Biotech industry faces off: US vs. China

00:00 Speaker A

According to a recent report from the Harvard Belfer Center for Science and International Affairs, China has the most immediate opportunity to overtake the United States in biotechnology. For more, let's welcome in Arta Rawi America's industry markets leader and Health Sciences and wellness, as well as Yahoo Finance's very own Anjali Camlani. Welcome to you both. All right, I'll start with you. Uh, maybe it's just a big question, big picture question. Does the US have the investment power, in your opinion, to overtake China in biotech?

01:05 Arta Rawi

Yeah, thanks for having me. Uh, the biotech is the innovation feeder to the big pharmaceuticals and it only uh nurtures well in an ecosystem. So to answer your question, what do you need in that ecosystem for that to nurture? Uh, investment capacity, which we have been having for the last, you know, decades, if you will, to kind of keep investing in that innovation to move on. NIH has been probably the world's largest VC over $40 billion in non-dilute funding into the entrepreneurial startups. Then you have talent who has been, you know, coming all these top universities and MDs and PhDs who are dedicated to advance it. And then you need this technology transfer system so that those intellectual property translate into a startup. And then with that investment capacity, it keeps growing and then through testing and going to the humans and then ultimately being developed for everyone's use. So, uh, yes, the US still has the capacity to invest, but it is not potentially the only game in town given the development coming from China.

03:01 Anjali Camlani

I'm curious, Arta, because we know, I know you've been tracking the deals and uh, we've seen the number of deals steadily increasing over the years. I saw, uh, one of the ones that you sent, which looks at the number of deals so far to date for 2025 is more than half of what we saw in 2024. So we can expect that to really outpace 2024. What does that mean though? Because I know that some of the deals that are happening are more, um, what you would call licensing deals, right? It's not necessarily that this money is going to from scratch investment and innovation, but it's more stuff that has already happened and is built up. Talk to me about that and why that matters.

04:07 Arta Rawi

I mean, first of all, the numbers are pretty compelling. A couple years ago, we had pretty much like no deals under a billion dollars in 2016. And as of last year, there were $30 billion worth of licensing deals from Chinese assets into the US, and 2025 is a very strong start, so they're definitely going to beat that number. So the reason why this is happening is in 2015, Chinese Communist Party put a priority of investing in biotech and that was a priority sectors. And it was 10 years ago, and that 10 years of journey started to play out for their benefit because China historically has been known for this active product ingredients and excipients, which is like the chemicals that pharmaceuticals were using to make small molecule products. And that journey now is taking them to upstream to more advanced innovation. Probably we still have not seen a first in class, but clearly they are going for best in class, like those are the shots on goal if you are seeing more and more.

05:44 Anjali Camlani

Well, that's why, that would be my question because I know that we've seen sort of they're doing copycats or metoos in terms of the type of innovation coming out of China. Um, do we expect that they have the wherewithal to outdo the US then in that sense, in terms of coming up with the next blockbuster for the entire world?

06:12 Arta Rawi

I mean, there are a couple examples, early examples that some of the Chinese based assets actually head-to-head comparisons, you know, beat or exceed, at least match the efficacy and safety profile of some of the Western developed compounds. But this is also a journey as the audio question. So what is it, what do they need more to get there? So they have the talent. I mean a lot of Western educated MDs and PhDs went back to China working on that. The government itself as a part of prioritization program have been investing in it. So then the question is, do they have an exit strategy for those entrepreneurs? And that I think is where they are lacking because there's no like an IPO market that is comparable to the Western standards. There's no like an M&A exit until recently. I think that's where the weakness kind of may be the opportunity for them to come up. But the deals we were talking about, they're because of the intellectual property concerns, because of the concerns of reliability and trust in the data because, you know, there's no such institution in the world like FDA that everyone trusts and hopefully continue to trust. And for that reason, the deals seem to be more asset purchases. So I'm not taking a risk by operating in China, but I'm buying the asset and in a licensing deal, and I'll continue to develop it, especially if you can make this cheaper and faster in China, which has been their competitive advantage over the Western companies, then you bring that into a human fast and then the human testing can be done, validations can be done in the more Western setting. I think that can be a winning formula for the industry.