April 21, 2025 • 46 mins
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Business of Biotech MVP Allan Shaw is back to talk about the rise of China's biotech sector, and its evolution from fast follower to global innovation powerhouse. Increased deal activity with Chinese biopharmaceutical companies is injecting new risk into traditional development models in the West, despite an uncertain policy environment in the U.S. vis-à-vis China. Will faster trial starts, cheaper asset upfronts, and a growing talent base slingshot Shanghai's biotech hub into an innovation destination on par with Boston and San Francisco?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Ben Comer (00:04):
Welcome back to the Business of Biotech.
I'm your host, Ben Comer, ChiefEditor at Life Science Leader,
and today I'm grateful to have aBusiness of Biotech MVP on the
show, Allan Shaw.
Allan has been a five-timepublic company COO, he's served
on a number of board ofdirectors and I'm happy to have
(00:26):
him here to talk about a verytimely subject Chinese biotech,
which has become something of ago-to source of innovation for
global big pharma and biotechalike.
Deal activity has been robustin recent months.
To use just one example, Merckhas, since last November,
(00:49):
announced three multi-billiondollar out licensing deals with
Chinese biotech companies.
And Merck is certainly not theonly company doing deals in
China and eyeing newopportunities.
Lilly and Novo Nordisk are twoother recent examples of
companies doing big deals inChina.
But fortunately we have Allanon as our guest to explain
(01:12):
what's behind China's growingbiopharmaceutical industry and
why Western companies havebecome so keen on Chinese
biotech and what it all means.
Thanks for being here, Allan.
Allan Shaw (01:26):
Thanks a lot, Ben.
Always glad to be here andquite excited to do an episode
with you now, but I'm reallylooking forward to chatting
about China with you and theepisodes that go forward from
here.
Ben Comer (01:41):
Likewise, Allan, thank you.
I really appreciate yourwillingness to move on from Matt
and be on an episode with meMore to come.
Absolutely, absolutely.
Anticipation, I think, ofChina's growing middle class
(02:03):
expanded health care benefitswith the idea of commercializing
more products for the Chinesemarket.
But that's not really whatwe're talking about today.
Of course, that's stillhappening, but what we're
talking about is the dramaticgrowth of China's own biotech
industry over the last decade.
Allan, what is driving thatsurge and how did we get here?
Allan Shaw (02:29):
Yeah, it's an interesting evolution that we've
been witnessing and you know Iwould say that China's rise in
biotech is the result of adeliberate and well-executed
strategy that combines policy,talent and capital investment.
But there's several factorsthat I think specifically have
really been drivers behind this.
(02:50):
You know, we've done a reallygood job of training a lot of
Chinese top scientists here inthe United States and we've done
such a good job that they'vebeen able to bring back this
world-class expertise andrepopulate that very effectively
over in China and havedeveloped very strong networks.
(03:11):
The Chinese government havealso prioritized biotech as a
strategic industry and they'vebeen providing a lot of funding
and incentives to help driveinnovation and really really
grow that.
You know, when I was over inSuzhou .
.
.
you know it was like walking inin Cambridge really, you know,
(03:34):
and that's part of the greaterShanghai hub that we'll be
hearing more and more about inthe future.
You know they they have reallya low, much lower the future.
You know they have really amuch lower cost workforce.
You know their PhDs areliterally a dime a dozen over
there and that really enablesmuch more cost-effective ways of
(03:58):
doing things compared to otherparts of the world and their
regulatory environment is also,perhaps some people would argue,
a little loose, but it doesenable faster pathways, making
it an interesting place fordevelopment, but certainly been
a very fertile area for R&Dright now, and so all of these
(04:23):
factors have really created adynamic biotech ecosystem that
is really starting to reallystep onto the global stage, and
you know I look forward totalking about you know the
implications.
Ben Comer (04:36):
Yeah, yeah, that's, that's absolutely right.
I mean I mentioned in the introWestern pharma companies have
been increasingly striking dealswith with Chinese biotech firms
.
I gave a couple of examples inMerck and Lilly and Novo, which
were just the couple thatoccurred to me.
Can you quantify howsignificant that shift has
(05:01):
become?
Allan Shaw (05:03):
Yes, it's there.
It's growing like a weed.
You only have to go back fiveyears ago and approximately, if
you look at $50 million as yourthreshold cut off, that
represented about 5% of theglobal deals were originated out
of China.
You fast forward to this pastyear originated out of China.
(05:24):
You fast forward to this pastyear, according to data out
there, and there's now thatrepresents almost 30% of the
deals that are licensed areoriginating out of China.
That's really a significantlyexponential growth and it
involves, like besides Merck, az, gsk and, as you touched on you
(05:46):
know, there was a recent MerckLP little a deal and we'll be
hearing a lot about LP(a) as aclinical standard of care in
cardiology.
But you know, there'sopportunities, to say the least,
and not only are the strategicsgoing over there, but there's a
(06:06):
lot of investors also goingover there and taking advantage
of the opportunity to reallyharvest the crops and the
availability of assets overthere.
Bain, RTW are pouring hundredsof million dollars into Chinese
biotechs and the rationale forthis is a confluence of factors.
(06:29):
You know the Chinese companiesare producing high quality drugs
, often biosimilars or bio, notbio betters, actually, not
biosimilars that enhanceexisting therapies at a fraction
of western development coursesI referenced.
Their inputs are just so muchless.
And also, what's contributed tothis is their capital market
(06:51):
system has really blown up overthere.
So, you know, you've got a lot,of, a lot of needy companies,
you know, I guess they're evenneedier than ours, even needier
than ours.
And so right now, you know,because so many of them are also
clustering around similartargets, it's really, you know,
(07:14):
giving a whole new meaning toChinese menus and they're really
, you know, so it's really abuyer's market in China right
now.
And what makes and what I thinkunderscores some of that and
this is according to a recentwhite paper that Locust Walk put
out that the upfront paymentsare significantly lower than
(07:37):
those in the that paid from theUnited States, almost like two
times lower.
You know, like you're payingalmost 5%, I think.
If you used US metrics, theupfront used to represent about
10% of the total deal value.
Now if you go into China,you're paying about 5%.
(07:58):
So that's a big difference andit makes it a lot smaller
upfront.
Yeah, and the shift reallyunderscores the growing role of
Chinese biotech and globalinnovation landscape and
highlights the increasingappetite of companies for
accessing these low, low, lowcost effective assets.
You know it all.
(08:18):
It also implies that there ismoney that's leaving the, the
traditional ecosystem as well.
Ben Comer (08:26):
Yeah, yeah, absolutely.
And you know you mentioned thegovernment heavily subsidizing
the biotech industry in China,and you know we've seen this in
other sectors as well, inelectric cars.
Everybody heard about DeepSeekand AI and it seems like what?
(08:46):
And just thinking about thosetwo industries, what they have
in common, seemingly, is thatthey're creating a technology
you know, similar or better towhat exists in other global
markets, and yet significantlycheaper, you know, aside from it
.
How are they able to do that?
(09:07):
I guess, aside from is it allgovernment subsidies that allows
, you know, the Chinese marketto develop drugs, to build
electric cars, to create AIalgorithms and apps more cheaply
?
Allan Shaw (09:23):
You know it's.
You know it's really a greatquestion and I think you know
you can go a lot of differentplaces with it.
But you know you can also lookat how we do things and I think
there's a lot of legacypractices in the way we develop
drugs.
You know we spend a lot of timeon animal models yeah, yet how
(09:45):
many times, you know.
And then we often say theseanimal models don't translate,
you know.
So you know you're putting a lotof layers in your process there
.
You know we can talk about theclinical drug process too.
That's got a lot of layers ofyesterday built into that and
there are probably moreeffective, more cost-effective
(10:06):
ways, particularly when youstart looking at developing the
drugs for chronic diseases whereyou need multiple phase twos.
You need the power of thesestudies and you know what you're
doing is you're selling a suitoff the rack and we know that.
You know people aren't off therack.
So you, you know there's a lotof disconnects from you know
(10:27):
what we're doing in the studies.
So you know when you, when yousuperimpose that back to china,
you know they're they're notnecessarily doing that.
You know they they're cuttingout a lot of the upfront uh,
animal work, you know, and theygo right into humans, and I
often quipped that human modelstranslate so much better.
Ben Comer (10:48):
Yeah, yeah, right Now , that's a really interesting
point.
