"DeepSeek moment" in medicine, China's innovative drugs have also reached."

Recently, the breakthrough progress of the Chinese AI company DeepSeek has attracted global attention. Deutsche Bank released a report on February 5, pointing out that not only DeepSeek, but from clothing, steel, shipbuilding to telecommunications equipment, and now the latest AI, Chinese companies are rising globally. In the field of biomedicine, a similar revolution is taking place. Just like DeepSeek challenging AI giants with efficient and low-cost models, Chinese innovative drug companies are reshaping the global pharmaceutical innovation landscape through a similar path: creating the same or even better innovative results at lower costs. This high cost-effective innovation model is shaking up the traditional heavy capital research and development ecosystem in the United States. For American biotech companies, this is a DeepSeek-style impact - when big pharmaceutical companies can obtain the same innovation from China at extremely low prices, who would still be willing to pay billions of dollars to acquire American biotech companies? Rising new models: China's high-cost-effective innovation For decades, the U.S. biotechnology industry has formed a solid innovation ecosystem: centered around Boston-Cambridge and the San Francisco Bay Area, thriving biotech companies rely on a steady supply of talent from top universities such as MIT and Stanford University. These biotech companies have a stable downstream customer - large pharmaceutical companies. To fill the market gaps brought about by the expiration of patented drugs, these pharmaceutical giants have always been willing to acquire biotech companies with potential new drugs at high premiums. This heavy capital innovation model has supported the long-term prosperity of the U.S. biopharmaceutical industry and fostered a thriving venture capital ecosystem. However, just as DeepSeek challenges AI giants with a lean budget, Chinese biotech companies are shaking up this traditional pattern with a completely new model. This new model is built on significant cost advantages: Chinese companies can conduct clinical trials at costs much lower than those in the United States, while having a high-quality and efficient R&D team. In addition, the reform of the Chinese regulatory system in recent years has accelerated the approval process, demonstrating amazing innovation speed and efficiency by Chinese companies. The booming weight loss drug market is an example. Faced with the dominance of Eli Lilly and Novo Nordisk in the injectable GLP-1 hypoglycemic weight loss drug market, these two multinational giants turned to Chinese companies for oral drug solutions. By the end of 2024, after screening obesity products globally, Merck selected an oral GLP-1 drug from the Chinese company HANSOH PHARMA, with a prepayment of $112 million and up to $1.9 billion in milestone payments. The year before, AstraZeneca also acquired a similar product from the Chinese company Eccogene for a prepayment of $185 million and up to $1.83 billion in milestone payments. Reshaping the global pharmaceutical innovation landscape In the fall of 2023, a blockbuster news shook the global biopharmaceutical industry - Summit Therapeutics, supported by billionaire Bob Duggan, announced that its drug imported from the Chinese company Akeso surpassed Merck's star product Keytruda in a head-to-head clinical trial for lung cancer. As a $30 billion annual sales immunotherapy product, Keytruda has long dominated the market. This result immediately brought Summit billions of dollars in market value growth. Although the drug has not yet been approved by U.S. regulatory agencies, the successful collaboration between Summit and Akeso has had a profound impact on the industry. For example, shortly after Summit announced clinical results of the dual-target antibody imported from Akeso, Merck immediately imported a similar dual-target antibody drug from LaNova Medicines in Shanghai, which targets PD-1 and VEGF. The success of Chinese pharmaceutical companies is not isolated. Data shows that China Meheco Group's transactions are rapidly rising. In 2020, in large pharmaceutical transactions worth $50 million or more, the proportion of large pharmaceutical transactions involving China (prepayment of $50 million or more) was less than 5%, but by 2024, this ratio had surged to nearly 30%. Industry insiders predict that in ten years, a large number of innovative drugs originating from Chinese laboratories will enter the U.S. market. In addition, multinational pharmaceutical companies are also increasing their investments in Chinese innovation, and a wave of mergers and acquisitions targeting Chinese innovative drug companies is emerging. On December 26, 2023, AstraZeneca acquired the Chinese CAR-T therapy company Genexin Bio for $1.2 billion, pioneering the acquisition of Chinese innovative drug companies by multinational pharmaceutical companies. Subsequently, Novartis acquired Syneron Pharmaceuticals, and Genmab acquired Puffin Bio for $1.8 billion. The latest case is that the German mRNA company Baheun Tai announced the acquisition of PulmoBio for $800 million in prepayment plus a maximum of $150 million in milestone payments. This transaction is expected to be completed in the first quarter of 2025. The future has arrived Currently, China Meheco Group's innovation is mainly focused on improving existing drugs, but its innovation capabilities are steadily increasing. As Summit leader Duggan said, "If you are looking for innovation, China is the most reasonable choice." This judgment is being increasingly validated by market behavior. For patients around the world, this competition brings more treatment options; for the industry, it heralds a major shift in the global pharmaceutical innovation landscape. Excerpted from "Wall Street Perspective," author: Gao Zhimou. GMTEight Editor: Zhang Jinliang.