Will the next blockbuster drug come from China?
The biopharma industry is booming following record investment and improved supply chains
In an industrial suburb of Shanghai, a changing of the guard in drugmaking is unfolding.
Engineers inspect a line of enormous stainless-steel vats where a biologic drug will soon begin production, derived from cells originating in hamster ovaries. With each vat big enough to make 50,000 litres of the medicine, the facility is just one piece of evidence of a biopharma industry boom under way across China.
The plant belongs to BiBo Pharma, which began construction in February and is already a month ahead of schedule, propelled by rapid-fire approvals and hands-on support from the local Lingang district government.
China’s biopharma industry is riding high. A flurry of dealmaking has brought foreign drugmakers to China in search of promising molecules to replenish thinning pipelines. In June, for example, AstraZeneca signed a deal with Chinese biotech CSPC Pharmaceuticals for up to $5.2bn.
Only five years ago, the sector was derided as a laggard for its failure to produce an effective Covid-19 vaccine. Today, western pharmaceutical executives and investors warn privately that their companies risk losing the lead in drug innovation to China.
At the heart of China’s biopharma rise are speed and efficiency — factors that are making drug development not only faster but significantly cheaper. The nation’s advantage stems from a vast, highly skilled workforce: from lab researchers and equipment manufacturers to the labourers bolting BiBo’s new production line into place. While some of this talent has been trained overseas at US universities and at large pharma groups, the bulk of the workforce is homegrown engineers.
A McKinsey report lays out China’s time-and-cost advantage at every stage of drug development. The consultancy estimates that Chinese drugmakers can move two to three times faster than the global average in advancing a target molecule into a drug candidate and into early clinical trials.
Once a therapy passes initial animal tests, patient enrolment for clinical trials in China is two to five times faster, depending on the therapeutic area, thanks to a large patient pool with unmet medical needs.
“In the past three to four years, China has really sped up. It’s one of the most important sources of innovation,” says Peng Jiao, BiBo’s founder and chief executive. He adds that China’s strengths in developing novel medicines lie in fields where the foundational research has already been established, but laboratory work is needed to figure out the right formulations.
“This is more like a puzzle, which requires an engineering rather than a scientific mindset. For this kind of work, you need a highly efficient team that moves very quickly to figure out which way is going to work,” he adds.
Chinese companies can achieve some of this speed and cost saving compared with western rivals due to generous state support. Peng’s factory sits down the road from Tesla’s Shanghai gigafactory, inside an industrial park reserved for biotech start-ups that receive subsidies, cheap rent and start-to-finish assistance from the Lingang authorities.
It took officials just nine days to approve BiBo’s construction plans — a process that can drag on for up to six months in Europe, where Peng is scouting for another manufacturing site.
Peng has manufacturing operations for biologics, medicines derived from living organisms, in both Boston and Shanghai. A decade ago, he says, there was a clear experience gap between his US and China scientific teams. Now, that divide has vanished. His Shanghai staff, he says, are as experienced — and deliver work faster, at a greater scale.
For founders such as Peng, China’s gravitational pull has strengthened. Tapping into the country’s network of supply chains accelerates every stage of the research and development cycle, from discovery to scale-up manufacturing and clinical testing. Shorter timelines improve survival odds for early-stage biotechs, allowing them to test more ideas, kill failures quickly and improve their chances of discovering a blockbuster therapy.
Yet the industry now faces a pivotal question: can China’s rising biotech champions grow into fully global companies capable of competing with the world’s largest pharmaceutical groups? And will increasingly tense geopolitics — particularly with the US, the world’s most profitable drug market — hinder their expansion?
“China’s early-stage R&D is now globally competitive. But for late-stage development — overseas trials, regulatory filings and commercialisation — Chinese firms still have significant room to grow,” says UBS pharma analyst Chen Chen.
“That won’t always be the case,” she adds. By partnering with multinational drugmakers to take products abroad, Chinese biotechs can “secure funding for continued innovation while learning from partners’ strengths in clinical development and commercialisation”.
“Over time, Chinese companies will build their own global capabilities,” she says.
China has steadily climbed the rungs of the global drug supply chain. In the late 1990s and early 2000s, it nurtured a crop of generic drugmakers replicating off-patent medicines.
It then moved into supplying active pharmaceutical ingredients, before becoming a preferred destination for outsourced biotech manufacturing and, later, drug development itself.
