Breaking through with innovative drugs under new narratives requires more resilience and a "storm-like" transformation | Industry Observation

How the Division of Biotech and Biopharma Shapes the Healthcare Industry Ecosystem?

“The Science and Technology Innovation Board Daily,” March 19 (Reporter Shi Shiyun) American economist Joseph Schumpeter once said in his famous work “The Theory of Economic Development”: “The fundamental phenomenon of economic development is the ‘storm-like innovation’ that entrepreneurs use to break the old equilibrium.” If this assertion is projected onto China’s innovative drug sector, we have more vivid examples.

In the past, the global pharmaceutical market was long dominated by European and American giants, with target discovery, clinical development, and commercialization pricing firmly locked within the existing framework. However, after a decade of leapfrog development, China’s biopharmaceutical industry has shifted towards original innovation, continuously achieving technological catch-up and industry accumulation under the leadership of a batch of Chinese entrepreneurs, gradually shedding the label of “a major generic drug country” and initiating a “disruptive storm” belonging to latecomers.

However, within this domestic wave of innovative drug rise, industry participants are also acutely aware that behind the industry’s rapid progress, many challenges still exist.

▌Breaking Through Targets and Ecological Reconstruction - Not All Biotech Companies Need to Become Biopharma

Although China’s biopharmaceutical industry has already secured an important position globally and has produced several well-known domestic pharmaceutical companies, to date, there has not emerged a domestic company that can compete with multinationals like Pfizer, Eli Lilly, Roche, or other MNCs.

Regarding this gap, during a recent frontline survey by reporters from “The Science and Technology Innovation Board Daily,” Luy Qiang, co-founder and chairman of Jinfang Pharmaceutical (02595.HK), candidly stated: “The domestic medical insurance payment system still needs further improvement; although relevant policies are continuously optimized, there is still room for enhancement compared to mature overseas markets. At the same time, local entrepreneurs need to have stronger strategic determination and industry insight and must avoid blindly chasing hot trends.”

“Additionally, the domestic capital market’s exploration and professional understanding of clinical data need to be more in-depth, which can provide drug companies with more reasonable and matching valuations.” Luy Qiang further stated.

This viewpoint also points directly to the reality pain points in the development of China’s biopharmaceutical industry. Against the backdrop of rapid industry development, issues like R&D homogenization and overcrowded tracks are becoming increasingly prominent. Hot targets like PD-1, GLP-1, HER2, and EGFR are clustered together, leading many companies into repeated competition, which not only wastes R&D resources but also continuously dilutes the value of innovation. Aside from the companies that are first to market gaining a first-mover advantage, subsequent similar products that crowd the market are easily trapped in price competition and commercialization dilemmas, making it challenging to form sustainable core competitiveness.

On the capital market side, overheating sentiments have also fostered a certain industry bubble. Some funds were previously keen on chasing short-term trends and business development transactions, neglecting in-depth evaluations of clinical data, pipeline value, and commercialization potential, leading to deviations between some pharmaceutical companies’ valuations and fundamentals. Once market sentiments shift, the sector can experience extreme fluctuations, and truly innovative companies may struggle to obtain stable and reasonable valuation support, potentially exacerbating short-term behaviors in the industry.

In Luy Qiang’s view, regardless of which stage of development a company is in, it should always focus on and continuously build its core competitiveness.

“Innovative drug R&D does not have to get caught up in the absolute distinction between ‘first in class’ and ‘fast follow.’ What truly matters is to base itself on unmet clinical needs, carve out a differentiated innovation path, and align closely with its team’s R&D strength and execution capability. This is the key for Biotech to establish a long-term presence and create core competitiveness,” Luy Qiang told reporters from “The Science and Technology Innovation Board Daily.”

“For example, the RAS target mutation occurs at a very high rate in various tumors, but there is a significant unmet treatment need clinically. In the field of pancreatic cancer, RAS mutant patients have long lacked targeted drugs, and clinical treatment has relied solely on chemotherapy regimens for a long time. If relevant products can be successfully developed targeting this target, it can effectively address clinical pain points,” Luy Qiang said.

RAS is also a key target that Jinfang Pharmaceutical is focusing on. It is a family of critical oncogenic proteins, including several subtypes like KRAS. Due to the smooth surface structure of this protein, traditional small molecule drugs find it challenging to identify and bind to active “pockets” where they can exert their effects, creating a high technical barrier for drug development, and it was once viewed as a “non-druggable” target. Until 2021, Amgen’s sotorasib received accelerated approval from the U.S. FDA.

Currently, Jinfang’s RAS pipeline includes classic small molecule targeted drugs, non-degradable molecular glue, and new antibody-drug conjugates created using innovative synergistic mechanisms. In 2024, Jinfang’s KRAS G12C inhibitor, furzasertib, will be approved for marketing, making it the first of its kind in China and successfully entering the 2025 national medical insurance catalog. Innovent Biologics (01801.HK) holds the exclusive development and commercialization rights for this product in China (including Hong Kong, Macau, and Taiwan).

Additionally, Luy Qiang revealed to reporters from “The Science and Technology Innovation Board Daily” that another RAS pipeline product from Jinfang Pharmaceutical is expected to be approved for marketing in 2028.

As core products successively enter commercialization and critical clinical stages, a question of general concern in the industry also emerges: Does Biotech necessarily have to grow into Biopharma as its ultimate goal?

In this regard, Luy Qiang believes that not every Biotech is suitable, nor does every Biotech have the capability to grow into a traditionally defined Biopharma. Some founders come from scientific backgrounds and lack commercial operational experience, and are not good at business marketing; for such Biotechs, forcibly transforming could exceed their capability boundaries.

