In 2021, one of the record years in biotechnology investments, about 50 drugs were approved by the FDA. 36 of these were small molecules. In my opinion, only about 5 of these were truly innovative targeting novel mechanisms and novel targets. The 10th revision of the International Classification of Diseases (ICD) contained 55,000 codes for diseases, injuries and conditions. Even if we assume that there are only 10,000 diseases, 50 FDA approvals per year seems to be an extraordinarily small number.
The reason for this small number of innovative and effective therapeutics is the long time, high cost, and low probability of success of drug discovery and development. On average, this process takes 12 years, costs over $2 Billion dollars and fails over 90% of the time. The most innovative therapeutics with novel targets have even higher probability of failure. To get these 50 drugs approved in 2021, the pharmaceutical companies globally spent over $100 Billion and over a decade.
The biotechnology industry is very different from any other industry and it is important to understand how it works, and the role China plays in delivering safe and effective medicines to suffering patients worldwide. Sharing risk, expenses, and infrastructure will result in acceleration of global biotechnology and increase the number of innovative drug approvals. Closer collaboration between the US and China in biotechnology would allow investors to share huge risks and returns while benefiting everyone on the planet and making this world a much better place.
1. Biotechnology aims to protect the fundamental human right – the right to live
Unlike many other areas, where leadership in technology increases the utility of life by either providing more entertainment options or new capabilities, biotechnology is aimed at reducing suffering and extending life itself. According to the United Nations Human Rights Office, the right to live is the most fundamental human right. It makes sense, the person does not need any other rights when there is no person. Therefore, biotechnology aims to protect the most important and fundamental human right – the right to live.
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2. Advances in biotechnology benefit everyone on the planet, but mostly the US
Diseases do not have borders and do not discriminate by nationality. In developed countries, the risk of developing cancer, Alzheimer’s, Parkinson’s, and most other diseases depends on life expectancy. And the longer people live, the higher the chances since most of the diseases are associated with and driven by aging. Even at current rates, I should expect one out of every two readers of this article to get cancer in their lifetime. But over the past two decades, several effective cancer therapies were discovered and developed. For example, some patients can be entirely cured by immunotherapy. And many of the recent immunotherapy drugs were discovered, perfected, and made cheaper and more accessible to patients worldwide thanks to the recent boom in biotechnology in China. For many, cancer is not a death sentence anymore.
The US has more to benefit from advances in biotechnology than any other country for two reasons. First, it has the most expensive healthcare system in the world, representing over 18% of the GDP in 2021 or $4.3 Trillion.
Second, life expectancy in the US in 2021 was lower than in China. In 2021, life expectancy in mainland China was 78.2 years, in Hong Kong was 85.1 years, and in the US, it was 76.1 years. Just think about it, on average, the Chinese live two years longer than Americans, and the Chinese living in Hong Kong live 9 (nine) years longer than Americans. If the right to live is a fundamental human right, the US needs to work hard to “catch up”.
It seems paradoxical that the US is and historically has been the largest funder of biomedical science worldwide, with the National Institutes of Health being the largest funding body. However, neither the Democrats nor Republicans nor any popular independent politician prioritized increasing longevity and putting it on the political agenda.
Although the US is the largest funder of biomedical science worldwide, they have not prioritized increasing healthspan and longevity. Many of the advances needed to extend American lives can be delivered by collaborating with China. The cost and speed of drug discovery can be substantially decreased by distributing the workload and risks. A drug discovered in collaboration with China will benefit patients in the US and when the US investors own part of this drug, everyone wins.
3. China has more scientists and is rapidly advancing in the quality of science
It is natural to expect a nation of over 1.4 billion people who rose out of poverty and, for a very long time, focused on one or two children per family, and invested heavily in education to have more scientists than any other country in the world. Unsurprisingly, between 2018 and 2020 China published 23.4% of the world’s scientific papers, eclipsing the US. China now holds the top place in terms of the highest-cited academic papers, according to the journal Science published by the American Academy of the Advancement of Science (AAAS), indicating superior quality of the research. And if we look at the trends, China is just getting started.
Many of these scientists are inventing new methods to decipher the mechanisms of disease, identify promising drug targets, and developing new ways to treat deadly diseases.
4. Many “rare diseases” are not that rare in China
While the definition of a “rare disease” may vary, the European Union defines it as a disease affecting less than 1 in 2,000 citizens. These diseases are difficult to fund and study because small patient populations make these diseases attractive to the investors and difficult to enroll patients into clinical studies.
However, with 1.4 billion people, 1 in 2,000 is 700,000 patients – there are 69 countries in the world with fewer number of citizens. Studying many of these diseases, for example rare liver diseases, may improve our understanding of the broader disease biology and China is stepping up the efforts all around.