They may not have the samekinds of, you know, incremental
base costs.
You know that that farm, thatbig pharma has developed over
years, some of which you know isprobably wasteful or needs to
be redesigned to be moreefficient.
(11:09):
They may not have the same basecosts in China.
Allan Shaw (11:13):
Absolutely.
And now, if you're going to be,you know, scouting and trying
to bring in assets, you know,are you going to be better with
a molecule or an antibody that'sbeen in man, or are you going
to be happier with a moleculethat's been in a mouse or a rat,
or a monkey for that matter?
Ben Comer (11:32):
I know what I'd be happier with.
Allan Shaw (11:35):
So you know there's, and so you can really de-risk
things and run the so-calledkiller experiment a lot sooner
and get better results.
That translate, and becausecosts are cheaper over there,
you have cost advantages besidesspeed and efficiency and the
science has become very, very,very, very good over there.
(11:57):
You know they're certainly.
You know they've come up withthe new PD-L1/ VEGF that you
know Akeso is developing withSummit, but you know there's a
lot of other great, great thingsthat they're doing over there.
And then, as you touched on,you know, depending on your
partnerships, you know you couldpotentially open up access to,
(12:18):
you know, a population ofbillions.
Ben Comer (12:22):
Yeah, yeah Right.
I saw a Simon Kucher reportrecently that had that showed in
2023, which was the most recentdata in the report, 39 percent
of all clinical trials, phaseone through four, were happening
in China in 2023, which was,you know, a dramatic increase,
(12:44):
just in you know the five yearsprior to 2023, which I think
reflects that you knowcontinuing interest in
commercializing drugs in China.
But it also reflects you knowwhat you're talking about the
growing amount of Chineseinitiated clinical research and
the real strength in R&D thatthey've developed.
Allan Shaw (13:07):
Now, indeed, and I think you need to also
distinguish between the studiesthat are being run for
commercialization purposes inChina versus those that are
being run straight efficacy aswell, because at least some of
the noise that I've been hearingfrom folks when I talk about,
(13:28):
you know, this new trend orphenomena, or you know it's hard
to call it a phenomena it'sreal, but it is the fact that I
think people find that it's agreat place to get early stage
stuff.
You know I don't think peopleare really relying on, for a lot
of reasons, great place to getearly stage stuff.
You know I don't think peopleare really relying on, for a lot
of reasons, on the stuff that'sbeing developed, yeah, in the,
(13:53):
in the clinic, from the baselinedrug development, and the
perception is that they have not, they haven't, I guess they
have not imported enough chopsin order to do actually do the
clinical development in a waythat people would feel
comfortable with.
Ben Comer (14:13):
Yeah, I think the FDA is more or less kind of express
that view, not to mention thefact that, uh, I think there's
some pretty strict Chinese lawsabout transferring health data
from Chinese nationals outsideof the exchange or back and
forth in clinical developmentprograms.
(14:35):
Obviously, in most countries,you have to conduct clinical
trials In the country where youwant to commercialize a drug not
always the case.
It sort of depends on somecircumstances.
But I've had some people morethan one person mentioned that
to me as something that I thinkthere are workarounds that have
been established butnevertheless it's not as easy as
(14:58):
conducting a phase two trial inChina or a phase three trial in
China and, you know, submittingthat to the FDA.
You know, to get a drugapproved in the US, as Lilly
found out, you know, with theirPD-1 back in 2022 found out, you
(15:21):
know, with their PD-1 back in2022.
Allan Shaw (15:23):
No, exactly, you know, I think the playbook is to
get the asset early and thendevelop it yourself before it
can be screwed up, or and do itwith your goalposts, your
measurements and answer thequestions under your control and
with assurance that theunderlying data is reflective of
the experiments.
Ben Comer (15:39):
Yeah, so strong preclinical assets not at a
premium, at a lower cost foracquisition.
Is that what's primarilydriving Western big pharma and
investors to seek out Chinesebiotech partnerships and deals?
Allan Shaw (16:02):
Yeah, and I think they're looking at later stage
programs too, depending, youknow, depending on the expertise
.
But yeah, I think you've nailedthat and you know it really, you
know, gives them theopportunity to, you know,
backfill their pipeline, becauseyou know it does beg a question
(16:29):
of what they're going to dowith their own internal R&D
resources, because they'vereally, I think they can
probably put those functions ona diet in some regards I don't
see the productivity of theyield coming from those areas.
But, yeah, I think that's goingto be part of the playbook.
I think, you know, ultimately,Shanghai, the Shanghai hub, will
be at it in the same breath asSan Diego, San Francisco and
(16:54):
Boston.
You know, like I said earlier,when I was in Suzhou, it had the
same kind of feel and energy aswalking around Cambridge.
You know you couldn't stepanywhere without crushing a
molecule.
So I do think it offers, youknow, I think what you're going
(17:27):
to get to is, you know,historically the Chinese
companies have been more of afast follower, I think, and I
think people have been feelingvery comfortable with them in
that role.
But I think it's stillultimately causing a problem as
far as supply and demand isconcerned.
Ben Comer (17:46):
Yeah, yeah, well, and I'm glad you mentioned the
patent cliff, because I thinkthat has to be at least part of
the reason why some of thesedeals are getting done right.
We have a kind of not sincewhat 2007 or 2010, you know a
pretty substantial patent clifffor a lot of big pharma
(18:08):
companies coming in the nextcouple of years.
Allan Shaw (18:11):
right, oh, no, indeed, and that's been the
speculation that these guys havea pile of cash and they'll be
doing deals, and it hasn'tnecessarily played out that way
right now, and people arescratching their heads and
that's probably for a separatediscussion.
But the IPO market isn'tworking.
The M&A market isn't working,you know, know, it's causing a
(18:36):
little bit of consternation inthe marketplace and I think this
, this dynamic too, it allowscompanies, rather than buying
companies, right, rather thanbuying a cow, you can go buy,
you can go go to china and buythe steak.
So, yeah, it does give, it doesgive people options.
But you, you have to askyourself is this kind of
(18:59):
potentially?
Not only is it redirectingresources out of the United
States, but are we potentiallyalso cannibalizing a little bit
of the M&A dynamic?
That's kind of been animportant pillar in how the
capital markets forbiopharmaceuticals have worked?
Ben Comer (19:17):
Yeah Well, Allan, I'm going to have you back on and
we'll dig into this issue of thebroken IPO market and what
companies can do.
We'll save that for a futureepisode.
Going back to China, are therespecific drug types or
therapeutic areas that companiesare really looking to China for
(19:39):
?
And you know we've alreadyalluded to or discussed, you
know, the PD-1s and howeffective Chinese biotech has
gotten at developing those.
But what you know, what, whatelse, what other drug types are,
and maybe it's not a specificone or two, maybe it's, it's all
(20:00):
across the map, I'm not sure.
Allan Shaw (20:03):
No, it's, it's.
It's interesting to see how,where they're really carving out
their differentiation and beingcompetitive, being competitive,
and you know, I think peopleask are they really being
(20:24):
bio-betters or are theyinnovating?
And I think the generalperspective has been that
they've been kind of me-tos orme-betters is what I've heard a
lot of people talk about butthey've been doing that so well
and so prolifically.
Now that you know you're seeingcompetition coming out of the
woodwork and people are beingblindsided, competitive
(20:48):
landscape and having convictionthat you've got your arms around
it, because there is so much ofthat going on over there.
But I do think the innovationis bubbling under the surface.
(21:09):
I recently was advised that,based on the number of patents
that have been issued or filed,China is actually kicking our
butts Really.
Yeah, so the innovation isbubbling under the surface.
So while today they're known asinnovators and I think we've
(21:30):
still got an innovative heads upon them they are catching up
very wise, very quickly.
And to your question, you knowthey've they've proven
themselves to be very, very goodat making antibodies.
Um, they've been being able tomake the ADCs, which have been
very uh, that that have beenselling like hotcakes yeah, not
(21:53):
an easy product to make eitherno, so they've, they've really
been able to uh do a good job onthose.
Uh, there, I understand, youknow they're doing a good job on
by specific.
So they've got the antibodiesdown and uh, and I think they've
gotten and they've gotteneverybody's attention on that.
But they're also, you know, thechemists are very good too.
(22:16):
So you know they got.
They can certainly go toe totoe with anybody on small
molecules and I think that'sreally where the general focus
is.
