<div id="readability-page-1">A quarter featuring multiple eye-popping deals is no longer unusual for China’s pharmaceutical industry – in fact, it may soon be considered a slow season. In recent months, companies including CSPC Pharmaceutical and RemeGen have struck out-licensing agreements worth up to US$18.5 billion and US$5.6 billion respectively, while Haisco Pharmaceutical Group has added two of its own — most recently a deal worth up to US$745 million. Under the terms of the deal, the Beijing-based Haisco granted US pharmaceutical giant AbbVie the rights to develop, manufacture and sell a portfolio of home-grown pain drug molecules outside China, as global drug makers race to replenish pipelines ahead of a looming patent cliff. The burst of deal making signals a shift in how Chinese biotech firms are positioning themselves in the global drug industry – moving beyond low-cost manufacturing into higher-value innovation. With artificial intelligence also reshaping drug discovery and development, that shift may be hitting a new gear, raising a bigger question about how quickly China could climb to the global industry’s top tier. “China is already a large player in the global drug value chain, and its role could become larger over the next three to five years,” said Tony Ren, head of Asia Healthcare Research at Macquarie Capital, whose team covers about 30 healthcare stocks in Hong Kong, China and Japan. According to Macquarie Capital and McKinsey, the pharmaceutical value chain can be grouped into four main stages: research and development (R&amp;D), clinical trials, manufacturing and commercialisation. Once focused largely on drug-ingredient manufacturing, China is now moving into higher-value R&amp;D. While the US still holds a clear lead over China in innovative drug R&amp;D, AI could be a game changer and help firms close the gap faster than expected.   “China’s pharmaceutical industry is adopting AI at a pace that few outside the sector fully appreciate,” said Leung Chuen-yan, a partner for healthcare investment at Hong Kong-based Value Partners Group. “Companies are deploying AI across the full drug discovery value chain, from target identification and novel molecule design through to clinical trial optimisation. “The most immediate impact is in the early stages: AI-driven target discovery and generative chemistry are compressing what used to be four-to-five-year preclinical timelines into 12 to 18 months,” Leung said, adding that China had a structural advantage in vast patient data sets, a deep bench of computational biology talent, and a regulatory environment that was increasingly accommodating of AI-derived candidates. “The companies that combine proprietary AI platforms with rigorous clinical execution will define the next generation of global biopharma,” he said. Among the notable Chinese AI-driven drug discovery firms is Hong Kong-listed XtalPi, which uses AI across molecular generation, structure prediction and synthesis design. Hangzhou-based METiS TechBio, meanwhile, has built an advanced drug pipeline using a proprietary AI platform focused on optimising drug delivery. Its lead candidate, MTS-004, an oral treatment for neurological disorders, has completed phase 3 trials, making it China’s first AI-designed drug candidate to reach that stage, and the company plans to seek regulatory approval at home this year. China accounted for about 30 per cent of the global experimental drug pipeline, according to a January report from McKinsey, up from near zero two decades ago. Overseas partners signed out-licensing deals worth about US$52 billion in the first two months of this year, after a record 157 agreements totalling US$135.7 billion in 2025.   China is now a heavyweight in some of the most cutting-edge drug technologies in the world. Over the past two and a half years, Chinese pharmaceutical firms had been responsible for about 70 per cent of the world’s antibody-drug conjugate (ADC) projects in research and clinical development, according to a December Goldman Sachs report. ADCs are a class of cancer drugs designed to make treatment more precise and less toxic. Domestic firms such as the Beijing-headquartered Biocytogen Pharmaceuticals and Hangzhou DAC Biotech accounted for five of the world’s top 10 ADC developers by pipeline size, according to GlobalData in 2024. A similar story is starting to play out in small interfering RNA (siRNA) therapies, a new class of gene-silencing drugs. Chinese siRNA companies had already made significant progress and had “the potential to replicate the successful path of China’s ADCs two years ago”, said John Yung, head of Asia healthcare research at Citigroup, in a note earlier this year. This ascent has caught the attention of US lawmakers, who have sounded the alarm that China could come to dominate the global pharmaceutical supply chain, much as it has in sectors such as electric vehicles and solar panels. Chinese players are moving up the value chain and are likely to engage in global drug development through an increasingly diverse set of models. At the summit of the value chain sits what US congressman John Moolenaar called “the cutting-edge biotech pipeline that will determine who leads medicine”. China supplied about one-third of the world’s active pharmaceutical ingredients, according to the China Chamber of Commerce for Import and Export of Medicines and Health Products.  