From "Factory of the World" to "Laboratory of the World"—The Rapid Growth of China's Drug Discovery and the Next Industrial Competition Facing Japan

There was once a fixed notion about Chinese products worldwide.

"Cheap but not cutting-edge."

This view was repeated with solar panels, automobiles, and storage batteries. However, before anyone realized it, Chinese companies had become entities that shook the global market not only in production volume but also in technology, price, and development speed.

And now, the same change is beginning to occur in the world of "medicine."

Until now, the Chinese pharmaceutical industry was strongly associated with generics, active pharmaceutical ingredients, and contract manufacturing. The ideas for new drugs were generated in places like Boston and San Francisco in the U.S., Cambridge in the U.K., and Basel in Switzerland, with China being the producer—this division of roles had long persisted.

But by 2026, this worldview is rapidly becoming a thing of the past.

Global pharmaceutical giants like Pfizer, AstraZeneca, and GSK are paying huge sums to acquire new drug candidates developed by Chinese companies. Japanese companies are no exception. Takeda Pharmaceutical and Astellas Pharma are increasingly moving to introduce promising drug candidates from Chinese biotech firms.

The flow of drug discovery money worldwide has begun to shift from the West to China.

A Lung Cancer Drug from China that Surprised the World

One of the drugs symbolizing this change is "ivonescimab," developed by Akeso.

It is a bispecific antibody that acts on two targets, PD-1 and VEGF, combining cancer immunotherapy and angiogenesis inhibition in a single molecule.

What surprised pharmaceutical stakeholders worldwide was the phase 3 trial HARMONi-2 for non-small cell lung cancer conducted in China.

The comparator was Merck's Keytruda (generic name pembrolizumab). Keytruda is a drug that significantly changed cancer treatment globally and boasts one of the largest pharmaceutical sales worldwide.

In this trial, ivonescimab significantly improved the "progression-free survival" period, the time patients with PD-L1 positive advanced non-small cell lung cancer lived without disease progression.

"A Chinese company surpassed Keytruda."

It's no wonder such shocking expressions quickly spread among investors and the media.

However, an important caveat is necessary here.

HARMONi-2 was a trial conducted in China, and it does not mean that it has been confirmed to be superior to Keytruda for all patients worldwide. It is necessary to evaluate whether the same results can be obtained in international trials with different racial compositions and treatment environments, including long-term survival and safety.

Nonetheless, it is also true that this drug has not ended as mere talk.

As of August 2026, numerous phase 3 trials involving ivonescimab, including announced, ongoing, and completed ones, are underway, with development expansion into colorectal cancer, bladder cancer, and more.

In other words, new drug candidates from China are growing into massive development programs aimed at the global market, not just products for the domestic Chinese market.

The Era of "Buying Drugs from China" Has Arrived

Another important aspect is not just the drugs themselves.

The "flow of money" in the pharmaceutical industry is beginning to reverse.

Chinese companies were once on the receiving end of technology, patents, and branded drugs from Western companies.

Now, the situation is reversed.

Western companies are searching for drugs born in Chinese company laboratories.

A symbolic example is the contract between Pfizer and China's 3SBio.

In 2025, Pfizer signed a contract to acquire development and sales rights, primarily outside China, for the PD-1/VEGF bispecific antibody SSGJ-707 developed by 3SBio.

The upfront payment alone was $1.25 billion. Additionally, a $100 million equity investment in 3SBio was included. Milestones based on development, approval, and sales could reach up to $4.8 billion.

One of the world's largest pharmaceutical companies is investing such a large amount in a single new drug candidate that has not even been approved yet.

This indicates that Chinese drug discovery has moved beyond the stage of "buying because it's cheap."

An article analyzing major research and development partnerships in 2025 by Nature also noted that Chinese companies were involved in five of the top ten deals, highlighting that early-stage development assets from China are becoming an important supply source for major global pharmaceutical companies.

China is transitioning from being a "factory" that manufactures pharmaceuticals to a "laboratory" that continuously produces new drug candidates.

Why Has China Become So Fast?

The rise of Chinese drug discovery did not happen overnight.

The first factor is the research and development infrastructure formed on a national scale.

The Chinese government has positioned biotechnology as a strategic industry, linking research facilities, universities, hospitals, companies, and investment funds.

The second major factor is the number of patients.

China has a massive domestic market, making it easier to conduct clinical trials involving a large number of patients for specific diseases. In drug development, it is crucial not only to "find a good compound" but also to "gather the necessary number of patients and quickly obtain accurate data."

The third factor is human resources.

Chinese researchers who gained experience at Western universities, pharmaceutical companies, and research institutes have been returning home for years, starting companies or leading research and development.

The fourth factor is competition.

In China, many companies pursue the same promising targets. Many companies flock to fields like PD-1, VEGF, ADC, and CAR-T, which may seem like excessive competition at first glance.

However, this results in competition to develop "even slightly better molecules," "even safer drugs," and "even faster clinical trials."

What happened in Chinese manufacturing, which mass-produced low-cost products, is beginning to occur at the molecular level in research and development.

"Is It Really Innovation?" Cautious Voices on Social Media

On the other hand, reactions on social media are not simply that "China has completely won."

On Reddit, where English-speaking biotechnology stakeholders gather, China's development speed and cost competitiveness are highly praised, with opinions suggesting that "the fact that major pharmaceutical companies are paying huge sums is itself an evaluation of quality."

