Decoding China's Biotech Industry Growth: A 10-Year journey

The past decade has witnessed remarkable growth and advancements in China's biotech industry, with a promising future ahead. As we delve into the intricacies of decoding this industry's progress, and overall trends, several key factors come into play.

One crucial aspect to consider is the rapid pace at which China has established itself as a key player in the global biotech market. This is highlighted by the recent discussions on Biden administration's "BioSecure Act" currently being debated in the US congress. It brought into focus some of China's most successful biotech enterprises, such as WuxiApptec, and its associated biotech wing, WuxiBiologics, in the context of data security, intellectual property, and unfair competitions, to name a few. The rapid rise of these companies in the past decade exemplifies the general notion the world has come to know as "China Speed,". As with a few other industries that came before biotech, such as solar, battery, 5G, electric vehicles, the incredible acceleration of Chinese industry in these sectors can be attributed to the country's central government 5-yr strategies that started to pivot away from the traditional manufacturing industries, which formed the foundation of China's rapid industrial revolution from 40 years ago, and toward high tech, such as chips, biotech, new materials, etc.. With these national 5-yr goals, come coordinated policies and financial support in order to achieve these goals on a massive scale. This is the most important factor for any industry/sector that rises (and falls) in China with such incredible speed.

Development of the "Biomedical sector" as a strategic focus goal was set first set by the 12th 5-yr plan in 2010, and it mandated that this sector shall become a major pillar in the Chinese economy by year 2025. So, how has China done so far?

First, on the achievements: the biologics, as a sector of the pharmaceutical industry, essentially did not exist before 2012 in China; traditional Chinese medicines and small molecular chemical drugs dominated the Chinese drug industry. With the new strategic focus, China began to focus on biologics, which had become a mature sector in the West with the commercial and medical successes of biologics products represented by monoclonal antibodies such as Humira, Herceptin, Rituxan, Avastin etc.

China's first wave of biologics products were focused on creating biosimilars to these innovative biologics products. The promise of commercialization with "China Speed" of these blockbusters brought about huge investment in everything from R&D to manufacturing facilities, to talent acquisitions from abroad. These formed the foundation for the development of the Chinese biotech industry for the next 10 years. With this, significant R&D efforts did yield some highly valuable drug candidates including an impressive early stage clinical pipelines. Secondly. significant achievement is on the drug regulation standards and practices: Chinese drug regulatory agency NMPA (National Medical Products Administration) has gone through drastic changes in an effort for China to have become a member of the ICH in June, 2017, and has continued the efforts to catch up with the latest in drug regulatory standards set by the US FDA and European Medicine Agency (EMA). Thirdly, Chinese biotech industry has begun their integration into the global supply chain; however, the abilities for Chinese companies to manufacture late clinical stage to commercial stage biologics products, rather than R&D and early clinical stage pipelines, with quality standards that meet FDA and EMA standards are so far very limited., Besides WuxiBiologics, there are only less than a handful of Chinese biotech companies whose manufactured products from China have received FDA and/or EMA approval for commercial manufacturing.

Hence, despite of the impressive progress, huge gaps still exist between Chinese biotech industry and the West. These gaps have manifested in an overall low Return of Investment (ROI), and caused "bubbles"so large that the market crash became inevitable. The down turn, which started at the beginning of 2022, is described as the "Severe Winter" for the industry, whose dark clouds and long shadows have been sustaining for the past 2 years with no clear Spring in sight. This, coupled with the increasing "de-risking efforts" from the West to back away from forming stronger connections with China in areas including biotech makes for a unclear path forward, both for the strategy within and towards China for the global industry at large.

It is important to look at the different factors that contributed to both the achievements and the current down turn so far, in order for all stakeholders to understand both the potential and limitations to the Chinese biotech sector. In the blogs to follow, I will attempt to go into more granular analysis of each of the contributing factors by combining public data with my own experiences and analysis. I hope these will contribute to a deeper understanding and discussions on what's possible, vs. what's difficult to achieve, in order to re-direct the strategic thinking on the type of investment and collaborations between Chinese biotech companies and the West, for the next 10 years.

In conclusion, the past decade has seen a period of rapid growth and transformation for China's biotech industry. With a strong influx of government and private equity support, and emphasis on innovation, regulatory changes, biologics product development, and supply chain expansion, the Chinese biotech sector is on the right trajectory for continued success in the years to come. However, there are significant challenges that have limited the value it delivers to the investors and patients and therefore, careful analysis of what caused the low ROI is needed in order for the industry in general to find more rational and precise ways to participate in the future.