They haven't been as prolific inthe cell that I've seen in the
cell or gene therapy space and Ithink that's also very costly
modality in the cell or genetherapy space and I think that's
(22:38):
also a very costly modality andthat's not the way their
medical system operates.
But I think it's those twoparticular modalities that
they've done really well andtypically what they do is they
tweak the chemistry, theyenhance efficacy a little bit,
improve safety profiles, ratherthan doing traditionally, doing
the innovative first move ofdrugs.
(23:00):
But as I said, you know theyare moving forward and I think
we got to take them seriously.
Yeah, because I think they cancreate, and they are creating,
dislocation in the system thatthat we've previously understood
(23:21):
.
Ben Comer (23:23):
Right, and you know we we've been talking about this
question of innovation, whichyou're saying is bubbling up,
versus kind of the refining ofexisting drugs, incrementally
improving existing drugs.
Do you anticipate the emergenceof a Chinese big pharma that is
(23:48):
doing more global trials,bringing more products into the
US that were originated in Chinaand maybe initially studied
with a phase three, or maybe twoand three, conducted as part of
a global trial system in the USand then approved in the US?
I mean, are we still a waysaway from that or is that on the
(24:11):
near horizon?
Allan Shaw (24:14):
And I think the US represents a a big market.
So I think naturally it would,it would make sense for
companies to do that certainlysome have yeah yeah, I think it
has.
It has been done, and I thinkthere are smaller companies that
are that are migrating over oneof the more successful ipos
this year uh, a percentage isbasically a company that's come
(24:38):
from over there and they'reexecuting very well.
So I think, you're going to seethat.
There's no question about it,particularly, and I think part
of what will influence that toois how their capital market
system works.
You know, there was a period oftime where, if you had a choice
I was involved with one ofthose companies you could go.
(25:01):
I remember when I got involvedI said are we looking east or
are we looking west?
Right now, I think you can onlylook west, but the western
model is like, we've said, hasits own issues, but it's still
looking like, we've said, hasits own issues, but it's still
looking better than the others.
And I think the one thing thatwe have here in the United
(25:21):
States and this is one we haveto be careful about is we have
the ecosystem.
We've created a really, reallyrobust ecosystem and it's the
envy of the world.
You know, that's why you got alot of European companies, a lot
of companies out of Israel.
You have companies from Asiawho coming over here, not only
for our capital markets, butit's for our infrastructure.
(25:44):
And china is certainly, youknow, may, you know, may
ultimately come to a point wherepeople find that to be a
fertile place to go to, and Ithink it has its purpose.
But right now the capitalmarkets, it doesn't have the
complete ecosystem.
So I still think we have a legup, but I think we also a high
(26:08):
risk of that.
I mean, you know, I thinkwhat's going on today, you know,
unlike when the Russians putrockets in space and that kind
(26:29):
of, was a wake-up call to the USto kind of harness our
technology and we had theso-called space race that JFK
initiated, At this point in time, when we're basically getting a
shot across our bow that Chinais a real emerging biotech
competitor for leadership, ourresponse is to blow up the NIH.
(26:53):
Right, it's a bit ironic andyou know we and you know I think
there's an opportunity forcourse correction, but you know
we shouldn't just take it forgranted.
Ben Comer (27:06):
Yeah, that's a.
That's a great point.
And I did want to ask you youknow how you think some of those
US policies NIH funding, cuts,tariffs, you know alter the
competitive landscape.
I was speaking to a gentlemanwho has a really interesting
book coming out in late Aprilcalled so Small it's about.
(27:30):
It's a history of germ theory,and he is the head of science
writing at MIT.
He's a professor there but alsoan author, and what he was
telling me is that when you stopfunding something like the NIH,
freeze research grants, evenfor six months, much less like a
four-year period, potentially,you don't just pick up where you
(27:55):
left off.
You actually really lose some.
You know not just people andprograms, but also just
knowledge.
You know he referenced.
You know in the lab that youknow the single guy who knows to
knock twice on the side of the,you know the machine to make it
work right, who, once he's gone.
(28:16):
You know no one knows how to dothat and you just the knowledge
is lost and he was quiteconcerned about that.
But anyway, Allan, you knowwhat do you think some of these
US policies might do to?
You know, affect thecompetitive landscape, affect
the competitive landscape.
Allan Shaw (28:35):
Yeah, you know, I think long-term.
You know you can't measure thenear-term implications of doing
something at the NIH because youknow the lead time of
development and their impact isusually felt.
Ben Comer (28:49):
You know a generation later, A year later yeah.
Allan Shaw (28:53):
So you know it's one of those things that you can do
for short term gratification.
You know, I, you know, and Ithink as a general premise, you
know, all this funding has kindof become like an entitlement
and people have viewed thesethings as entitlements and
that's not a good thing either,right.
So you know, I think you know,doing something that's a little
(29:16):
bit more freestanding andchallenging the status quo of
how we allocate resources Ithink makes infinite sense if
it's done in rational,thoughtful manner.
You know, I mean I kind of hateto think how much money the
government has spent onsupporting the amyloid plaque
(29:36):
hypothesis.
I mean, I'm sure there's asmall fortune, was there.
So you know, we got to bethoughtful about how we do
things.
But I think those are longerterm implications.
You know, I think stuff that canhave bigger implications are
things that kind of view, thingsthat put barriers around global
(30:02):
medicine.
You know it's global medicine.
You know this is about humanityand you know trying to kind of
artificially tether that togeographical boundaries seems a
bit unnatural in the spirit ofhelping mankind.
(30:22):
So you know, to me theBioSecure Act didn't make a lot
of sense.
It seemed to be highlydisruptive.
It's adding costs and delays,arguably to bring in drugs to
market as opposed to helpingpeople do that.
You know, if there's disrespecton respecting IP, you know
(30:45):
that's a different issue and youneed to address it differently.
But so from my perspective, Ithink a lot of these policies
are not particularly helpful.
But I guess it's through theeyes of the beholder and what
you're trying to solve, for youknow you're trying.
If this is all about patienceand I've always thought that,
(31:07):
you know, at the end of the day,while a lot of people make
money on this and it is aprofitable way of doing so, I
thought this was still all aboutpatience and about you know, if
you do the right thing forpatients, everything else takes
care of itself and somehow we'regetting that.
That's getting lost intranslation.
(31:28):
When it comes down to that, Ithink as an industry we can do a
much better job in terms ofresource allocation.
I mean, you know, how do youget 100 CAR-T CD19 companies?
You know, look at what's goingon in obesity right now.
It's actually somewhat obese.
(31:49):
Yeah, obese pipelines, yeah,yeah, so it's you know we have
to be smarter about how weallocate.
It's such a lemming approach.
You know why do we need so manycheckpoint pdl ones?
Uh, out there, you know we justall we're doing is actually
commoditizing good science, andso you know we are.
We sow the seeds to a lot ofthese problems, and you know,
(32:12):
and, and it's you you have toask yourself who wrote the check
for that hundredth CD 19company?
Who thought that was a goodidea?
Ben Comer (32:21):
Yeah, yeah, Right.
Well, tariffs, Peter Navarro,saber, rattling aside what.
What are the potentialdownsides if there are any, of
China's growing role in biotech,particularly for US and
(32:42):
European companies?
Allan Shaw (32:46):
You know, the biggest concern is China's
ability to produce high qualitydrugs at lower costs, which can
really disrupt the financingmodels here in the US and Europe
, as we've touched on.
You know, their ability to dothat kind of as we touched on, I
think can really put the M&Amarket at risk.
(33:07):
And you know it's going to putmore pressure on companies to
actually launch their ownproducts, commercialize their
own products.
And you know, I think it doeschallenge one of the
underpinnings of how the capitalmarkets currently work.
You know M&A has been a bigdriver of returns and I've
(33:31):
actually written an article inthe past saying that at times
when the market's been hot it'salmost akin to a casino
mentality as far as who peoplethink is going to be the next
takeout I mean.
So you know people havecompanies circled up.
So if there are things that areplaying out as a consequence of
China's emergence, that's kindof giving people an alternative
(33:56):
to that channel.
That's going to have itsimplications at the end of the
day yeah, I don't see anygetting around that and it's
also going to hit the valuationsof companies and their cost of
capital.
Because if they're basicallyresetting the prices, not only
(34:20):
for drug prices that arecommercial, but what are the
trade values of a phase oneasset or a phase two asset, your
valuations are going to beimpacted too.