Regarding the large contract between Pfizer and 3SBio, some industry stakeholders on LinkedIn and X see it as "a deal that changes the valuation standard for drug candidates from China."

However, cautionary opinions remain strong.

A particular point of debate is the difference between "First-in-Class" and "Me-better."

Creating an entirely new mechanism of action that no one in the world has achieved and improving the performance of existing drugs by utilizing already successful targets are not the same.

In the biotech industry community on social media, while acknowledging that Chinese companies are extremely strong in "the ability to improve known targets faster and cheaper," there are also opinions that "more achievements should be seen regarding true innovation in unexplored biology."

Regarding ivonescimab, while evaluating the excellent results in Chinese trials, there are also posts calmly pointing out the need to see if it can be replicated in trials involving patients outside China.

This debate is important.

With cars or smartphones, it's easier to compare performance by actually using the finished product.

Pharmaceuticals are different.

The true value can only be understood by evaluating numerous factors, including patient background, trial design, racial differences, combination therapies, safety, and long-term survival.

Therefore, underestimating Chinese drug discovery is dangerous, but so is concluding it as "the world's best" based solely on contract amounts or a single trial.

A Sense of Crisis Also Visible in Japanese Social Media

On Japanese social media platforms like X and LinkedIn, posts suggesting that the era of viewing China's pharmaceutical industry merely as a low-cost production country is over are increasing.

While introducing the expansion of Chinese licensing deals in 2025, there are also posts warning that China is transforming from a "country that makes cheaply" to one that discovers drugs and supplies them to the world.

Additionally, there are opinions on LinkedIn highlighting the need for Japanese companies to further utilize cross-border joint development, mentioning the expansion of collaboration with Asian biotech companies, including those from Japan, Korea, and China.

Interestingly, it's not just opinions that view China as a simple "threat."

There is also the perspective of "what's wrong with buying drugs from Chinese companies if it means delivering good medicine to patients faster?"

The pharmaceutical industry has aspects different from semiconductors or weapons.

The ultimate goal is not the market share of a nation but treating patients.

Therefore, the debate surrounding Chinese drug discovery simultaneously involves the three logics of "industrial competition," "security," and "patient benefit."

Japanese Companies Are Already Turning Toward China

Let's shift the focus to Japan.

Considering the rise of Chinese drug discovery as merely a "competition between the U.S. and China" misses the essence.

Japanese companies are already part of this trend.

In 2025, Takeda Pharmaceutical advanced a strategic partnership with China's Innovent Biologics, adding multiple next-generation cancer treatment candidates to its pipeline.

In the same year, Astellas Pharma acquired a license for an ADC candidate targeting CLDN18.2 from Evopoint Biosciences in Suzhou, China. The upfront payment was announced as $130 million.

In other words, Chinese companies are both competitors and "places to find the next new drug" for Japanese companies.

This relationship will likely become even more complex in the future.

If Japanese companies introduce new drug candidates from Chinese companies, their pipelines will strengthen.

If successful, it will benefit patients in Japan and worldwide.

However, if contract money and research funds flow to the Chinese side, that capital will also be used for next-generation research and development.

Today's partner could become the biggest competitor in ten years.

This is precisely the pattern the world experienced with automobiles, batteries, and solar power.

What Japan Should Fear Is Not "China" but the "Speed Gap"

The Japanese pharmaceutical industry still has strengths.

There are companies and research institutions with high capabilities in many fields, including basic science, chemistry, antibody technology, manufacturing quality, safety evaluation, and clinical medicine.

The issue is not just "whether research can be conducted."

It's about how quickly research results can be turned into companies, funds raised, clinical trials advanced, and brought to the global market.

Competition is occurring in this entire process.

Excellent university research ends as a paper.

Startups are created but fail to attract large funding.

It takes time to start clinical trials.

Foreign companies delay development in the Japanese market.

Promising talent moves to American companies.

When these issues accumulate, even if individual researchers are excellent, the "national speed of drug creation" declines.

The Japanese government itself has recently positioned addressing "drug lag" and "drug loss" and enhancing drug discovery capabilities as important policies.

The Japan Pharmaceutical Manufacturers Association also, in its 2026 policy, emphasized the need to strengthen drug discovery capabilities and research and development infrastructure, positioning the pharmaceutical industry as a knowledge-intensive industry with international competitiveness.

In other words, the awareness of the problem is already shared in Japan.

The question is the speed of execution.

It's Not as Simple as "Excluding China Will Solve the Problem"

In the U.S., there is a growing movement to view the Chinese bioindustry as a security issue.

By the end of 2025, legislation including the BIOSECURE Act was enacted, and by 2026, moves to regulate the relationship between the U.S. and Chinese bioindustries, such as the designation concerning WuXi AppTec, became more concrete.

Discussions continue on how much to regulate investment and technology transfer to China.

However, in the pharmaceutical industry, simple decoupling is challenging.

If excellent new drug candidates exist in China, not using them may disadvantage patients.

On the other hand, relying too much on one country for important manufacturing and research functions poses risks to supply chains and security.

What Japan needs is not a binary choice of "whether to engage with China or not."

It's about incorporating technology from around the world, including the U.S., Europe, China, Korea, and Singapore, while maintaining research, clinical trial, and manufacturing capabilities domestically, and also exporting Japanese technology globally.

In other words, a strategy to "connect global drug discovery to Japan" is more important than a "closing strategy."

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