Big pharma is turning to China for the newest drug ideas

Not long ago, China was a backwater for drug research. Its companies made pharmaceutical ingredients or lower-cost generic drugs. Its patients offered an opportunity for big drugmakers to sell medicines developed in the West.

Now it’s a major player in biotechnology. Researchers and startups in China are racing to develop hot new medicines for cancer, weight-loss and other diseases. Many are on the cutting edge of molecular biology.

“China is rallying their innovation to degrees that we haven’t seen before,” Pfizer Chief Executive Albert Bourla said.

Looking to tap in to the innovation, big drugmakers and investors are spending billions to lock up rights to promising Chinese-originated drug candidates like 3SBio’s.

All told, Western and Japanese drugmakers did 70 transactions with Chinese biotechs last year, paying nearly $5.6 billion upfront to get rights to promising molecules, according to pharmaceutical commercial intelligence firm Evaluate.

So far this year, the companies have spent almost $1.9 billion on 30 deals, Evaluate said.

Biotech is one of the advanced technologies that China has designated a national priority. Like artificial intelligence and electric vehicles, biotech in China has taken off in recent years, and Chinese drug research threatens to soon overtake the West’s.

Its rapid progress promises to help patients. Not only does China promise a new source of lifesaving medicines, but a less expensive supply, too.

Its advance has stirred national-security concerns in the U.S. Lawmakers and government officials have warned the U.S. could lose a large and important source of jobs and become dangerously dependent on China’s supply of medicines if drug innovation shifts to China.

Drugmakers in the U.S., Europe and Japan, on the other hand, see a more practical benefit: a new source of assets.

Drugmakers are under pressure to continually find new drugs to replace older products that lose sales when their patent protection runs out. And finding new, difference-making medicine is hard. Many promising leads fail during testing. Chinese biotechs are now filling the gaps.

Pfizer and other companies seeking to get into the booming market for weight-loss drugs, for example, have licensed rights to GLP-1 medicines that Chinese biotechs quickly developed.

Likewise, China has become a big supplier of a class of next-generation chemotherapy treatments, known as antibody-drug conjugates.

“Most U.S. and European pharma companies are actively searching for Chinese new drugs now,” said Paul Zhang, a partner with Bluestar BioAdvisors who advises drugmakers on the China biotech market. “Things are cheaper and faster.”

China accounted for 30% of the world’s pipeline of experimental drugs last year, according to McKinsey.

Last fall Gilead Sciences agreed to pay $120 million upfront to Chinese biotech Pregene Biopharma, which can rapidly test therapies known as CAR-Ts like ones that Gilead is developing.

“While we look in the U.S. and around the world for innovation, what we are seeing coming out of China is fundamentally different than what we saw five years ago,” said Gilead Chief Financial Officer Andrew Dickinson.

The progress is no accident. Starting in the 1980s, the Chinese central government targeted becoming a scientific superpower in certain technologies, including biotech. To realize its ambitions, the government has invested to build research labs and Ph.D. programs.

It has also created a regulatory system that permits rapid testing and speedier approvals of drug candidates, making it easier for drug researchers to innovate. For instance, the government established a route for researchers to quickly start testing drugs, rather than having to wait the months it takes to get cleared in the West.

Today cities like Shanghai and Suzhou are teeming with lab space and biotech startups. There, researchers who not long ago copied popular Western medicines are developing more advanced treatments. Some of the startups have executives who had studied and worked in the U.S., and have labs there, too.

They are aided by a cottage industry that helps scout for promising and lucrative targets for research.

When Novartis scientists published a paper in July 2024 for one of the most promising new classes of drugs, called molecular glue, Chinese drug scouts took notice.

Just four days later, a Chinese microblog published a detailed analysis of the paper and associated patent filings.

It read like a “how-to guide” for Chinese researchers interested in quickly making molecular-glue drugs that could rival those being developed by Novartis and Bristol-Myers Squibb which are among the big Western drugmakers racing to develop the drugs, said Zach Collins, a partner at Mission BioCapital, a U.S.-based venture firm that has closely monitored Chinese drug R&D for potential licensing opportunities.

The post broke down the potential molecules that were the most promising from the patent and which compounds were likely to be further developed. It also laid out how researchers could, with the help of the published work of Western firms, come up with their own drug candidate.

GluBio Therapeutics, a 22-employee company with operations in Shanghai and San Diego, had been working on its own therapies. By poring over the patents from Western companies, the biotech found clues to improve its drug candidates.

Within months, GluBio had made tweaks that produced more powerful and targeted therapies. It attracted interest from Western companies and sold a stake in February to French drugmaker Sanofi.

Molecular glue is a technology that promotes the stickiness of disease-causing proteins, allowing them to be degraded. It promises a way to treat cancers and other diseases that had been considered “undruggable.” The market potential is huge.

GluBio was established in 2021 with funding from Chinese venture capitalists to find molecular-glue drugs. Chief Executive Gang Lu is a native of Shanghai who had gotten a Ph.D. from UCLA, then worked in the U.S. as a scientist and research manager for Western drugmakers including Bristol-Myers.

The startup began working on molecular-glue drugs for sickle-cell disease, among other conditions.

By studying the molecular-glue patents of Bristol-Myers and Novartis, GluBio drew lessons that “helped us further improve our compounds” and clearly differentiate its experimental drugs from Novartis and Bristol-Myers’s, Lu said.

“That’s how we attracted a few drug companies that are developing treatment for SCD to the negotiation table” in 2024, he said.

Sanofi, which has been developing its own sickle-cell treatments, noticed GluBio’s work while scouting for additions to its pipeline.

The French drugmaker liked the prospects for GluBio’s drug candidates, and figured the company could develop them “quickly and well, and with less dollars or euros or yen than it would require somewhere else,” said Monika Vnuk, Sanofi’s global head of partnering and business development.

Sanofi made a $30 million strategic equity investment to support a first round of testing of the two experimental sickle-cell drugs. It was among six license deals and four equity investments the French drugmaker has done with Chinese biotechs in the past two years, Vnuk said.

GluBio’s sickle-cell drug candidates trail rivals from Novartis and Bristol-Myers, but Lu said it could close the gap by doing early-stage research and testing in China. It takes about two to four months to get a clinical trial going in China after seeking regulatory clearance, compared with six to nine months in the U.S.

In China, there are more patients and healthy volunteers who are willing to participate in trials, Lu said, and they can be enrolled more quickly at a single large academic medical center rather than spread out among many different centers.

“Lower cost, high quality, high speed, for sure, that’s the trick of success,” he said.ality, high speed, for sure, that’s the trick of success,” he said.

Write to Peter Loftus at Peter.Loftus@wsj.com