While a start-up’s recent success is being referred to as a ‘DeepSeek moment,’ industry experts note that domestic companies still lag behind leading global pharmaceutical firms.
When Zhao Hong, the head physician at China’s top cancer hospital affiliated with the Chinese Academy of Medical Sciences, mentioned to his colleagues at a Communist Party meeting in March that a lesser-known biotechnology company based in Guangzhou had developed a cancer drug that outperformed the world’s best-selling medication, it caught the attention of investors.
As a long-serving frontline physician, my deepest impression is that China is experiencing the most promising period in the development of its biopharmaceutical industry,” he said to state media on the sidelines of the annual Chinese People’s Political Consultative Conference. “In the past year, not only does China have the world’s second-highest number of new drugs in development, but it has also seen a domestically developed new drug surpass the world’s leading cancer medication.
Indeed, some Western media outlets claimed that the success of start-up Akeso’s cancer drug ivonescimab was aDeepSeek momentfor China’s pharmaceutical sector – comparable in effect to the artificial intelligence startup’s release earlier this year of advanced models that were created at a significantly lower expense than international competitors.
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But was the comparison valid? Although Chinese pharmaceutical development companies have achieved progress, analysts and experts are doubtful about their ability to consistently produce successes similar to ivonescimab, let alone introduce genuinely innovative breakthroughs—particularly in a complicated and strictly regulated industry that may not be conducive to the kind of transformative advances DeepSeek achieved.
Akeso revealed in May of last year that a late-stage clinical trial indicated ivonescimab might extend the progression of non-small-cell lung cancer by five months compared to Merck’s Keytruda, a widely used treatment for various cancers that generated $29.5 billion in sales in 2024.
The following media coverage caused Akeso’s stock to rise by 150 percent as part of a broader surge fueled by an extraordinary level oflicensing deals, which indicated that multinational counterparts were acknowledging China’s capabilities in pharmaceutical development.
Following a three-year decline in the sector, investorspiled back into Chinese drug firms this year, emboldened by evidence that a decade of reform in the country’s regulatory regime – to incentivise innovation and discourage copying of foreign branded medicines – had borne fruit.
The Hang Seng Biotech index, which monitors the 50 biggest biotechnology, pharmaceutical, and medical equipment companies listed in Hong Kong, has risen by 107 percent this year following a 70 percent drop from its peak in mid-2021. Although it remains 40 percent lower than its highest point, it significantly outperformed the 251-stock Nasdaq Biotechnology Index, which recorded a 9.2 percent increase for the year.
“The dedication of Chinese companies to research and development is yielding results, as shown by a rise in oncology trials to 39 percent of the global total last year, up from just 5 percent in 2014,” stated Cui Cui, head of healthcare research for Asia at Jefferies, referencing data from US healthcare provider IQVIA.
She mentioned that since 2022, Chinese companies have created 639 drug candidates with “first-in-class” potential — a term indicating a new treatment method. This represented almost a fourfold rise from 137 during the period between 2018 and 2021, and it occurred at a faster pace than the 100 to 150 percent growth in similar candidates developed by companies in the US, European Union, and Japan, she added.
The data indicated an increase in Chinese companies’ interest in investing in advanced pharmaceutical research, along with their growing competitive edge.
Pharmaceutical and biotechnology companies listed in Mainland China and Hong Kong have collectively raised $11.3 billion this year through 63 share offerings as of September 18, according to Dealogic’s data.
The figure represented a significant turnaround from three years of steep declines, with new listing deals amounting to US$2.5 billion and follow-on issuances reaching US$8.8 billion. Total transactions fell from a high of 95 deals worth US$29.2 billion in 2021 to 33 deals valued at US$2.9 billion last year, due to an extended stock market downturn and economic contraction.
The excitement this year stemmed from the pressure exerted by multinational companies to cut drug expenses and revitalize their drug development pipelines as they faced the so-called “patent cliff,” which was caused by the imminent expiration of patents on several top-selling products, according to Cui.
The presence of quality mid-stage drug candidates from China at costsfar belowthe US biotech sector was encouraging major multinational companies to pursue licensing agreements with Chinese firms, according to a January report from US brokerage Stifel.
“Compared to 2020-21, it is evident that Chinese biotech companies have enhanced their global competitiveness, strengthened collaboration with international partners, and achieved greater success in licensing their drug candidates to partners,” said Zhang Song, founder of Beijing-based healthcare-focused private equity firm CTS Capital, which oversees more than 5 billion yuan in assets.
Chinese firms’ drugs are quickly advancing into forefront areas like antibody-drug conjugates and bispecific antibodies, along with cell and gene therapies, he mentioned.
Nevertheless, due to China’s relatively shorter history in biotechnology, a “significant gap” remained compared to multinational corporations in terms of the depth and scope of development pipelines, research and development funding, and the ability to manage long-term, high-risk projects, he noted.