So you know there's a rippleeffect.
You know I wouldn't call themthe drunks that came to the
party, but it has that kind ofpotential implication on the way
(34:45):
the model has traditionallyworked.
Model has traditionally worked.
You know, certainly I think theMe Too's is going to kind of
make things branded productsbecome almost generic before
their time.
You know, I think it'll give anew meaning to branded generic
(35:06):
in certain respects.
In certain respects and from anational security perspective,
you know concerns persist aroundthe IP protection and
over-reliance on Chinese supplylines.
So you know, going back to whatI said, you know I don't want
to poo-poo them, but I think inthe context of what you're
(35:30):
trying to solve for or address,it's a little bit of the tail
wagging the dog and I wouldsuggest that there's different
ways to try to mitigate thoserisks.
But you know the whole thing.
So many people work with WuXiand you know WuXi may have, you
know, be having data that may beultimately very competitive
(35:51):
somewhere down the road, and youknow I guess that's a business
decision and you know, I thinkyou can make a decision on that.
But I think there's otherChinese suppliers.
You don't have to work withWuXi as well.
So you know, if these trendscontinue, they could certainly
they are reshaping thecompetitive landscape and do
(36:13):
pose long-term challenges.
I don't think people really wantto think about it, but it's
here, it's now and it's notgoing away and, as I understand
it, the US government's actuallygoing to be putting out a paper
in the first week in Aprilthat's going to be talking a
little bit more about this.
(36:34):
So it'll be interesting.
Guys, when I was at the CowenConference not that long ago,
they had a couple ofrepresentatives and there was
actually a subcommitteeappointed by the Senate looking
at biotech innovation Senatelooking at biotech innovation.
(36:55):
So they were trying to tie thisin.
But it seems to me the biggerissue is that they're working on
executive order, expansion ofpowers and overspending, and I
think that this is where this isall going to kind of rubber
hits the road.
Ben Comer (37:08):
Well, okay, so you talked about additional risk
associated with Chinese biotechbased on, you know, some of the
existing making with their PDLPD1 back in 2022 that was
ultimately declined by the FDAwas that it would be.
(37:36):
You know, they'd offer it atsomething like a 40% discount to
the other immune cancerimmunotherapies that were on the
market at the time.
And I remember Richard Pazdursaying well, you know, FDA
doesn't consider cost.
But I think people heard thatand thought, well, you know, if
we can get this, you know biobetter essentially, or you know
(38:00):
some sort of equal cancerproduct at a much lower cost,
wouldn't that be good forpatients?
What do you think about thatcost?
Wouldn't that be good forpatients?
What do you think about that?
Do you think Chinese biotech'spresence and the growth of
Chinese biotech is ultimatelygood or ultimately bad for
patients?
Allan Shaw (38:20):
You know, I think in the short term, China's growing
biotech presence, I think, isgreat for patients.
You know, I think it'll bringdown costs and make drugs much
cheaper and lead to betteraccess over in the short term.
However, the long term pictureis a lot more complex.
(38:43):
If traditional biotech fundingmodels break down, incentives
for high-risk, high-rewardinnovation can diminish.
This may result in fewerfirst-in-class breakthroughs and
more incremental improvements,potentially slowing the pace of
medical advancement.
You know, I think ourrisk-reward model works pretty
(39:07):
well and I think it's become theenvy of the world and China's
doing a really good jobemulating it.
You know, are there things thatwe can do better and more
efficiently?
Absolutely, but you know, Ithink you got to be careful what
you wish for.
You know, if you start, if youstart, it's like the sweater,
(39:32):
the loose thread on a sweater.
Once you start pulling on that,you know who knows where that
thing is going to go.
So you know we do need to thinkabout how we squeeze, do things
more efficiently.
You know, and I think you know,I think clinical development is
a ripe area to take a freshlook at.
You know, and I think you know,I think clinical development is
a ripe area to take a freshlook at.
You know we should also look at, you know, questioning.
(39:55):
You know our preclinical workand you know whether or not
there's opportunities to squeezetime out of that.
You know they can really getdrugs to market in half the time
.
We do, you know, and there'stradeoffs.
Obviously there's risks, we do,you know, and there's
trade-offs.
Obviously there's risks, andyou know, as a fundamental view
is, you know, are you trying toidentify things that are just
(40:16):
safe and then you can try tofigure out things whether they
work later on?
So there's different, there'sstill different fundamental
approaches.
But I think, at the end of theday, this is a real opportunity
for us to kind of look atourselves, take stock and
understand what we're doing goodand what we're not doing good,
(40:36):
and even on a bigger picture,while everybody's quite anxious
over the new head of HSS andwhat might actually happen and
for good reason but I would alsosay that when you spend $4
trillion a year on healthcareand you have the highest cost
per capita in the free world,yet you have the lowest life
(40:59):
expectancy in the free worldthat we're in fact paying more
for less, there's probablyopportunities in a lot of areas
for us to be more efficient onhow we do things.
Ben Comer (41:09):
Yeah, something's amiss, right Exactly.
Allan Shaw (41:13):
Yeah, yeah.
Ben Comer (41:15):
So do you?
Do you think that you know wetalked about a shot across the
bow and we're kind ofretrenching here at the moment?
Do you think that we'll see ashift in global biotech
leadership away from the US,given China's rise?
(41:35):
Are we getting to that point ornot yet?
Allan Shaw (41:40):
You know, I've thought about that a lot and I
think at this point, I thinkit's pretty safe to say that
we're still there.
You know, I think we're stillinnovating, I think that
breakthroughs and what we'reseeing, you know, speak for
themselves.
But I don't think you know yougot to also look at what
(42:01):
happened to the dinosaur.
At the end of the day, and youcan't rest on your laurels the
fact that they're out patentingus right now.
You know it could be a bunch ofcrap that they're throwing over
the wall.
I have no idea what they'refiling, but the fact that
they're close on an absolutenumber basis, or beating us on
(42:22):
an absolute number basis, doessuggest that that should serve
as a wake-up call if we want tocontinue to maintain our
leadership.
You know, it's like the hareand the mouse, whatever it was.
The tortoise, yeah, If we taketoo many naps along the way,
(42:47):
those guys will get to us.
So no, I think this should be.
This should serve as a wake upcall, and that's why I think
it's so ironic that you know,really right now, the actions
that we've taken has beenanything but the has been the
antithesis of a wake up call,which I think is frustrating and
scaring a lot of folks.
Ben Comer (43:09):
So, Allan, where do we go from here?
You know, what should we bethinking about in, I guess, the
short to midterm?
What should we, you know, crossour fingers about?
What should we keep an eye outfor?
You know where are we headed.
Does the industry have thecollective will to make the
(43:30):
adjustments and see this as anopportunity to compete?
You know, to up our game.
Allan Shaw (43:39):
You know, policymakers, investors and
biopharmaceutical leaders musttake proactive steps at this
time to ensure innovationremains incentivized, while
strategically leveraging China'sefficiencies.
China's biotech emergence isn'ta future trend, it's here.
(44:00):
Whether it's an opportunity ora challenge depends on how the
industry, people adapt.
The race for innovation is onand the next decade will
determine who leads the nextwave of medical breakthroughs.
So you know, I would say rightnow it's a coin toss, but I
think there's still greatopportunity for us to grab the
(44:21):
bull by the horns.
And I think, if you look atAmerica, every time it is
confronted with a challenge, youknow we, we we know how to
innovate, we know how to pivotand we know how to pivot and we
know how to rationalize things.
And you know, certainly, I think, the current leadership is not
accepting status quo.
So, on one hand, you know, ifyou're looking at efficiencies
(44:45):
that may be gained from theclinical side, fda, this might
represent a unique opportunityto take a freestanding approach
to see if some of thosepractices can be shed and be
more efficient.
On the other hand, you knowsimilar people are making
decisions to blow up NIH, whichI think may get you a tax cut
(45:11):
this year, but I'm not sure whatit'll do, you know, 10 years
from now.
So you know again.
I think you got to be carefulwhat you wish for.
Ben Comer (45:19):
Yeah, all right.
Well, I think that is a nice,positive and yet nuanced note
for us to end on, Allan.
We've been speaking with AllanShaw, a biotech soothsayer and
longtime friend of this podcast.