At each step, Chinese clinical research organisations (CROs) and contract manufacturing organisations (CMOs), which develop and manufacture drugs on behalf of biotechs, accumulated expertise in ever more complex scientific and engineering processes.
The progression has turned outsourcing companies such as WuXi AppTec and GenScript into linchpins for drug development not only in China, but for biotech companies worldwide.
“There is a joke in the US biotech industry that if you want to run a study, you ‘just WuXi it’,” says Ashoka Rajendra, founder of Orchestra, a San Francisco-based software platform for biotech companies.
“There is an entire infrastructure in China that is supporting US and European R&D,” he says. “At first, companies would go to China for very specific deliverables, like making DNA or proteins. Then the work moved up the sophistication curve. It wasn’t just tasks with a precise set of instructions, but running studies and generating data.”
Egan Peltan is one such US biotech founder who relies on Chinese suppliers. “Initially, the industry used Chinese CROs because they were cheaper. That is no longer true; their prices are similar. We use them because of the efficiency and time savings,” he says.
For young biotech companies, supplier speed can be existential. “A project that takes a US CRO six to eight weeks would take a Chinese company about three . . . For early-stage companies with no revenue, every day you are waiting is money you have to set on fire,” Peltan says.
Over the past decade, this same knowhow has been redirected from servicing foreign to local clients. China’s biotech sector is experiencing the same evolution seen in automotive manufacturing, consumer electronics and even textiles: from a low-cost outsourcing hub to a source of its own intellectual property. This shift is especially pronounced in biologics and cell therapy, areas that hinge on rapid experimentation and iterative lab work — tasks that are both cheaper and faster to execute in China.
The scale and pace of change may come as a surprise to some, says Zhang Fangning, McKinsey’s partner of life sciences in Greater China. “But the origins of this growth lie in factors that have worked in concert for more than a decade: a steady growth of talent and capital; supportive policies; a robust local supply chain; and the sheer intensity of engineers and scientists who are driving the execution.”
Beijing accelerated this transition by prioritising biotech as a strategic sector both for economic growth and as a means to develop drugs tailored to the ethnic Chinese population.
It introduced reforms in the mid-2010s that made it easier for biotech companies to raise capital and pursue innovation. Hong Kong then loosened stock market listing rules in 2018, enabling pre-revenue companies to list and the resulting wave of biotech IPOs ushered in venture capital investment.
At around the same time, drug authorities in China relaxed clinical trial requirements for certain categories of innovative therapies, making it easier to progress drug candidates.
Rona Therapeutics is one such beneficiary. The Shanghai-based start-up, which plans to list in Hong Kong, specialises in RNA interference therapies that suppress proteins linked to metabolic diseases such as obesity. Founded in 2021, Rona already has 15 drugs in its pipeline, with three undergoing clinical trials.
“Because the cost of developing a drug is so much lower in China, companies can afford a broader pipeline,” says founder and chief executive Stella Shi. “Where a US company might have to focus on a single asset, Chinese biotechs listing in Hong Kong typically have at least 10 candidates.”
The data reflects that shift. China’s share of global innovative drug candidates in clinical trials has risen from 8 per cent in 2018 to 30 per cent this year, according to McKinsey. Over the same period, the US share has fallen from 47 per cent to 36 per cent.
China’s strengths in biotech are concentrated in fields that demand intensive engineering and high-volume laboratory work to iterate and refine new therapies. This is particularly evident in antibody-drug conjugates (ADCs), so-called “biological missiles” that send chemicals directly to tumours, as well as multispecific antibodies, immune proteins that bind to the surface of cancer cells. McKinsey estimates that Chinese companies account for 54 per cent of innovative ADC assets in phase 1 and 2 clinical trials, and 48 per cent of multispecific antibodies.
Sichuan Biokin, a listed company developing targeted ADC therapies for cancer, has 17 treatments in its pipeline. ADCs drew significant investor enthusiasm in western biotech in the early 2010s, thanks to their potency in killing cancer cells. But many programmes stalled because of the difficulty in controlling toxic side effects.
“ADCs have stronger tumour-killing power. The problem in the 2010s was that no one could solve the toxicity issue,” says founder and chief executive Zhu Yi. He describes the challenge as fundamentally an engineering puzzle: identifying the “right specific technical path” that allows a highly toxic payload to attack cancer cells without damaging healthy tissue.
