China is reshaping the drug discovery landscape

For decades, the story of pharmaceutical innovation followed a familiar path.

By Annabelle Kay

Ideas were generated in Western labs, funded by Western capital, approved by regulators such as the FDA or EMA, and then exported globally. That path is no longer the only one.

A new centre of gravity is emerging, and it is reshaping how drugs are discovered, developed, and brought to patients around the world.

From foundation to first-in-class

China’s biopharmaceutical sector has undergone one of the most rapid transformations in the history of the life sciences industry. In its early stages, the focus was largely on generics and contract manufacturing – a pragmatic starting point for building scientific and industrial capability at scale.

That foundation, it turns out, was exactly that: a foundation.

Over the past decade, sustained investment in talent, infrastructure, and regulatory reform has enabled Chinese biotech companies to move into genuinely novel drug discovery. The shift has been both deliberate and significant, and the global industry is now paying close attention.

China has transitioned from a high-volume manufacturing hub into a world-class originator of novel drug candidates…

Annabelle Kay, Director, DesertSci

China has transitioned from a high-volume manufacturing hub into a world-class originator of novel drug candidates, particularly across oncology, autoimmune disease, and metabolic disorders.

The scale of this shift is clear. By the end of Q1 2026, approximately 30% of all novel drug candidates in global clinical development are expected to originate from Chinese-headquartered companies – up from the low single digits just a decade ago. More than 1,200 novel drug candidates are currently progressing through clinical trials.

The deal flow tells the real story

If you want to understand how seriously the global pharmaceutical industry is taking this shift, it is worth looking at licensing activity. In 2025 alone, Chinese biopharma companies signed outbound licensing deals with a total disclosed value of $135.7 billion.

These are not peripheral arrangements. Global pharmaceutical companies are actively targeting best- and first-in-class assets originating from Chinese innovators. This is pipeline strength that commands attention in any market.

One area where momentum is particularly pronounced is antibody-drug conjugates (ADCs). Chinese companies now account for approximately 90% of global ADC licensing activity by deal count, reflecting a highly concentrated area of technical expertise and innovation.

The engine behind the rise

This transformation has been years in the making. China’s progress has been driven by a coordinated alignment between national policy and industry development. Initiatives such as Healthy China 2030 and Made in China 2025 have provided a clear strategic roadmap, supported by consistent funding and regulatory reform.

At a regional level, local governments have played an active role in building the ecosystem – providing infrastructure, laboratory space, tax incentives, and dedicated biotech parks. Talent has been equally critical. A generation of internationally trained scientists has returned to China to build companies, bringing with them both deep technical expertise and global commercial perspective.

The result is an industry that is increasingly sophisticated, globally connected, and commercially aware.

A shifting centre of gravity for global innovation

This is not simply a regional shift. It has implications for the global life sciences ecosystem. For Western biotechs and investors, several lessons are emerging: the importance of capital efficiency, the value of streamlined development models, the role of strategic partnerships, and the need to understand regional competitive advantages.

Global pharmaceutical companies are also recognising that access to China’s clinical infrastructure, patient populations, and scientific talent represents a meaningful opportunity – not just a competitive pressure. By 2040, China-originated assets are projected to account for approximately one-third of US FDA approvals, a significant increase from around 5% today.

The question is not whether, but how

For leaders across drug discovery, business development, and life sciences investment, the conversation has already shifted. The question is no longer whether to engage with China’s biotech ecosystem, but how to do so in a way that creates genuine, mutual value. Organisations that invest early in building partnerships, developing cross-border fluency, and establishing frameworks for collaboration will be better positioned as this landscape continues to evolve.