I'm Ben Comer and you've justlistened to the Business of
(45:39):
Biotech.
Find us and subscribe anywhereyou listen to podcasts, and be
sure to check out new weeklyvideocasts of these
conversations every Monday underthe Business of Biotech tab at
Life Science Leader.
We'll see you next week andthanks for listening.
Welcome back to the Business of Biotech.
I'm your host, Ben Comer, ChiefEditor at Life Science Leader,
and today I'm grateful to have aBusiness of Biotech MVP on the
show, Allan Shaw.
Allan has been a five-timepublic company COO, he's served
on a number of board ofdirectors and I'm happy to have
(00:26):
him here to talk about a verytimely subject Chinese biotech,
which has become something of ago-to source of innovation for
global big pharma and biotechalike.
Deal activity has been robustin recent months.
To use just one example, Merckhas, since last November,
(00:49):
announced three multi-billiondollar out licensing deals with
Chinese biotech companies.
And Merck is certainly not theonly company doing deals in
China and eyeing newopportunities.
Lilly and Novo Nordisk are twoother recent examples of
companies doing big deals inChina.
But fortunately we have Allanon as our guest to explain
(01:12):
what's behind China's growingbiopharmaceutical industry and
why Western companies havebecome so keen on Chinese
biotech and what it all means.
Thanks for being here, Allan.
Allan Shaw (01:26):
Thanks a lot, Ben.
Always glad to be here andquite excited to do an episode
with you now, but I'm reallylooking forward to chatting
about China with you and theepisodes that go forward from
here.
Ben Comer (01:41):
Likewise, Allan, thank you.
I really appreciate yourwillingness to move on from Matt
and be on an episode with meMore to come.
Absolutely, absolutely.
Anticipation, I think, ofChina's growing middle class
(02:03):
expanded health care benefitswith the idea of commercializing
more products for the Chinesemarket.
But that's not really whatwe're talking about today.
Of course, that's stillhappening, but what we're
talking about is the dramaticgrowth of China's own biotech
industry over the last decade.
Allan, what is driving thatsurge and how did we get here?
Allan Shaw (02:29):
Yeah, it's an interesting evolution that we've
been witnessing and you know Iwould say that China's rise in
biotech is the result of adeliberate and well-executed
strategy that combines policy,talent and capital investment.
But there's several factorsthat I think specifically have
really been drivers behind this.
(02:50):
You know, we've done a reallygood job of training a lot of
Chinese top scientists here inthe United States and we've done
such a good job that they'vebeen able to bring back this
world-class expertise andrepopulate that very effectively
over in China and havedeveloped very strong networks.
(03:11):
The Chinese government havealso prioritized biotech as a
strategic industry and they'vebeen providing a lot of funding
and incentives to help driveinnovation and really really
grow that.
You know, when I was over inSuzhou .
.
.
you know it was like walking inin Cambridge really, you know,
(03:34):
and that's part of the greaterShanghai hub that we'll be
hearing more and more about inthe future.
You know they they have reallya low, much lower the future.
You know they have really amuch lower cost workforce.
You know their PhDs areliterally a dime a dozen over
there and that really enablesmuch more cost-effective ways of
(03:58):
doing things compared to otherparts of the world and their
regulatory environment is also,perhaps some people would argue,
a little loose, but it doesenable faster pathways, making
it an interesting place fordevelopment, but certainly been
a very fertile area for R&Dright now, and so all of these
(04:23):
factors have really created adynamic biotech ecosystem that
is really starting to reallystep onto the global stage, and
you know I look forward totalking about you know the
implications.
Ben Comer (04:36):
Yeah, yeah, that's, that's absolutely right.
I mean I mentioned in the introWestern pharma companies have
been increasingly striking dealswith with Chinese biotech firms
.
I gave a couple of examples inMerck and Lilly and Novo, which
were just the couple thatoccurred to me.
Can you quantify howsignificant that shift has
(05:01):
become?
Allan Shaw (05:03):
Yes, it's there.
It's growing like a weed.
You only have to go back fiveyears ago and approximately, if
you look at $50 million as yourthreshold cut off, that
represented about 5% of theglobal deals were originated out
of China.
You fast forward to this pastyear originated out of China.
(05:24):
You fast forward to this pastyear, according to data out
there, and there's now thatrepresents almost 30% of the
deals that are licensed areoriginating out of China.
That's really a significantlyexponential growth and it
involves, like besides Merck, az, gsk and, as you touched on you
(05:46):
know, there was a recent MerckLP little a deal and we'll be
hearing a lot about LP(a) as aclinical standard of care in
cardiology.
But you know, there'sopportunities, to say the least,
and not only are the strategicsgoing over there, but there's a
(06:06):
lot of investors also goingover there and taking advantage
of the opportunity to reallyharvest the crops and the
availability of assets overthere.
Bain, RTW are pouring hundredsof million dollars into Chinese
biotechs and the rationale forthis is a confluence of factors.
(06:29):
You know the Chinese companiesare producing high quality drugs
, often biosimilars or bio, notbio betters, actually, not
biosimilars that enhanceexisting therapies at a fraction
of western development coursesI referenced.
Their inputs are just so muchless.
And also, what's contributed tothis is their capital market
(06:51):
system has really blown up overthere.
So, you know, you've got a lot,of, a lot of needy companies,
you know, I guess they're evenneedier than ours, even needier
than ours.
And so right now, you know,because so many of them are also
clustering around similartargets, it's really, you know,
(07:14):
giving a whole new meaning toChinese menus and they're really
, you know, so it's really abuyer's market in China right
now.
And what makes and what I thinkunderscores some of that and
this is according to a recentwhite paper that Locust Walk put
out that the upfront paymentsare significantly lower than
(07:37):
those in the that paid from theUnited States, almost like two
times lower.
You know, like you're payingalmost 5%, I think.
If you used US metrics, theupfront used to represent about
10% of the total deal value.
Now if you go into China,you're paying about 5%.
(07:58):
So that's a big difference andit makes it a lot smaller
upfront.
Yeah, and the shift reallyunderscores the growing role of
Chinese biotech and globalinnovation landscape and
highlights the increasingappetite of companies for
accessing these low, low, lowcost effective assets.
You know it all.
(08:18):
It also implies that there ismoney that's leaving the, the
traditional ecosystem as well.
Ben Comer (08:26):
Yeah, yeah, absolutely.
And you know you mentioned thegovernment heavily subsidizing
the biotech industry in China,and you know we've seen this in
other sectors as well, inelectric cars.
Everybody heard about DeepSeekand AI and it seems like what?
(08:46):
And just thinking about thosetwo industries, what they have
in common, seemingly, is thatthey're creating a technology
you know, similar or better towhat exists in other global
markets, and yet significantlycheaper, you know, aside from it
.
How are they able to do that?
(09:07):
I guess, aside from is it allgovernment subsidies that allows
, you know, the Chinese marketto develop drugs, to build
electric cars, to create AIalgorithms and apps more cheaply
?
Allan Shaw (09:23):
You know it's.
You know it's really a greatquestion and I think you know
you can go a lot of differentplaces with it.
But you know you can also lookat how we do things and I think
there's a lot of legacypractices in the way we develop
drugs.
You know we spend a lot of timeon animal models yeah, yet how
(09:45):
many times, you know.
And then we often say theseanimal models don't translate,
you know.
So you know you're putting a lotof layers in your process there
.
You know we can talk about theclinical drug process too.
That's got a lot of layers ofyesterday built into that and
there are probably moreeffective, more cost-effective
(10:06):
ways, particularly when youstart looking at developing the
drugs for chronic diseases whereyou need multiple phase twos.
You need the power of thesestudies and you know what you're
doing is you're selling a suitoff the rack and we know that.
You know people aren't off therack.
So you, you know there's a lotof disconnects from you know
(10:27):
what we're doing in the studies.
So you know when you, when yousuperimpose that back to china,
you know they're they're notnecessarily doing that.
You know they they're cuttingout a lot of the upfront uh,
animal work, you know, and theygo right into humans, and I
often quipped that human modelstranslate so much better.
Ben Comer (10:48):
Yeah, yeah, right Now , that's a really interesting
point.
They may not have the samekinds of, you know, incremental
base costs.
You know that that farm, thatbig pharma has developed over
years, some of which you know isprobably wasteful or needs to
be redesigned to be moreefficient.
(11:09):
They may not have the same basecosts in China.