On this front, he argues, “Chinese companies have a natural advantage” due to the abundant supply of skilled technicians to run rapid-fire experiments and the relative ease of conducting clinical trials.
According to McKinsey, the time it takes to enrol patients in clinical trials in China is about half the global average, and the cost per patient is roughly 50 per cent lower than in the US and Europe.
This efficiency is driven not only by China’s large and ageing population — much of which has limited access to costly therapies — but also by the structure of its hospital system and the ability of patients to learn about ongoing trials through social media and volunteer directly.
China’s growing capabilities have drawn pharmaceutical multinationals to the country to either buy or co-develop innovative drugs. China’s share of out-licensing deals to the US and Europe has risen from 2 per cent in 2018 to 20 per cent this year, according to McKinsey.
This surge in dealmaking has transformed the work of lawyers such as Aaron Gu at Han Kun Law Offices in Shanghai. Five years ago, he mainly advised on deals in which Chinese companies purchased domestic rights to foreign-developed drugs. Now, he works primarily on out-licensing agreements in which Chinese companies sell their homegrown assets to multinational drugmakers.
“For Big Pharma, the deals they are signing in China aren’t a lot of money compared to the future potential revenue from the assets — and the losses that will come from the patent cliff,” he says.
Although he has watched China’s biotech industry mature rapidly, he cautions that it will still take “many years” before its companies grow into global pharmaceutical companies on the scale of Johnson & Johnson or AstraZeneca. No Chinese group ranks among the world’s 20 largest listed pharmaceutical companies by market capitalisation — the top three of which are all American.
Josh Smiley, chief operating officer at Zai Lab, says it will take time for companies in China to develop “systems that contemplate global development. We’re going to continue to see really good innovation come out of China in the next few years. But in many cases, those innovators are going to need a partner to help them with development,” he says.
They must also create international sales forces, navigate foreign regulatory systems and cultivate supply chains outside China, especially as western governments push to create localised manufacturing for critical industries such as pharmaceuticals. For many Chinese biotechs — often unprofitable and with volatile revenue — these investments remain out of reach.
The Beijing-founded BeOne, formerly known as BeiGene, relocated its headquarters out of China, and is widely viewed as the most successful Chinese-founded biotech to build a fully international operation. But that expansion was fuelled by unprecedented funding, totalling several billion dollars, capital not available to other Chinese biotechs.
Still, Sichuan Biokin’s Zhu, is optimistic about the potential for his company to turn into a multinational pharmaceutical company. In 2023, it inked a deal with the US-based Bristol Myers Squibb to co-develop an ADC for solid tumours, including non-small cell lung and breast cancers.
Such partnerships are essential for Chinese biotechs seeking to enter lucrative overseas markets, particularly the US. China’s share of new drugs approved by the US Food and Drug Administration — defined as medicines containing active ingredients not previously approved — has risen from 1 per cent in 2018 to 6 per cent so far in 2025, according to McKinsey.
Chinese regulators drive hard bargains on drug pricing, meaning companies must expand abroad to achieve the profitability needed for long-term growth. “Managing across countries multiplies complexity and resource demands exponentially,” Zhu says. “Partnering with a multinational lets us learn first-hand how global operations work. It’s like having a personal tutor showing you, day by day, how to build a global business.”
Working with larger foreign companies, he adds, has helped Sichuan Biokin understand the organisational structures and capabilities needed to scale. “We mirrored that and learnt by doing. But we have also seen the weaknesses of Big Pharma — the bureaucracy and inefficiency — which has helped us avoid detours as we grow.”
There may be further bumps in the road. In Washington, a growing chorus is warning about China’s rise in biopharma. US lawmakers have sought to restrict reliance on Chinese suppliers of pharmaceutical ingredients as well as CROs and CMOs. In October, a group of senators questioned why pharmaceutical companies were expanding their investments in China and said the industry needed to reshore manufacturing and protect innovation at home.
Governments may decide to intervene directly, says Brad Loncar, an expert on Chinese biotech.
“US and global companies are funding the rise, education and knowledge of China’s biotech sector,” he says. “The Chinese biotech sector is college kids right now. [The US and others] are sending them to college and funding it. But they will graduate one day and be on their own.”