“I also do not agree that ‘Biopharma’ is inherently superior to ‘Biotech.’ In a healthy and complete industrial ecosystem, the two are simply positioned differently and have different divisions of labor. Just like a forest cannot only have tigers and lions; it needs diverse species to constitute ecological balance. Biotech has its unique core advantages, and Biopharma also has its irreplaceable value; this specialization has already formed in mature overseas markets,” Luy Qiang stated.

▌The CRO&CDMO Industry Bids Farewell to Scale Homogeneity, Pursuing Growth Through Technological Upgrades and Complex Molecules

The domestic innovative drug industry is making rapid strides, with a boom in business development transactions and a warming of financing. As it extends along the industrial chain to midstream links, the CRO&CDMO industry has also entered a period of rapid expansion.

Data shows that China’s CRO market size has grown from 97.8 billion yuan in 2020 to 151.6 billion yuan in 2024, with an average annual compound growth rate of 11.58%. Expanding the view to encompass the entire CXO field, including CRO and CDMO, the Chinese CXO market size is expected to reach approximately 210 billion yuan in 2024, a year-on-year increase of 16.7%, and is expected to exceed 270 billion yuan by 2026.

The positive trend in the industry is gradually transmitting to performance. According to performance forecasts released by some companies in 2025, leading CXO companies like WuXi AppTec (603259.SH), Tigermed (300347.SZ), and Kintor Pharmaceutical (300759.SZ) have shown impressive performance, with some even reporting significant net profit increases.

However, alongside rapid development, the CRO&CDMO industry is also gradually exposing hidden concerns. In the context of continuous expansion of tracks and a rapid increase in the number of companies, many companies are concentrated in standardized, relatively low-threshold business areas such as preclinical research and routine formulation production, leading to increasingly intense homogenized competition. To compete for orders, many companies are forced into low-price bidding and volume-for-price internal competition, which not only compresses the overall industry profit margin but also weakens companies’ investment capabilities in technological upgrades, capacity optimization, and high-end innovative services.

During the BIOCHINA2026 (11th) YiMao Biotech Industry Conference held recently, Yao Zhiping, CTO of Chongqing Haoyuan (688131.SH), a subsidiary of Haoyuan Pharmaceutical, stated in an interview with reporters from “The Science and Technology Innovation Board Daily” that the current CRO&CDMO industry is gradually transitioning from a “scale expansion stage” to a “capability upgrade stage,” showcasing new development characteristics:

“The technological drive is becoming more significant; competition among enterprises has shifted from a simple capacity comparison to competition based on technology platforms, R&D strength, and comprehensive service capabilities, which is promoting service models to become more integrated. Clients are increasingly inclined to achieve full-process coverage from early R&D to industrialized production through a single partner, thereby shortening R&D cycles and reducing project management complexity,” Yao Zhiping said.

Yao Zhiping also pointed out that complex molecules have become the new growth line for the industry. The types of innovative drug molecules are continually diversifying, with ADCs, PROTACs, small nucleic acid drugs, and radiopharmaceuticals quickly emerging, which places higher demands on CDMO companies’ technical depth and interdisciplinary integration capabilities.

It is noteworthy that the enthusiasm of innovative drug companies for complex molecules brings both opportunities and challenges to the CRO&CDMO industry. Unlike traditional small molecule drugs, complex molecules have higher barriers in structural design, CMC development, process optimization, and large-scale production, often requiring collaboration across disciplines such as organic synthesis, analytical chemistry, formulation technology, and quality research.

Using ADC as an example, Yao Zhiping explained to reporters from “The Science and Technology Innovation Board Daily” that ADCs involve multiple technical fields such as antibody engineering, linker chemistry, high-toxicity payload development, and conjugation processes, which makes cross-disciplinary technical integration challenging and requires companies to possess both biopolymer and high-end small molecule chemistry capabilities, placing strict demands on the completeness of the technological platform.

“ADC products require very mature process development systems for conjugation reaction control, DAR distribution, purification separation, and quality consistency to be smoothly scaled up from laboratory research to GMP production. Many ADC payloads are high-toxicity molecules, which set high barriers for production facilities, safety management, and environmental control. They all have very stringent requirements, which is also a critical technical barrier for ADC industrialization,” Yao Zhiping said.

It is understood that Haoyuan Pharmaceutical has accumulated multiple practical experiences in the complex molecule CDMO field. As early as 2013, it participated in the development of Rongchang Biotech’s (688331.SH) ADC project RC48, providing key technological support and production for the drug-linker and assisting it in successfully achieving industrialization.

The R&D of innovative drugs is like a precisely meshed gear, interlocking and operating in synergy. In the increasingly competitive landscape of innovative drug R&D, pharmaceutical companies have become more stringent in their requirements for R&D cycles, project costs, and compliance pass rates.

On one hand, the pace of R&D is accelerating, and companies urgently need to shorten R&D cycles and speed up project advancement to seize market opportunities; on the other hand, cost control and quality compliance pressures are continuously increasing, raising higher standards for approval rates, stability, and safety. This also compels CRO&CDMO companies to find a balance between efficiency, quality, and cost.

In this regard, Yao Zhiping pointed out that companies can build platform-based and modular technical systems to avoid starting from scratch in developing processes for complex molecule projects, thereby significantly improving R&D efficiency; at the same time, they should continuously strengthen process development and analytical capabilities through high-throughput screening and data-driven process optimization to identify potential risks early in R&D, thereby improving the overall success rate of projects.

“The currently hot AI-driven drug development is also a great empowerment for the CRO&CDMO industry,” Yao Zhiping believes, “In the drug discovery phase, AI can enhance candidate molecule screening efficiency through structural prediction and virtual screening. In the process development phase, it can assist in synthetic route design, reaction condition optimization, and impurity prediction, effectively reducing the number of experimental iterations and further enhancing R&D efficiency.”