China's Clinical Trial Boom

Summary

In January, the Chinese company Deepseek released a reasoning AI model, called R1, that performs comparably to OpenAI's GPT-4o Turbo model on certain AI benchmarks but was developed with fewer resources at a much lower cost. Marc Andreessen called it “one of the most amazing and impressive breakthroughs I’ve ever seen,” even as NVIDIA’s stock plummeted by 17 percent — the largest ever one-day loss for a U.S. company.While China’s AI competitiveness may have blindsided the tech world, the pharmaceutical industry has already had quite a few “DeepSeek Moments” of its own. About one-fourth of all clinical trials and early drug development now happens in China. Large pharmaceutical companies in-license about a third of their experimental molecules from Chinese laboratories (meaning they purchase the rights to molecules developed by other research groups rather than discover them in-house), according to a report by Stifel. Just a couple of years ago, this number was about 10 percent."Ten years ago, a major [pharmaceutical company] seeking their next breakthrough molecule would have turned to an American or European biotech,” writes biotechnologist Alex Telford. “Today, they’re just as likely to license a molecule from a Chinese company. Chinese companies will often run the phase I trial in China for cheap, then flip it to a Western [pharmaceutical company] to run the expensive US trials and bring the drug to market."The reason for this shift is due, in part, to policy. Chinese regulators have passed reforms that lower barriers to market entry and streamline approvals. Those reforms could hold lessons for U.S. regulators hoping to speed up drug development, too.Impacts from China’s reforms can be seen by looking at clinical trial enrollment data. Such data is illuminating because enrollment numbers offer a measure of the administrative burden placed on new treatments as they move from concept to real-world testing. Patent filings and R&D budgets suggest how much a region i...