Pharma Executives Confident China Cycle That Has Happened To Every Other Industry Will Not Happen To Pharma
CAMBRIDGE, MA—Expressing calm assurance that the pattern of technology transfer, appropriation, and eventual displacement that has occurred in manufacturing, solar panels, semiconductors, telecommunications, electric vehicles, and virtually every other sector was not relevant to their situation, American pharmaceutical executives confirmed Tuesday that the China cycle would definitely not happen to biotech because “drug discovery is different.”
“I understand why people might draw parallels,” said an industry insider, watching Pfizer CEO Albert Bourla say at a New York gala that reliance on Chinese resources are “not just strategic but necessary“ to drive future development. “But pharmaceuticals aren’t like solar panels. You can’t just reverse-engineer a biologic. There’s know-how involved. Institutional knowledge. It’s not transferable.”
The comments came amid growing industry reliance on Chinese contract research organizations, which now conduct an estimated 40% of clinical trials for American drug companies, manufacture a majority of generic drug components, and have developed internal capabilities that executives describe as “complementary” rather than “competitive.”
“The CRO relationship is totally different from what happened in other industries,” explained a pharma executive who requested anonymity. “Take for example Moderna’s recent deal. Yes, we’re outsourcing our manufacturing. Yes, we’re training their scientists on our platforms. Yes, they’re building identical facilities and hiring our former employees. But the intellectual property stays with us. It can’t cross the border. Contracts are binding. That’s what makes them contracts.”
The executive acknowledged that Regor Therapeutics, a Chinese biotech founded by former Pfizer employees, had recently announced its own independent internal drug discovery pipeline that identified molecules purportedly “strikingly similar” to the medicines they had developed for Western clients.
“That’s just coincidence,” the executive said. “Convergent evolution. Great minds thinking alike. It happens all the time in science. Just because we paid them to develop a GLP-1 agonist and then they announced their own GLP-1 agnoist six months later doesn’t mean anything. GLP-1’s is an obvious target. Everyone’s doing GLP-1.”
Industry analysts noted that the pharmaceutical sector has followed an almost textbook version of the China cycle observed in other industries.
“Step one: outsource manufacturing to reduce costs. They did that,” said Dennis Hu, a veteran pharmaceutical industry commentator. “Step two: transfer technology through joint ventures and partnerships. They’re doing that now. Step three: watch as domestic Chinese competitors emerge with suspiciously similar products. That’s starting. Step four: get squeezed out of the Chinese market. Step five: get outcompeted globally. We’re somewhere between steps two and three. It’s all very predictable. I’ve been writing about this for years. No one wants to hear it.”
When presented with this analysis, pharmaceutical executives expressed polite disagreement.
“Dennis is a chemist,” said one executive, who requested anonymity. “He doesn’t understand the business dynamics. Yes, the same pattern happened in solar. And steel. And telecom equipment. And semiconductors. And batteries. And shipbuilding. And high-speed rail. And consumer electronics. And industrial robotics. But those are commodities. Drugs are not commodities. Drugs are innovative. You can’t commoditize innovation.”
The executive then excused himself to take a call about relocating additional manufacturing capacity to a new WuXi facility in Shanghai, which he described as “a short-term cost optimization that has no long-term strategic implications whatsoever.”
Chinese pharmaceutical companies, meanwhile, have begun expanding into global markets with drugs developed using capabilities built through Western partnerships.
“We are very grateful to our American partners for helping us develop our capabilities,” said a spokesperson for Hengrui Medicine, which has launched multiple drugs that compete directly with Western products in oncology and immunology. “We learned so much from them. They were wonderful teachers. Very generous with their knowledge. Very eager to share. We could not have done this without them. Truly.”
The spokesperson declined to comment on whether this statement was intended to be sarcastic.