“Many of China’s successful examples rely on established targets, rather than identifying new ones,” Zhang stated, noting that most Chinese pharmaceutical companies had not yet set up global sales teams and distribution networks.
A significant portion of the enthusiasm this year centered around publicly traded Chinese biopharmaceutical companies, whereas the private equity sector, which is controlled by seasoned and wealthy investors, has not yet experienced a rebound. The availability of funding for earlier stage, higher risk companies that are not listed remains restricted.
Mainland China and Hong Kong pharmaceutical and biotech companies secured US$7.7 billion through 444 deals last year from private equity and venture capital investors, down from US$20.42 billion in 799 deals in 2021, as reported by Preqin, a unit of asset management firm BlackRock. In the first half of this year, just 220 transactions totaling US$3.28 billion were documented.
In the meantime, the Hong Kong biotech stock rally drew significant involvement from non-specialist investors who are more accustomed to the wider technology markets, according to Tony Ren, head of Asia healthcare research at Macquarie Capital.
Several of these investors, hailing from industries including electric vehicles, e-commerce, and artificial intelligence, mistakenly believed that the same success elements could be transferred to the biotechnology field, he stated. He mentioned business model advancements like eliminating middlemen in supply chains to cut expenses.
In drug development, science-driven regulations throughout the supply chain—from clinical trials to payment reimbursement—left fewer opportunities for similar innovations, he stated.
Ren cast doubt on the emergence of a “DeepSeek moment” in drug development in a report published on September 22. “Efforts to implement the ‘move fast and break things’ approach in healthcare have mostly failed,” he stated.
Helen Chen, who leads L.E.K. Consulting’s China biopharmaceuticals and life sciences division, mentioned that various factors fueled the present and past stock market surges.
The surge in 2020-21 was driven by a strong global biotech investment environment, along with quicker exits for investors thanks to the implementation of Chapter 18A in Hong Kong and the new technology-focused stock exchange in Shanghai,” she mentioned. “Now, there is a lot of enthusiasm about the acknowledgment of Chinese innovative assets, and the role they can potentially take in the global pharmaceutical market.
Chapter 18A refers to the listing system introduced by Hong Kong’s stock exchange in 2018, which enables emerging pharmaceutical and medical device companies that have not yet generated profits or even sales to offer shares in the city. Similarly, the creation of a science and technology innovation board by the Shanghai exchange in 2019 also enabled numerous unprofitable biotech companies to go public.
This year has seen a rise in activities where Chinese pharmaceutical companies license their candidates to international partners, aiming to speed up their expansion into foreign markets. These partners will fund clinical trials, secure regulatory clearances, and introduce the medicines in international markets.
Some 95 so-called “out-licensingChinese companies concluded deals valued at US$89 billion this year by August 24, making up 33 percent of the global total, almost double the 17 percent recorded last year, as per a September 14 report from Changjiang Securities based on data from Insight.
Although the deals showcased the innovative potential of certain industry pioneers, the entire Chinese sector was still struggling to keep up on the world stage, Chen noted.
It is evident that Chinese companies are at the forefront in specific fields,” she stated. “That being said, I believe the average Chinese company is likely still a quick imitator.
For instance, in addition to Akeso, Chinese companies Biotheus and 3SBio have also created cutting-edge candidates in the field of cancer medications that enhance the functionality of immune cells and block the formation of blood vessels in tumors, she mentioned.
The rapid approach of Chinese companies is also proving effective in the obesity medication sector, where more than 60 candidates are in development, competing to capture market share from established drugs introduced by international firms.
Innovent Biologics, which obtained the rights to develop mazdutide, a candidate from US-based Eli Lilly, became the first local company to launch aweight lossdrug in the emerging and rapidly expanding Chinese market in July. It was promoted as the world’s first medication that targets two areas, demonstrating effectiveness in curbing hunger to improve weight loss and decrease liver fat.
A finance professional from Suzhou, Li Weijia, who took part in the late-stage clinical trial of mazdutide, expressed his support for increased product options from local companies. Li mentioned that he lost 22 percent of his weight, going from 108 kilograms to a lower weight within eight months, and also reversed his fatty liver condition.
Nevertheless, despite the US Food and Drug Administration (FDA) approval being a highly sought-after achievement that greatly boosts a product’s market potential and attractiveness to investors, Chinese accomplishments in this area remain in the initial phase.
Chinese companies represented just approximately 5 per cent of the 58 medications that received FDA approval or were in accelerated review processes since January last year, according to Chen from L.E.K. Consulting, referencing data from industry source Dingxiangyuan.
But it represents a beginning.
This shows that Chinese assets can gain recognition and approval from the US FDA,” she stated. “I believe the 5 percent is just the start, and the percentage will grow over time.
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This piece was first published in the South China Morning Post (www.scmp.com), a top news outlet covering China and Asia.
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