The world's leading pharmaceutical companies are betting on Chinese biotech companies - the upcoming Trump administration is a variable.

December 3, 2024 16:29 JST
Deal making in pharmaceuticals, one of the few areas of cooperation between China and the West.
Major pharmaceutical companies focusing on new drug discovery in China, looking at the "patent cliff".
Amidst geopolitical tensions affecting industries like semiconductors and electric vehicles (EVs), deal making in pharmaceuticals has become one of the few areas where China and the West are cooperating. Industry insiders are eagerly watching how this situation will change with the incoming Trump administration.

According to DealForma, seven major pharmaceutical companies have taken steps to license and acquire molecules for new drugs originating in China this year, investing at least a total of $3.150 billion (approximately ¥473 billion) in upfront payments and capital. Some companies are also enhancing their presence locally in the quest to find the raw diamond.
According to a report released by Stifel Financial's investment banking division in October, research and development (R&D) executives of major pharmaceutical companies have visited China at least once in the past year.
　　AbbVie and Bristol-Myers Squibb hold Partnering Days in Shanghai for meetings with local companies, while Roche Holding, Bayer, Eli Lilly, and others have already established or plan to establish incubators for building relationships with early-stage startups. Additionally, Pfizer announced at a recent highly anticipated exhibition that it will invest $1 billion in China over the next five years.

Even as major pharmaceutical companies from the US and Europe distance themselves from Chinese research and development providers or establish production facilities specifically tailored for China, transactions involving biotechnology have become so attractive that Western drug manufacturers cannot afford to overlook them.

Darren Ji, who served as Roche's Head of Asia & Emerging Countries Partnering Activities, says, 'I have never seen so many multinational companies coming to China and scouring the country.'

China has a long history as an outsourcing hub for foreign pharmaceutical companies and as a production hub for existing drugs that are structurally similar ('me too' pharmaceuticals) already in the market. However, due to government efforts supporting some cutting-edge industries, it is now becoming a crucial hunting ground for entirely new therapeutic drugs.
Susan Galbraith, Head of Oncology Research at AstraZeneca, who has been visiting China for drug discovery purposes for 20 years, points out, 'True innovation is emerging.' She also mentions about the pace of learning and adaptation in China, 'Honestly, it may be faster than anywhere else in the world.'

For major pharmaceutical companies, buying assets from smaller biotechnology firms is commonplace. While drug manufacturers develop their own molecules in the research department, they also look at other companies' discoveries to fill their pipelines, sometimes even acquiring entire companies.

As major pharmaceutical companies are anticipating patent expirations by 2030 for therapeutics such as cancer and inflammatory diseases, there is a particular need for portfolio replenishment. Analysts estimate that the so-called 'patent cliff' could jeopardize annual revenues of $180 billion to $360 billion. Some executives of pharmaceutical giants are focusing on blockbuster drugs that have the potential to generate at least $1 billion in annual sales.
There are doubts about whether promising initial data obtained from new drug candidate trials in China can be replicated in larger global trials. Additionally, even if replication is successful, it may take several years for these molecular compounds to reach the market.
However, global drug manufacturers believe that it is only a matter of time before Chinese science proves its value.

Tim Oppler, Managing Director at Stifel, points out that ten years ago, Chinese companies were developing generic equivalents, with concerns even raised about them not containing the correct ingredients. He notes, 'Ten years later, Chinese companies are developing truly excellent molecules that rival the best biotechnology companies in the USA.'
According to companies interviewed by Bloomberg, despite ongoing trade tensions, their deal-making plans remain unchanged. However, the threat of decoupling initiated under the Biden administration seems unlikely to ease even with a future Trump administration.
Roche's CEO, Thomas Schinecker, mentions, 'Whatever increases geopolitical tensions is not a good thing,' highlighting the potential disruptions in the supply chain. He remarks, 'This is not only an issue for the pharmaceutical industry but a global concern.'

The end.