Allan Shaw (11:13):
Absolutely.
And now, if you're going to be,you know, scouting and trying
to bring in assets, you know,are you going to be better with
a molecule or an antibody that'sbeen in man, or are you going
to be happier with a moleculethat's been in a mouse or a rat,
or a monkey for that matter?
Ben Comer (11:32):
I know what I'd be happier with.
Allan Shaw (11:35):
So you know there's, and so you can really de-risk
things and run the so-calledkiller experiment a lot sooner
and get better results.
That translate, and becausecosts are cheaper over there,
you have cost advantages besidesspeed and efficiency and the
science has become very, very,very, very good over there.
(11:57):
You know they're certainly.
You know they've come up withthe new PD-L1/ VEGF that you
know Akeso is developing withSummit, but you know there's a
lot of other great, great thingsthat they're doing over there.
And then, as you touched on,you know, depending on your
partnerships, you know you couldpotentially open up access to,
(12:18):
you know, a population ofbillions.
Ben Comer (12:22):
Yeah, yeah Right.
I saw a Simon Kucher reportrecently that had that showed in
2023, which was the most recentdata in the report, 39 percent
of all clinical trials, phaseone through four, were happening
in China in 2023, which was,you know, a dramatic increase,
(12:44):
just in you know the five yearsprior to 2023, which I think
reflects that you knowcontinuing interest in
commercializing drugs in China.
But it also reflects you knowwhat you're talking about the
growing amount of Chineseinitiated clinical research and
the real strength in R&D thatthey've developed.
Allan Shaw (13:07):
Now, indeed, and I think you need to also
distinguish between the studiesthat are being run for
commercialization purposes inChina versus those that are
being run straight efficacy aswell, because at least some of
the noise that I've been hearingfrom folks when I talk about,
(13:28):
you know, this new trend orphenomena, or you know it's hard
to call it a phenomena it'sreal, but it is the fact that I
think people find that it's agreat place to get early stage
stuff.
You know I don't think peopleare really relying on, for a lot
of reasons, great place to getearly stage stuff.
You know I don't think peopleare really relying on, for a lot
of reasons, on the stuff that'sbeing developed, yeah, in the,
(13:53):
in the clinic, from the baselinedrug development, and the
perception is that they have not, they haven't, I guess they
have not imported enough chopsin order to do actually do the
clinical development in a waythat people would feel
comfortable with.
Ben Comer (14:13):
Yeah, I think the FDA is more or less kind of express
that view, not to mention thefact that, uh, I think there's
some pretty strict Chinese lawsabout transferring health data
from Chinese nationals outsideof the exchange or back and
forth in clinical developmentprograms.
(14:35):
Obviously, in most countries,you have to conduct clinical
trials In the country where youwant to commercialize a drug not
always the case.
It sort of depends on somecircumstances.
But I've had some people morethan one person mentioned that
to me as something that I thinkthere are workarounds that have
been established butnevertheless it's not as easy as
(14:58):
conducting a phase two trial inChina or a phase three trial in
China and, you know, submittingthat to the FDA.
You know, to get a drugapproved in the US, as Lilly
found out, you know, with theirPD-1 back in 2022 found out, you
(15:21):
know, with their PD-1 back in2022.
Allan Shaw (15:23):
No, exactly, you know, I think the playbook is to
get the asset early and thendevelop it yourself before it
can be screwed up, or and do itwith your goalposts, your
measurements and answer thequestions under your control and
with assurance that theunderlying data is reflective of
the experiments.
Ben Comer (15:39):
Yeah, so strong preclinical assets not at a
premium, at a lower cost foracquisition.
Is that what's primarilydriving Western big pharma and
investors to seek out Chinesebiotech partnerships and deals?
Allan Shaw (16:02):
Yeah, and I think they're looking at later stage
programs too, depending, youknow, depending on the expertise
.
But yeah, I think you've nailedthat and you know it really, you
know, gives them theopportunity to, you know,
backfill their pipeline, becauseyou know it does beg a question
(16:29):
of what they're going to dowith their own internal R&D
resources, because they'vereally, I think they can
probably put those functions ona diet in some regards I don't
see the productivity of theyield coming from those areas.
But, yeah, I think that's goingto be part of the playbook.
I think, you know, ultimately,Shanghai, the Shanghai hub, will
be at it in the same breath asSan Diego, San Francisco and
(16:54):
Boston.
You know, like I said earlier,when I was in Suzhou, it had the
same kind of feel and energy aswalking around Cambridge.
You know you couldn't stepanywhere without crushing a
molecule.
So I do think it offers, youknow, I think what you're going
(17:27):
to get to is, you know,historically the Chinese
companies have been more of afast follower, I think, and I
think people have been feelingvery comfortable with them in
that role.
But I think it's stillultimately causing a problem as
far as supply and demand isconcerned.
Ben Comer (17:46):
Yeah, yeah, well, and I'm glad you mentioned the
patent cliff, because I thinkthat has to be at least part of
the reason why some of thesedeals are getting done right.
We have a kind of not sincewhat 2007 or 2010, you know a
pretty substantial patent clifffor a lot of big pharma
(18:08):
companies coming in the nextcouple of years.
Allan Shaw (18:11):
right, oh, no, indeed, and that's been the
speculation that these guys havea pile of cash and they'll be
doing deals, and it hasn'tnecessarily played out that way
right now, and people arescratching their heads and
that's probably for a separatediscussion.
But the IPO market isn'tworking.
The M&A market isn't working,you know, know, it's causing a
(18:36):
little bit of consternation inthe marketplace and I think this
, this dynamic too, it allowscompanies, rather than buying
companies, right, rather thanbuying a cow, you can go buy,
you can go go to china and buythe steak.
So, yeah, it does give, it doesgive people options.
But you, you have to askyourself is this kind of
(18:59):
potentially?
Not only is it redirectingresources out of the United
States, but are we potentiallyalso cannibalizing a little bit
of the M&A dynamic?
That's kind of been animportant pillar in how the
capital markets forbiopharmaceuticals have worked?
Ben Comer (19:17):
Yeah Well, Allan, I'm going to have you back on and
we'll dig into this issue of thebroken IPO market and what
companies can do.
We'll save that for a futureepisode.
Going back to China, are therespecific drug types or
therapeutic areas that companiesare really looking to China for
(19:39):
?
And you know we've alreadyalluded to or discussed, you
know, the PD-1s and howeffective Chinese biotech has
gotten at developing those.
But what you know, what, whatelse, what other drug types are,
and maybe it's not a specificone or two, maybe it's, it's all
(20:00):
across the map, I'm not sure.
Allan Shaw (20:03):
No, it's, it's.
It's interesting to see how,where they're really carving out
their differentiation and beingcompetitive, being competitive,
and you know, I think peopleask are they really being
(20:24):
bio-betters or are theyinnovating?
And I think the generalperspective has been that
they've been kind of me-tos orme-betters is what I've heard a
lot of people talk about butthey've been doing that so well
and so prolifically.
Now that you know you're seeingcompetition coming out of the
woodwork and people are beingblindsided, competitive
(20:48):
landscape and having convictionthat you've got your arms around
it, because there is so much ofthat going on over there.
But I do think the innovationis bubbling under the surface.
(21:09):
I recently was advised that,based on the number of patents
that have been issued or filed,China is actually kicking our
butts Really.
Yeah, so the innovation isbubbling under the surface.
So while today they're known asinnovators and I think we've
(21:30):
still got an innovative heads upon them they are catching up
very wise, very quickly.
And to your question, you knowthey've they've proven
themselves to be very, very goodat making antibodies.
Um, they've been being able tomake the ADCs, which have been
very uh, that that have beenselling like hotcakes yeah, not
(21:53):
an easy product to make eitherno, so they've, they've really
been able to uh do a good job onthose.
Uh, there, I understand, youknow they're doing a good job on
by specific.
So they've got the antibodiesdown and uh, and I think they've
gotten and they've gotteneverybody's attention on that.
But they're also, you know, thechemists are very good too.
(22:16):
So you know they got.
They can certainly go toe totoe with anybody on small
molecules and I think that'sreally where the general focus
is.
They haven't been as prolific inthe cell that I've seen in the
cell or gene therapy space and Ithink that's also very costly
modality in the cell or genetherapy space and I think that's
(22:38):
also a very costly modality andthat's not the way their
medical system operates.
