The competition and cooperation in the field of biotechnology between China and the United States are standing at a subtle turning point.

In the past six months, China's overseas authorization transactions for innovative drugs have frequently exceeded billions of dollars, FDA executives have experienced rare personnel turbulence, and the US Congress has continued to pressure China's biotechnology cooperation - multiple variables are intertwined. This is the core issue discussed by the participants in the "First Global Conference on New Drugs for Major Powers" hosted by Tongyi, where the US biotechnology war and Chinese pharmaceutical companies' overseas prospects were discussed. The industry not only sees the dawn of the "first year of China's innovation", but also faces the practical challenges of regulatory politicization and capital flow obstruction.

The fundamental reason for the game between China and the United States in the biotechnology industry lies in the source of innovation. The United States relies on decades of investment from NIH to build a discovery chain from basic science to new targets, with top talents and free exploration leading the way in the "0-1" long-term. China has long been known for its "1 to 10" engineering transformation, with extremely high efficiency and cost advantages that have led global pharmaceutical companies to compete for Chinese assets.

However, changes are happening. Ten years ago, domestic pharmaceutical companies were still anxious about how to transform from generic drugs and collectively seek "improved new" paths; Today, a number of local innovative drugs have been authorized to multinational giants with a transaction amount of billions or even billions of dollars.
From 'whether there is' to' whether it is good or not ', China's innovation is crossing the critical point of qualitative change.

01. Scientific resilience under regulatory shock

In the past year, the US FDA has experienced the most severe personnel upheaval in its modern history. Key positions such as Director of the Center for Biological Products Evaluation and Research (CBER), Director of the Center for Drug Evaluation and Research (CDER), and Director of the FDA have undergone intensive turnover.
The intensity of this round of personnel turmoil is rare. The former FDA director resigned after only 13 months in office, and several senior center directors either voluntarily or were forced to leave. A large number of experienced reviewers have left, and there is a clear gap in professional qualifications among the candidates filling the vacancies. A former FDA reviewer bluntly stated that this is the "most important 13 months" in the history of the agency, and the losses are difficult to recover in the short term.

However, it is worth noting that the FDA's grassroots review system still exhibits considerable independence and inertia. Most frontline reviewers, team leaders, and even department heads have received long-term professional training, and decision-making is based on clinical data as the core, rather than political directives. As long as there is no clear intervention from the immediate superiors, grassroots evaluation still tends to focus only on data and not politics. This structural scientific inertia constitutes a buffer layer for the FDA under political pressure.

At the same time, the FDA will launch a package of accelerated review policies in mid-2025, including streamlining CMC requirements for early clinical trials, increasing the application of AI tools in reviews, and reducing duplicate applications. On the surface, this appears to be a set of optimization measures under the guise of efficiency and science, but the media quoted FDA officials as saying that its true intention is to "respond to competition from China". The FDA's official website uses neutral language, but behind it lies the interweaving of congressional pressure and its own strategic anxiety.

A fundamental judgment is that the institutional resilience of the FDA still exists, and political pressure is difficult to fully penetrate the grassroots review system, but it is almost impossible to return to the pre politicized era. The competition between China and the United States in the pharmaceutical industry has been embedded in the structural framework of their relationship, and scientific issues cannot exist independently of geopolitics.

The politicization at the regulatory level is more of a temporary disturbance, and what truly determines the direction of competition is the deep differences in innovation capabilities and industrial ecology between the two countries. This difference is redefining the competitive boundary between Chinese and American medicine in an imperceptible way.

02. From "0 to 1" and "1 to 10"

The technological gap in the field of biomedicine between China and the United States is narrowing, but the ways in which it is narrowing are not balanced. It is a consensus in the industry that China's engineering capabilities have global competitiveness, but it still lags significantly behind in source innovation.

The so-called engineering capability is reflected in molecular optimization based on known targets, engineering modifications such as bispecific antibodies/ADC/nuclides, CMC development, and clinical advancement speed. The efficiency and cost control capabilities demonstrated by Chinese companies in these areas have been fully recognized by the global market. A large number of multinational pharmaceutical companies are coming to China to "sweep goods", which is pricing China's "1 to 10" capabilities, but breakthroughs in "0 to 1" are still scarce.

The true source innovation, namely the discovery of new targets, the analysis of new mechanisms, and the birth of first in class, is still mainly concentrated in the United States. There is an analysis that visualizes the differences between the two: Boston is like a highly divergent brain, while Shanghai is like a kung fu panda with extremely strong engineering execution ability. Although this statement is rough, it hits the nail on the head.

There are at least three structural reasons. Firstly, there is a serious polarization in the allocation of scientific research resources, with top scientists receiving an unimaginable amount of resources, while most researchers find it difficult to obtain sustained support. This highly centralized resource allocation method is not conducive to source innovation that requires extensive exploration. Secondly, the top-level concentration of academic achievements is still evident, and the most cutting-edge discoveries are still dominated by the United States. Thirdly, society lacks tolerance for 'slow science'. Source innovation requires long-term trial and error, while China's scientific research and industrial environment prefer rapid output.