At the same time, China is running clinical trials at a fraction of Western costs. Drug makers that run R&amp;D centres in mainland China said the country’s large patient pool and efficient hospital networks pushed down costs by shortening the timeline for testing new medicines. The country’s share of global clinical-trial activity had climbed to about 30 per cent, according to healthcare data firm IQVIA, as drug makers shifted more studies to mainland sites. “Clinical trials in China cost 50 to 60 per cent less than in the US, with phase 1 and 2 trials running 60 to 70 per cent faster, while direct costs are also roughly 30 per cent lower,” said Zhang Yi, chief medical officer of Hua Medicine, which runs an R&amp;D centre in Shanghai. Its first-in-class glucokinase activator for adults with type 2 diabetes won approval in Hong Kong this month. Alex Zhavoronkov, founder of AI drug discovery firm Insilico Medicine, said his company launched the same mid-stage clinical trial for a lung-disease medicine in China and the US in the first half of 2023. “By September 2024, the trial in China had completed enrolment, dosing and database lock, while the US trial was still actively recruiting,” he said. China now started about 2,700 new clinical trials a year, about 80 per cent of the US level, according to a November report by L.E.K. Consulting and PharmaDJ. “China’s clinical development is not just getting bigger, it’s becoming more innovative, more global and more digital,” said Helen Chen, partner and head of Asia healthcare at LEK Consulting. However, moving up the pharmaceutical value chain would require more than deal making and faster trials, according to biopharmaceutical analysts. “It will take China at least 20 to 30 years” to move to the very top of that chain, said Macquarie Capital’s Ren, noting that doing so would require sustained government funding and the efforts of top-tier scientists.  In China’s domestic pharmaceutical industry, the view from the bottom looking up is unsparing. The sector “remained at the low end of the chain”, and closing the gap at the very top would require not biotech engineers, of which China had an abundance, but scientists capable of venturing into “uncharted territory” with “no road and no compass”, Zhu Yi, founder of Shanghai-listed Sichuan Biokin Pharmaceutical, told Chinese media in January. The rewards for moving up the value chain are substantial. Patent monopolies on first-in-class drugs allow their owners to charge prices far exceeding conventional coverage thresholds, sometimes by orders of magnitude, according to the British Medical Journal. A Macquarie Capital report also showed that biotech innovators typically captured the greatest share of value, generating higher revenue and profit margins than upstream service providers and downstream distributors and hospitals. Of the 76 innovative drugs approved by China’s National Medical Products Administration in 2025, 11 were first in class, referring to those built on novel biological targets no competitor has yet addressed. Only four originated from Chinese companies, including mazdutide, a weight-loss injection co-developed by Innovent Biologics and Eli Lilly. By comparison, the US Food and Drug Administration (FDA) approved 20 first-in-class drugs out of 46 novel approvals in the same year, with more than half originating from American pharmaceutical and biotech companies, the FDA’s annual report showed. “China remains exceptionally strong from one to 10 – designing better or improved molecules that can hit the same target already proven and figuring out how to put them through clinical trials quickly and produce them at scale,” Ren said. By contrast, it still trails Western rivals from zero to one – the far more difficult process of discovering new biological targets and developing entirely novel therapies, which can take decades and depends on deep scientific insight. By stepping in after a biological target has already been identified and partially validated, Chinese biotech firms could lower clinical risk and reduce the cost of bringing experimental medicines to market, Ren said.     China’s rise in ADCs and siRNA therapies illustrates this pattern. The first ADC, Mylotarg, was developed by US drug maker Wyeth, now part of Pfizer, and approved in 2000. The first siRNA drug, Onpattro, was approved in 2018 by US biotech Alnylam Pharmaceuticals. Chinese firms were quick to follow. China-origin siRNA drugs were being licensed by multinational companies, underscoring how many Chinese biotechs were still seen more as pipeline suppliers than as direct commercial rivals, according to Cui Cui, head of healthcare research for Asia at Jefferies. For now, global drug makers were treating them as an external innovation engine that helped refresh their pipelines, she added. China is also mobilising national resources behind AI. “AI can help companies screen and select drug targets faster, design better clinical trial protocols and stress-test molecular candidates before they enter human trials,” said Sun Chuan, managing partner of the Hong Kong and Shanghai offices at law firm Morrison Foerster. “Across the biotech ecosystem, more and more companies are actively exploring and adopting AI to varying degrees.” Pipeline data backs up China’s competitive edge in speed. Chinese companies now accounted for roughly 24 per cent of all first-in-class drug candidates in global development, or an estimated 1,600 to 1,700 compounds at various stages of clinical trials, according to a March 2025 research note by Guotai Junan Securities. Beijing has made clear where it sees the industry heading. In this year’s government work report, delivered on March 5, biomedicine was for the first time designated an “emerging pillar industry” that the country aims to build into a foundation of the national economy.</div>

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<p>China's pharmaceutical industry is rapidly evolving, with major companies like CSPC Pharmaceutical and RemeGen securing significant out-licensing agreements. The shift from low-cost manufacturing to high-value innovation is evident, particularly with the integration of AI in drug discovery. AI is compressing preclinical timelines and enhancing R&D capabilities. China now accounts for 30% of the global experimental drug pipeline and is a leader in antibody-drug conjugate projects. This growth has raised concerns among US lawmakers about China's potential dominance in the global pharmaceutical supply chain.</p>

China’s drug makers are speeding up – will AI be their secret weapon?