The March of Chinese Biotech to the U.S. Can Become the Spark of Global Innovation for U.S. Firms

A recent article in the Wall Street Journal discussed the growth of senior-level U.S. life sciences executives accepting positions with Chinese biotech firms. According to the article, “China-based biotechnology startups looking to go global are poaching talent from the biggest American pharmaceutical companies, promising managers and medical chiefs lucrative pay packages and a more entrepreneurial work environment—all without asking them to uproot their lives in the U.S.”

Amidst a talent shortage for qualified biotech professionals at all levels in the U.S., this trend might be considered alarming, yet, as the world becomes more global, it can foster innovation and continued growth within an industry that is expected to be worth $775 Billion by 2024. 

Further, the loss of seasoned experts to China is nothing new among Contract Development & Manufacturing Organizations (CDMOs). In fact, it’s been going on for years. Chinese CDMOs have been setting up shop in the U.S. and hiring business people to staff their U.S, offices.  We’ve also seen Chinese young professionals, who received their education and early years of experience here in the states, take that knowledge back to China to run manufacturing operations there. 

U.S. biotech firms and CDMOs also have been sourcing raw materials and outsourcing to more cost-effective manufacturing plants in China to develop more affordable APIs and other molecules increasingly over the past few years.  It’s a natural evolution that those firms grow thanks to U.S. business and continue to move upstream into new markets and new opportunities.

But, despite these concerns, it’s important to note that the U.S. still owns the dominant spot in the rapidly growing biotech market, consuming a $300 Billion share, thanks to our world-leading academic institutions, research labs, and home to some of the world’s leading biotech firms. And, what is key is that we have robust capital markets that don’t exist anywhere else. 

Yet, this new strategy among Chinese firms to open up businesses in the U.S has proven to be lucrative. China’s expansion into U.S. markets is seen by some as one of the reasons for the growing U.S China rivalry and the recently introduced technological containment policy, which includes prohibiting US companies from selling core technologies and equipment to China; curtailing knowledge-transfer and academic exchanges with China; and prosecuting US-based Chinese scientists and engineers on spy charges. According to an article in a publication of the Hong Kong Economic Journal, China’s biotech and pharma industries could be hampered in three ways: by US restrictions on working visas and academic exchanges; by limits on the ability of Chinese companies to outsource biotech research to the US; and by the withholding of U.S. regulatory approvals, which are regarded as the global benchmark.

While these types of speculations are just that – unproven what-if scenarios – what is key is finding ways to work together across the globe with the common goal of introducing more affordable life-saving drugs and therapies and driving the type of competition that sparks innovation. This can be accomplished in the following four ways.

1. Sourcing and manufacturing in China. Especially for smaller U.S. CDMOs and generic drug manufacturers, there are clear benefits to sourcing products from China, the biggest one being the lower costs for raw materials and APIs, as well as manufacturing costs. And, especially in the early development stages when small batches are required, partnering with a Chinese firm that is already commercially manufacturing the material you require can provide a big boost to your product timetable and eliminate lots of developmental steps.  
   
2. Becoming culturally aware and engaging in active dialogue. There are clear cultural differences between the U.S. and China, as well as ways of doing business. It’s important to get to know what the cultural differences are and where they come from to operate from a place of understanding and tolerance.
   
3. Offering incentives to keep U.S. talent. While biotech talent may be leaving U.S. companies for Chinese start-ups, it’s important to make it attractive to keep that talent at U.S. firms. It’s not necessarily financial incentives that are swaying U.S. professionals, but the opportunities and excitement of the start-up environment.  As a result of consolidated big pharma firms dominating the market, smaller start-ups have lost influence or become gobbled up by the large firms. The U.S. has to nurture and invigorate a renewed start-up mentality in order to attract or retain the risk-taking leaders.  
   
4. Ensuring regulatory control across the board. While the FDA has more recently worked to ease restrictions to bring critical generics to market, what is key is that diligent FDA oversight is provided across the board for both U.S., Chinese and other companies seeking to commercialize drugs. Properly vetted drugs can meet real, life-saving needs regardless of the nationality of the company that produces them.

The world is becoming a smaller place and innovation does not end at geographical borders.  While it’s important that the U.S. retain its top spot as the hotbed of biotech innovation, there’s plenty of room for energetic and driven innovators wherever they may be. Bringing life-saving, affordable drugs to market is really the end goal.

We’d love to hear your thoughts about this topic. You can reach us at (978) 462-5555, or info@pcisynthesis.com.