China’s biotech rise is fueled by its 'first to file' patent system. Companies feed newly published patents into computers to design trivially different but functionally identical molecules, effectively creating a 'shadow generic industry' that undermines IP.
Related Insights
The weight-loss drug market is a duopoly, not a monopoly, because companies cannot patent the underlying biological mechanism (mimicking GLP-1). Instead, Novo Nordisk and Eli Lilly patented distinct molecules that achieve a similar outcome, allowing both to compete directly.
China has developed a first-rate biotech effort, enabling U.S. firms to buy or license preclinical assets more efficiently than building them domestically. This creates an arbitrage opportunity, leveraging China's R&D capabilities while relying on U.S. expertise and capital for global commercialization.
Many peptides are unlikely to ever receive FDA approval because their simple, easily replicated structures make them commodities. Pharma companies won't fund billion-dollar trials for drugs they can't patent, leaving them in a permanent gray market.
China is no longer just a low-cost manufacturing hub for biotech. It has become an innovation leader, leveraging regulatory advantages like investigator-initiated trials to gain a significant speed advantage in cutting-edge areas like cell and gene therapy. This shifts the competitive landscape from cost to a race for speed and novel science.
Faced with China's superior speed and cost in executing known science, the U.S. biotech industry cannot compete by simply iterating faster. Its strategic advantage lies in
The AI lobby's argument to ignore IP rights to outpace China is shortsighted. The US's global strength is built on robust IP protection. Eroding this standard domestically jeopardizes the ability to protect American innovations, like OpenAI's own models, abroad. Respecting IP is the long-term strategic play.
Morgan Stanley projects a dramatic increase in China's contribution to global medicine, with assets developed in China expected to represent about a third of all new US FDA approvals by 2040, a significant rise from just 5% today.
China is poised to become the next leader in biotechnology due to a combination of structural advantages. Their regulatory environment is moving faster, they have a deep talent pool, and they can conduct clinical trials at a greater speed and volume than the U.S., giving them a significant edge.
The next decade in biotech will prioritize speed and cost, areas where Chinese companies excel. They rapidly and cheaply advance molecules to early clinical trials, attracting major pharma companies to acquire assets that they historically would have sourced from US biotechs. This is reshaping the global competitive landscape.
Despite US-China tensions threatening innovation, the likely outcome is 'coopetition'—a blend of competition and collaboration—as global pharmaceutical firms navigate the dual imperatives of advancing innovation and ensuring supply chain resilience.