5. China made massive investments in research and development infrastructure
For those, who do not know China, it consists of around 35 provinces and territories that work as a single united organism. However, these provinces compete with each other on economic indicators and many other measures. This competition makes innovation much more evenly distributed – pretty much every region you go to, however remote, will have an innovation hub that is trying to attract, build and grow the innovative enterprises and are trying to build the entire ecosystems of companies that can work together. These innovation hubs conduct their own market research and usually understand who-is-who of the industry at the level of a good technology analyst.
For example, in 2020, after Insilico Medicine developed and validated the target discovery engine called PandaOmics and the clinical trials outcomes prediction platform called inClinico, we wanted to build a fully-robotic system to combine these two platforms to enable very rapid disease hypothesis generation, target identification, target validation, and translational medicine with minimal or no human involvement – full automation. Previously, no other company or research institution I know has done this before and we had to think about where we could build such futuristic lab. So I explored several areas in worldwide and in China where this could be done. We were not looking for funding from the government but we needed to have several companies in one place that could help build the robots, and also help with the development of disease models, tissue engineering, reprogramming of the cells, organoid development, and software development for fully-autonomous systems – you can not do it all by yourself, you need partners. To my surprise, there were several places in China, where these ecosystems existed. One of the most advanced biohubs in China, BioBAY, not only had the ecosystem of companies but was also willing to help attract the missing elements and locate all of them in one small area. Imagine that you could come to Boston and ask the mayor to locate five or six companies in one small area like the Kendall Square and make these companies collaborate.
Well, in China – it turns out to be a routine process. I was so impressed by the efficiency of this process that I wrote a long story about BioBAY and its CEO, Michael Yin. The ability to form these collaborative ecosystems that allow some of the very complex, risky, unproven projects with enormous potential to be built and tested quickly with the is a unique feature that I have not seen anywhere else in the world. Another story that I found to be unusual is how hard these local government officials and leaders of the innovation hubs work. Starting an ecosystem project required some coordination and every time the meeting was called it was set for Saturday or Sunday. When I asked the officials why they prefer to have these meetings on the weekend and late into the night, the answer was simple – “the weekdays are for the people and we do not want to disturb the normal workflow”.
Many of these innovation hubs and park bring together a large number of vendor companies that service the industry and academia. Just like the IT industry, where “designed in California, made in China”, commonly referred to as the “Apple business model” allowed many companies to flourish, the emergence of contract research organizations (CROs) in China enabled thousands of biotechnology companies worldwide to accelerate their research. The market value of the pharmaceutical CROs is projected to exceed $22 Billion in 2024 according to a recent report by EqualOcean. Many of these CRO companies are publicly traded in China and get rich valuations. This allowed these companies to raise money from the public market and debt financing and invest in research and development infrastructure that often surpasses the infrastructure of the large pharmaceutical companies in both scale and complexity. Furthermore, much of this infrastructure is getting rapidly automated with the push toward laboratory robotics. This is not a recent trend. Some of the largest CROs have been inbusiness since 2004 and scaled globally. If the US would like to catch up, it needs to invest substantially more and in parallel and in collaboration with China. This would benefit the patients and the healthy people alike.
6. China is rapidly improving the regulation for the acceleration of the clinical trials
In the past, China’s clinical trial process was extremely bureaucratic and lengthy and borrowed the best and the worst practices from the US and European regulators. However, in recent years, it realized that much of the time is wasted in negotiations between the companies and regulatory agencies. And it introduced strict standards and deadlines for the regulatory agencies to respond. It also revamped the staff at the regulatory agencies that now includes high-level scientists and clinicians that are motivated to deliver innovative therapeutics to patients faster. And while I have not seen any dramatic speed records yet, the approval process has been greatly expedited. These changes now make China a very attractive place to conduct the efficacy studies. In the past, most companies chose to first conduct the efficacy studies in the US and later re-do the studies in China. Today, many companies choose to perform the efficacy studies in the US and China in parallel. Greater collaboration between the regulatory agencies may help accelerate the delivery of novel efficacious therapeutics globally.
7. Push toward innovative therapeutics in China
Very often, the pharmaceutical industry in China is portrayed as the “copycat industry” as the local pharmaceutical companies preferred to either develop similar or in-license the effective therapeutics from the Western companies. However, in recent years, the government made innovation in biotechnology a national priority. To the disappointment of the many large pharmaceutical companies that were making enormous profits on off-patent generics, or “me too” copycat therapeutics, only the innovative drugs can get substantial profit margins. Also, biotechnology companies going public must demonstrate that they have innovative therapeutics in their pipelines.
