What’s driving China’s impressive level of biotech innovation?

Oncology Business Development, AstraZeneca


Maria Dahl

Some of China’s most innovative life sciences businesses were at the recent 2019 ChinaBio Partnering Forum in Shanghai and a number of them joined me for a panel discussion on the future of medical innovation.

Wei (William) Cao from Gracell Biotechnologies Group, Ming Wang of Phanes Therapeutics, Zheng Wei from Connect Biopharma and Dajun Yang of Ascentage Pharma generously shared their expert views on the drivers for innovative therapeutics development in China.

In my previous blog I looked at the impressive level of biotech innovation in China. Now I’d like to draw further on the expertise shared by the panel and take a deeper look at some of the trends driving this innovation.

Access to capital and local incentives

Two of the factors propelling the Chinese biotech sector to its current heights are the strong access to capital in the country, thanks to the likes of Hillhouse Capital Group, 6 Dimensions and Qiming Venture Partners, and plentiful local government initiatives.

There are a number of quite attractive incentives in different Chinese regions and many provide excellent support for setting up new biotech and pharmaceutical businesses, ranging from tax incentives to help with finding locations and human resources.

William Cao from Gracell highlighted in particular the support his company received from the Suzhou local government. This support was not in the shape of ’cash in the bank’, but came in the form of help with finding a location and other set-up arrangements. Gracell has a novel CAR-T platform for which the company has secured more than $100 million in funding from 6 Dimensions and others. The company started in Shanghai, but William Cao rightfully stated the city is very expensive, hence they opted to relocate as they grew and needed more space.

That said, Shanghai does have numerous initiatives to support biotech. For example, the Songjiang Economic Development Zone houses 82 new biomedical companies. The Shanghai government announced last year that companies which obtain new drug approvals, and intend to manufacture and sell the medicines in Shanghai, would be granted an annual subsidy equal to 10% of its initial research budget, up to a cap of 10 million RMB (~$1.4 million).

Advances in the university sector

Alongside these environmental changes there are also advances in the university sector and its approach towards technology transfer and intellectual property (IP), although new companies still face some challenges.

For example, links with academia in the country could be stronger. A number of co-founders do have an academic background, which in previous years was rarely seen, but it’s still not as common as it is in the western world.

The panel also noted that the infrastructure and systems for technology transfer within Chinese universities are not yet as sophisticated as their counterparts in the US or UK and this is clearly an important issue.

Nevertheless, there are an increasing number of companies based around university IP. One such firm is RPX, which was founded by Professor Niu Huang in Suzhou and is based on novel computational chemistry methods. It’s a good example of technology transfer from an academic institution, having licensed projects from the National Institute of Biological Sciences in Beijing. So, while technology transfer may not yet be at the same level as Cambridge UK, Boston or San Francisco, it is clearly happening.

Part of the reason that this side of the industry has yet to reach its full potential is that, in many cases, IP generated at state-owned universities is also owned by the state. Several of the panellists at ChinaBio referenced challenges with companies being started by academics where the ownership of intellectual property turned out to be more unclear than previously thought.

Another factor, as one of the panellists noted, was that Chinese universities are relatively well-funded. Consequently, there’s not always the same motivation for spin-out companies to make a return.

Nevertheless, the exciting thing about Chinese innovation is that the existence of these challenges just points to the room for further growth. So, while China’s biotech sector is still a work in progress, it’s already showing high levels of innovation and rapidly moving towards the levels of sophistication seen in the west.

My thanks again to Wei (William) Cao, Ming Wang, Zheng Wei and Dajun Yang for taking part in the China Innovation panel at ChinaBio Partnering Forum and to Xiaogang Pan from the AstraZeneca team for his many insights.