But I think it's those twoparticular modalities that
they've done really well andtypically what they do is they
tweak the chemistry, theyenhance efficacy a little bit,
improve safety profiles, ratherthan doing traditionally, doing
the innovative first move ofdrugs.
(23:00):
But as I said, you know theyare moving forward and I think
we got to take them seriously.
Yeah, because I think they cancreate, and they are creating,
dislocation in the system thatthat we've previously understood
(23:21):
.
Ben Comer (23:23):
Right, and you know we we've been talking about this
question of innovation, whichyou're saying is bubbling up,
versus kind of the refining ofexisting drugs, incrementally
improving existing drugs.
Do you anticipate the emergenceof a Chinese big pharma that is
(23:48):
doing more global trials,bringing more products into the
US that were originated in Chinaand maybe initially studied
with a phase three, or maybe twoand three, conducted as part of
a global trial system in the USand then approved in the US?
I mean, are we still a waysaway from that or is that on the
(24:11):
near horizon?
Allan Shaw (24:14):
And I think the US represents a a big market.
So I think naturally it would,it would make sense for
companies to do that certainlysome have yeah yeah, I think it
has.
It has been done, and I thinkthere are smaller companies that
are that are migrating over oneof the more successful ipos
this year uh, a percentage isbasically a company that's come
(24:38):
from over there and they'reexecuting very well.
So I think, you're going to seethat.
There's no question about it,particularly, and I think part
of what will influence that toois how their capital market
system works.
You know, there was a period oftime where, if you had a choice
I was involved with one ofthose companies you could go.
(25:01):
I remember when I got involvedI said are we looking east or
are we looking west?
Right now, I think you can onlylook west, but the western
model is like, we've said, hasits own issues, but it's still
looking like, we've said, hasits own issues, but it's still
looking better than the others.
And I think the one thing thatwe have here in the United
(25:21):
States and this is one we haveto be careful about is we have
the ecosystem.
We've created a really, reallyrobust ecosystem and it's the
envy of the world.
You know, that's why you got alot of European companies, a lot
of companies out of Israel.
You have companies from Asiawho coming over here, not only
for our capital markets, butit's for our infrastructure.
(25:44):
And china is certainly, youknow, may, you know, may
ultimately come to a point wherepeople find that to be a
fertile place to go to, and Ithink it has its purpose.
But right now the capitalmarkets, it doesn't have the
complete ecosystem.
So I still think we have a legup, but I think we also a high
(26:08):
risk of that.
I mean, you know, I thinkwhat's going on today, you know,
unlike when the Russians putrockets in space and that kind
(26:29):
of, was a wake-up call to the USto kind of harness our
technology and we had theso-called space race that JFK
initiated, At this point in time, when we're basically getting a
shot across our bow that Chinais a real emerging biotech
competitor for leadership, ourresponse is to blow up the NIH.
(26:53):
Right, it's a bit ironic andyou know we and you know I think
there's an opportunity forcourse correction, but you know
we shouldn't just take it forgranted.
Ben Comer (27:06):
Yeah, that's a.
That's a great point.
And I did want to ask you youknow how you think some of those
US policies NIH funding, cuts,tariffs, you know alter the
competitive landscape.
I was speaking to a gentlemanwho has a really interesting
book coming out in late Aprilcalled so Small it's about.
(27:30):
It's a history of germ theory,and he is the head of science
writing at MIT.
He's a professor there but alsoan author, and what he was
telling me is that when you stopfunding something like the NIH,
freeze research grants, evenfor six months, much less like a
four-year period, potentially,you don't just pick up where you
(27:55):
left off.
You actually really lose some.
You know not just people andprograms, but also just
knowledge.
You know he referenced.
You know in the lab that youknow the single guy who knows to
knock twice on the side of the,you know the machine to make it
work right, who, once he's gone.
(28:16):
You know no one knows how to dothat and you just the knowledge
is lost and he was quiteconcerned about that.
But anyway, Allan, you knowwhat do you think some of these
US policies might do to?
You know, affect thecompetitive landscape, affect
the competitive landscape.
Allan Shaw (28:35):
Yeah, you know, I think long-term.
You know you can't measure thenear-term implications of doing
something at the NIH because youknow the lead time of
development and their impact isusually felt.
Ben Comer (28:49):
You know a generation later, A year later yeah.
Allan Shaw (28:53):
So you know it's one of those things that you can do
for short term gratification.
You know, I, you know, and Ithink as a general premise, you
know, all this funding has kindof become like an entitlement
and people have viewed thesethings as entitlements and
that's not a good thing either,right.
So you know, I think you know,doing something that's a little
(29:16):
bit more freestanding andchallenging the status quo of
how we allocate resources Ithink makes infinite sense if
it's done in rational,thoughtful manner.
You know, I mean I kind of hateto think how much money the
government has spent onsupporting the amyloid plaque
(29:36):
hypothesis.
I mean, I'm sure there's asmall fortune, was there.
So you know, we got to bethoughtful about how we do
things.
But I think those are longerterm implications.
You know, I think stuff that canhave bigger implications are
things that kind of view, thingsthat put barriers around global
(30:02):
medicine.
You know it's global medicine.
You know this is about humanityand you know trying to kind of
artificially tether that togeographical boundaries seems a
bit unnatural in the spirit ofhelping mankind.
(30:22):
So you know, to me theBioSecure Act didn't make a lot
of sense.
It seemed to be highlydisruptive.
It's adding costs and delays,arguably to bring in drugs to
market as opposed to helpingpeople do that.
You know, if there's disrespecton respecting IP, you know
(30:45):
that's a different issue and youneed to address it differently.
But so from my perspective, Ithink a lot of these policies
are not particularly helpful.
But I guess it's through theeyes of the beholder and what
you're trying to solve, for youknow you're trying.
If this is all about patienceand I've always thought that,
(31:07):
you know, at the end of the day,while a lot of people make
money on this and it is aprofitable way of doing so, I
thought this was still all aboutpatience and about you know, if
you do the right thing forpatients, everything else takes
care of itself and somehow we'regetting that.
That's getting lost intranslation.
(31:28):
When it comes down to that, Ithink as an industry we can do a
much better job in terms ofresource allocation.
I mean, you know, how do youget 100 CAR-T CD19 companies?
You know, look at what's goingon in obesity right now.
It's actually somewhat obese.
(31:49):
Yeah, obese pipelines, yeah,yeah, so it's you know we have
to be smarter about how weallocate.
It's such a lemming approach.
You know why do we need so manycheckpoint pdl ones?
Uh, out there, you know we justall we're doing is actually
commoditizing good science, andso you know we are.
We sow the seeds to a lot ofthese problems, and you know,
(32:12):
and, and it's you you have toask yourself who wrote the check
for that hundredth CD 19company?
Who thought that was a goodidea?
Ben Comer (32:21):
Yeah, yeah, Right.
Well, tariffs, Peter Navarro,saber, rattling aside what.
What are the potentialdownsides if there are any, of
China's growing role in biotech,particularly for US and
(32:42):
European companies?
Allan Shaw (32:46):
You know, the biggest concern is China's
ability to produce high qualitydrugs at lower costs, which can
really disrupt the financingmodels here in the US and Europe
, as we've touched on.
You know, their ability to dothat kind of as we touched on, I
think can really put the M&Amarket at risk.
(33:07):
And you know it's going to putmore pressure on companies to
actually launch their ownproducts, commercialize their
own products.
And you know, I think it doeschallenge one of the
underpinnings of how the capitalmarkets currently work.
You know M&A has been a bigdriver of returns and I've
(33:31):
actually written an article inthe past saying that at times
when the market's been hot it'salmost akin to a casino
mentality as far as who peoplethink is going to be the next
takeout I mean.
So you know people havecompanies circled up.
So if there are things that areplaying out as a consequence of
China's emergence, that's kindof giving people an alternative
(33:56):
to that channel.
That's going to have itsimplications at the end of the
day yeah, I don't see anygetting around that and it's
also going to hit the valuationsof companies and their cost of
capital.
Because if they're basicallyresetting the prices, not only
(34:20):
for drug prices that arecommercial, but what are the
trade values of a phase oneasset or a phase two asset, your
valuations are going to beimpacted too.
So you know there's a rippleeffect.
You know I wouldn't call themthe drunks that came to the
party, but it has that kind ofpotential implication on the way
(34:45):
the model has traditionallyworked.