One movie I do recommend to all of my friends is “Dying to Survive”. With a $10.9 million budget, the authors delivered a $453 million blockbuster that made me shed a few tears and exposed the problem with overpriced generic drugs. The government also realized this problem and imposed caps on the profits for generic drugs that are not innovative. In order to realize above-average returns, pharmaceutical companies now need to demonstrate that the drugs are innovative and are not just a copy of an old thing. And to innovate, pharmaceutical companies need to invest heavily in R&D and take substantial risks. And since the drug discovery process is very lengthy and fails over 90% of the time, the most advanced pharmaceutical companies are now relying on AI and robotics startups to accelerate their R&D.
8. Increased funding in basic sciences in China
Like with the many other areas of the economy, with over $550 billion in spending on basic R&D, China is now almost on par with the US, which is still spending about 20% more. However, the efficiency of this spending, considering lower costs, work ethic, clear performance tracking and competition among different provincial governments, is likely to be higher. The fact that China surpassed the US by the number of highly-cited academic publications is likely a sign of this superior efficiency and increased funding. Naturally, this level of funding will result in biomedical breakthroughs independent of other countries. This is one of the many reasons why the large multinational pharmaceutical companies have established technology scouting centers, commonly referred to as “innovation hubs” to identify and get access to these early opportunities. The US should consider encouraging the large pharmaceutical companies to increase the local R&D presence in China to take advantage of the upcoming wave of local innovation.
9. China has a rapidly-growing public market with the expert industry analysts and investors
Recently, I met with a biotechnology company founded by the two high-profile academics who returned to China over a decade ago. They came up with a new disease hypothesis and wanted our team to narrow it down to individual targets and design small molecules in order to rapidly get to the preclinical candidate. When asked how they are planning to finance this very risky venture requiring millions of dollars of investments, they explained that they will fund it themselves until a certain point as they recently took another company public. Now, with the money from the IPO and experience running a biotech, they are planning to incubate a new company. They also have many friendly venture capital firms that made money on their previous IPO and will be willing to support the company. This situation is very common in China. A decade of booming biotechnology sector creates a virtuous cycle of discovery, incubation, investment, validation, and exit. This system is now self-sustaining and can exist and grow even in total isolation. Limiting collaboration with China in biotechnology will only keep the China-discovered drugs away from the patients for a limited amount of time and will limit the extraordinary returns that can be made in a collaborative environment by the US firms.
10. Biotechnology is a “molecular casino” with multi-billion dollar stakes where the loser loses everything and the winner while making substantial returns, also benefits everyone
Biotechnology is a molecular casino because it involves taking high risks in order to potentially achieve high rewards. The field involves using molecular and cellular techniques to develop new products and technologies, and these efforts can be very costly. However, if a biotechnology company is successful in developing and bringing a new product to market, the returns can be substantial. For example, a successful new drug could generate billions of dollars in revenue for the company that developed it.
At the same time, biotechnology has the potential to benefit everyone, not just the companies that are successful in the molecular casino. This is because the products and technologies developed through biotechnology can have a wide range of applications, from improving public health to increasing agricultural productivity. So even if a particular biotechnology company does not make substantial returns, the advances it helps to bring about can still have a positive impact on society as a whole.
Collaboration in AI-Powered and Robotics-Enabled Drug Discovery Benefits Everyone
AI-powered and robotics-enabled drug discovery have the potential to revolutionize the way we approach and treat diseases, making them an area of collaboration that should be prioritized by both China and the United States. This is because the development of new and effective medications benefits not just the countries involved in their discovery, but the entire global community.
One of the main reasons why collaboration in this field is so important is that the process of drug discovery is incredibly complex and costly. It can take many years and vast resources to identify and develop a new medication, and the risk of failure is high. This is especially true when it comes to developing treatments for diseases that are rare or poorly understood, or for which there are currently no effective treatments available.
By collaborating, China and the United States can share the risk and cost of drug discovery, giving both countries more “shots on goal” and increasing the chances of success. This not only benefits the countries involved, but also the patients who stand to benefit from the development of new and innovative treatments.
In addition to the financial benefits of collaboration, there is also a strong scientific argument for working together in this field. Biotechnology and AI-enabled drug discovery are highly interdisciplinary fields, requiring expertise in areas such as biology, chemistry, computer science, and engineering. By pooling the resources and expertise of both countries, we can bring together some of the best and brightest scientists and researchers to work on the most pressing health challenges facing the world today.
Finally, it is worth noting that the global nature of the pharmaceutical industry means that the development of new drugs has the potential to benefit people all around the world, regardless of where they were discovered. This further underscores the importance of international collaboration in this field, as it allows us to tackle some of the most pressing health challenges facing the world in a more coordinated and efficient manner.
In conclusion, biotechnology and AI-enabled drug discovery are areas of collaboration that should be prioritized by both China and the United States. By working together, we can share the risk and cost of drug discovery, bring together some of the best and brightest scientists and researchers, and ultimately benefit the global community by developing new and effective treatments for a wide range of diseases.