency. Even today, most molecules coming out of Chinese companies are still “me too” or perhaps “me better” drugs following mechanisms already validated elsewhere. And few have their drugs compete alongside Western firms in more innovation-heavy markets such as the U.S.
That’s why China’s biotech boom so far is still largely an internal celebration rather than a global event. Of course, China’s biotech industry is still young and needs time to mature. But in the long run, in-house R&D capabilities matter most, both from a reputation point of view and for business sustainability.
Unlike the more therapeutically diverse research landscape in the U.S., oncology is the dominant theme among Chinese biotechs; only one firm on our list is not built for oncology, and it's not because we intentionally ignored the others. Some cardiovascular and metabolic diseases are prevalent in China but lack attention from domestic firms.
These 10 companies are not the only ones we've noticed, and we will continue monitoring China’s burgeoning biopharma industry for true innovators and trend-setters. Perhaps this list will become a regular series here at Fierce. — Angus Liu