Model has traditionally worked.
You know, certainly I think theMe Too's is going to kind of
make things branded productsbecome almost generic before
their time.
You know, I think it'll give anew meaning to branded generic
(35:06):
in certain respects.
In certain respects and from anational security perspective,
you know concerns persist aroundthe IP protection and
over-reliance on Chinese supplylines.
So you know, going back to whatI said, you know I don't want
to poo-poo them, but I think inthe context of what you're
(35:30):
trying to solve for or address,it's a little bit of the tail
wagging the dog and I wouldsuggest that there's different
ways to try to mitigate thoserisks.
But you know the whole thing.
So many people work with WuXiand you know WuXi may have, you
know, be having data that may beultimately very competitive
(35:51):
somewhere down the road, and youknow I guess that's a business
decision and you know, I thinkyou can make a decision on that.
But I think there's otherChinese suppliers.
You don't have to work withWuXi as well.
So you know, if these trendscontinue, they could certainly
they are reshaping thecompetitive landscape and do
(36:13):
pose long-term challenges.
I don't think people really wantto think about it, but it's
here, it's now and it's notgoing away and, as I understand
it, the US government's actuallygoing to be putting out a paper
in the first week in Aprilthat's going to be talking a
little bit more about this.
(36:34):
So it'll be interesting.
Guys, when I was at the CowenConference not that long ago,
they had a couple ofrepresentatives and there was
actually a subcommitteeappointed by the Senate looking
at biotech innovation Senatelooking at biotech innovation.
(36:55):
So they were trying to tie thisin.
But it seems to me the biggerissue is that they're working on
executive order, expansion ofpowers and overspending, and I
think that this is where this isall going to kind of rubber
hits the road.
Ben Comer (37:08):
Well, okay, so you talked about additional risk
associated with Chinese biotechbased on, you know, some of the
existing making with their PDLPD1 back in 2022 that was
ultimately declined by the FDAwas that it would be.
(37:36):
You know, they'd offer it atsomething like a 40% discount to
the other immune cancerimmunotherapies that were on the
market at the time.
And I remember Richard Pazdursaying well, you know, FDA
doesn't consider cost.
But I think people heard thatand thought, well, you know, if
we can get this, you know biobetter essentially, or you know
(38:00):
some sort of equal cancerproduct at a much lower cost,
wouldn't that be good forpatients?
What do you think about thatcost?
Wouldn't that be good forpatients?
What do you think about that?
Do you think Chinese biotech'spresence and the growth of
Chinese biotech is ultimatelygood or ultimately bad for
patients?
Allan Shaw (38:20):
You know, I think in the short term, China's growing
biotech presence, I think, isgreat for patients.
You know, I think it'll bringdown costs and make drugs much
cheaper and lead to betteraccess over in the short term.
However, the long term pictureis a lot more complex.
(38:43):
If traditional biotech fundingmodels break down, incentives
for high-risk, high-rewardinnovation can diminish.
This may result in fewerfirst-in-class breakthroughs and
more incremental improvements,potentially slowing the pace of
medical advancement.
You know, I think ourrisk-reward model works pretty
(39:07):
well and I think it's become theenvy of the world and China's
doing a really good jobemulating it.
You know, are there things thatwe can do better and more
efficiently?
Absolutely, but you know, Ithink you got to be careful what
you wish for.
You know, if you start, if youstart, it's like the sweater,
(39:32):
the loose thread on a sweater.
Once you start pulling on that,you know who knows where that
thing is going to go.
So you know we do need to thinkabout how we squeeze, do things
more efficiently.
You know, and I think you know,I think clinical development is
a ripe area to take a freshlook at.
You know, and I think you know,I think clinical development is
a ripe area to take a freshlook at.
You know we should also look at, you know, questioning.
(39:55):
You know our preclinical workand you know whether or not
there's opportunities to squeezetime out of that.
You know they can really getdrugs to market in half the time
.
We do, you know, and there'stradeoffs.
Obviously there's risks, we do,you know, and there's
trade-offs.
Obviously there's risks, andyou know, as a fundamental view
is, you know, are you trying toidentify things that are just
(40:16):
safe and then you can try tofigure out things whether they
work later on?
So there's different, there'sstill different fundamental
approaches.
But I think, at the end of theday, this is a real opportunity
for us to kind of look atourselves, take stock and
understand what we're doing goodand what we're not doing good,
(40:36):
and even on a bigger picture,while everybody's quite anxious
over the new head of HSS andwhat might actually happen and
for good reason but I would alsosay that when you spend $4
trillion a year on healthcareand you have the highest cost
per capita in the free world,yet you have the lowest life
(40:59):
expectancy in the free worldthat we're in fact paying more
for less, there's probablyopportunities in a lot of areas
for us to be more efficient onhow we do things.
Ben Comer (41:09):
Yeah, something's amiss, right Exactly.
Allan Shaw (41:13):
Yeah, yeah.
Ben Comer (41:15):
So do you?
Do you think that you know wetalked about a shot across the
bow and we're kind ofretrenching here at the moment?
Do you think that we'll see ashift in global biotech
leadership away from the US,given China's rise?
(41:35):
Are we getting to that point ornot yet?
Allan Shaw (41:40):
You know, I've thought about that a lot and I
think at this point, I thinkit's pretty safe to say that
we're still there.
You know, I think we're stillinnovating, I think that
breakthroughs and what we'reseeing, you know, speak for
themselves.
But I don't think you know yougot to also look at what
(42:01):
happened to the dinosaur.
At the end of the day, and youcan't rest on your laurels the
fact that they're out patentingus right now.
You know it could be a bunch ofcrap that they're throwing over
the wall.
I have no idea what they'refiling, but the fact that
they're close on an absolutenumber basis, or beating us on
(42:22):
an absolute number basis, doessuggest that that should serve
as a wake-up call if we want tocontinue to maintain our
leadership.
You know, it's like the hareand the mouse, whatever it was.
The tortoise, yeah, If we taketoo many naps along the way,
(42:47):
those guys will get to us.
So no, I think this should be.
This should serve as a wake upcall, and that's why I think
it's so ironic that you know,really right now, the actions
that we've taken has beenanything but the has been the
antithesis of a wake up call,which I think is frustrating and
scaring a lot of folks.
Ben Comer (43:09):
So, Allan, where do we go from here?
You know, what should we bethinking about in, I guess, the
short to midterm?
What should we, you know, crossour fingers about?
What should we keep an eye outfor?
You know where are we headed.
Does the industry have thecollective will to make the
(43:30):
adjustments and see this as anopportunity to compete?
You know, to up our game.
Allan Shaw (43:39):
You know, policymakers, investors and
biopharmaceutical leaders musttake proactive steps at this
time to ensure innovationremains incentivized, while
strategically leveraging China'sefficiencies.
China's biotech emergence isn'ta future trend, it's here.
(44:00):
Whether it's an opportunity ora challenge depends on how the
industry, people adapt.
The race for innovation is onand the next decade will
determine who leads the nextwave of medical breakthroughs.
So you know, I would say rightnow it's a coin toss, but I
think there's still greatopportunity for us to grab the
(44:21):
bull by the horns.
And I think, if you look atAmerica, every time it is
confronted with a challenge, youknow we, we we know how to
innovate, we know how to pivotand we know how to pivot and we
know how to rationalize things.
And you know, certainly, I think, the current leadership is not
accepting status quo.
So, on one hand, you know, ifyou're looking at efficiencies
(44:45):
that may be gained from theclinical side, fda, this might
represent a unique opportunityto take a freestanding approach
to see if some of thosepractices can be shed and be
more efficient.
On the other hand, you knowsimilar people are making
decisions to blow up NIH, whichI think may get you a tax cut
(45:11):
this year, but I'm not sure whatit'll do, you know, 10 years
from now.
So you know again.
I think you got to be carefulwhat you wish for.
Ben Comer (45:19):
Yeah, all right.
Well, I think that is a nice,positive and yet nuanced note
for us to end on, Allan.
We've been speaking with AllanShaw, a biotech soothsayer and
longtime friend of this podcast.
I'm Ben Comer and you've justlistened to the Business of
(45:39):
Biotech.
Find us and subscribe anywhereyou listen to podcasts, and be
sure to check out new weeklyvideocasts of these
conversations every Monday underthe Business of Biotech tab at
Life Science Leader.
We'll see you next week andthanks for listening.
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