The narrative of China as an innovation 'threat' in biopharma may be a deliberate strategy to spur action in the U.S. By creating a sense of urgency and competition, reminiscent of the U.S.-Soviet superpower struggle, the industry may be attempting to mobilize investment and political will, even if the framing is seen as unfortunate.
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By framing competition with China as an existential threat, tech leaders create urgency and justification for government intervention like subsidies or favorable trade policies. This transforms a commercial request for financial support into a matter of national security, making it more compelling for policymakers.
Unlike the NIH's science-driven approach, the Department of Defense's new biotech funding priorities will be reactive to geopolitical threats. The DOD will invest in areas where China is perceived to be advancing, such as synthetic biology and biologic data security, rather than funding basic research.
Contrary to lingering Western perceptions, the idea that data from Chinese biotechs is poor or that the country doesn't produce real innovation is outdated and incorrect. China's life sciences sector is now increasingly sophisticated and innovative, fueled by significant government investment, making it a critical global player that cannot be underestimated.
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.
Driven by significant government investment, China is rapidly becoming a leader in biotech R&D, licensing, and outsourcing. This shift is a top-of-mind concern for US biotech and pharma executives, with China now involved in a majority of top R&D licensing deals.
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
Beyond just pharma, China is engaging in a 'salami slicing' strategy to take over the foundational infrastructure of the U.S. biotech economy. This slow, incremental acquisition of manufacturing and research capabilities mirrors its successful long-term strategy for dominating sectors like rare earths.
According to investor Joe Edelman, China's main strength is developing new molecules. This means US and European firms will increasingly in-license drugs from China, creating fierce competition for the small US biotechs that traditionally filled this pipeline role for larger pharmaceutical companies.
Pharmaceutical companies are engaging in lengthy negotiations with US biotech startups while simultaneously exploring cheaper, faster assets in China. This creates negotiation leverage and puts downward pressure on valuations and deal terms for US-based innovators.
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.