In terms of data quality, Chinese pharmaceutical companies have also made significant progress. Due to the higher requirements of Chinese regulatory agencies in some aspects compared to the United States, and the increasing awareness of enterprises going global, more and more Chinese pharmaceutical companies are no less than their international counterparts in terms of the integrity and traceability of clinical trial data.

But the real gap lies in the design logic of early clinical trials, whether it only meets the minimum requirements for domestic approval or is it anchored to global registration standards from the beginning? The root cause of some cases of overseas obstruction often lies in the early experimental design not fully considering the FDA's differentiated requirements.

The narrowing of the technological gap has not automatically translated into a global competitive advantage. The overseas path of Chinese pharmaceutical companies is undergoing a drastic intergenerational succession, and the deep-seated problems exposed in this process are far more difficult than the technological gap itself.

03. The succession of sea routes

The overseas model of Chinese pharmaceutical companies is undergoing intergenerational evolution. The earliest "selling seedlings" - authorizing early assets to multinational pharmaceutical companies - still exists, but its proportion is declining. Instead, the rise of the NewCo model has led to the divestment of overseas equity in assets, which will be carried and promoted by newly established companies overseas, and then authorized or sold at a higher price once the data is mature.

The logic of NewCo has its market foundation. The stage preference of large pharmaceutical companies for acquiring Chinese assets is shifting backwards, and for assets in preclinical or early clinical stages, they tend to wait for more mature data. This leaves a 'middle layer' space for NewCo.

There are cases showing that a certain NewCo obtained an asset from a multinational pharmaceutical company and authorized it to another multinational pharmaceutical company at a significant premium five months later, with a financing scale of hundreds of millions of dollars. Industry observers pointed out that this model is attractive in terms of capital efficiency, but its sustainability is highly dependent on the liquidity of the capital market. Once the exit mechanism is blocked, NewCo's enthusiasm will inevitably cool down.

The geopolitical risk in the production process is a variable that is easily underestimated. After COVID-19, the United States' vigilance towards excessive dependence on China in drug production has significantly increased. A simple criterion for judgment is that if the asset involves complex production and is difficult to transfer outside of China, the difficulty of the transaction will significantly increase; If the production process is easily transferred overseas, the impact will be relatively limited. This signal suggests that Chinese pharmaceutical companies should include production transferability as a core consideration in the early design of their overseas assets.

The most inspiring reference is Takeda Pharmaceuticals in Japan. Takeda's path from a local Japanese enterprise to a global pharmaceutical company is clear: in the early stages, it accumulated experience through joint research and development with multinational pharmaceutical companies, then acquired a US company to obtain a tumor pipeline, and finally completed its global transformation based on Japanese assets and operated by a US team.

For Chinese pharmaceutical companies, true globalization requires not only competitiveness at the product level, but also the courage to "de localize" at the organizational level, such as whether they dare to let overseas teams dominate overseas markets and whether they can achieve true cultural integration. At present, except for a very small number of enterprises, the overseas capacity building of most Chinese pharmaceutical companies is still in the early stage.

Insufficient capital liquidity is the primary bottleneck restricting long-term investment in innovative drugs. Innovative drug development has a long cycle, high investment, and high failure rate, requiring capital to have sufficient patience and free exit channels. In the current pharmaceutical investment and financing ecosystem in China, the limited exit mechanism significantly reduces the long-term willingness of capital allocation.

When capital cannot flow freely, it will seek exports in a more short-sighted way, such as a large number of homogenized fast follow projects, rather than high-risk and high return source innovation.

The deeper issue lies in the structural conflict between the internal competition ecosystem and the emergence of originality. The number of Chinese biopharmaceutical companies once exceeded 7000, but there is serious homogenization. If resources are highly concentrated in the hands of a few top scientists and most researchers find it difficult to obtain support, there is a lack of soil for extensive source innovation.

When the internal competition develops to its extreme, although a few excellent achievements may be screened out, it is difficult to support the widespread emergence of originality. Observers have pointed out that China's repeated screening mechanism is more brutal than that of the United States, and the selected individuals are excellent, but it is not conducive to areas that require extensive exploration. Before the rise of globalization, the Japanese pharmaceutical industry underwent a fierce internal integration, shrinking from thousands of companies to a few globally competitive companies. China has not yet truly entered this stage, but the trend has already emerged.

A positive signal is that the conversion capacity of domestic universities and research institutions is substantially improving. More and more overseas investors and pharmaceutical companies are starting to collaborate with domestic PIs from the source, attempting to lock in innovation in the early stages. However, if China's original innovation achievements are preemptively transformed by overseas capital, the value capture of innovation will still flow out. Therefore, how to form a complete transformation loop from basic research to clinical development in China is a systemic issue that urgently needs to be addressed.

- Conclusion -

The regulatory environment may fluctuate and geopolitical disturbances may occur, but 'good medicine cannot stop it' is the underlying logic of crossing cycles.

The politicization of the FDA may be temporary, but the competition pressure between China and the United States reflected behind it is long-term. China's advantages in engineering capabilities, clinical advancement speed, and cost efficiency have been fully recognized by the global market, but it still takes time to supplement source innovation, improve capital ecology, and establish organizational globalization capabilities.

The only certain and unchanging strategy is to make truly good medicine and then let it go to the world.