In the midsummer of 2026, the global biopharmaceutical industry is experiencing a profound "cognitive earthquake."

 

On one hand, the wave of Chinese innovative drug out-licensing is reshaping the global pharmaceutical landscape at an unprecedented intensity. In the first half of 2026, Chinese pharmaceutical companies completed 86 out-licensing transactions, with a total disclosed value of $97.6 billion, a 40% year-on-year increase. Major deals such as AstraZeneca's $18.5 billion partnership with CSPC, BMS's $15.2 billion collaboration with Hengrui, and Pfizer's $10.5 billion agreement with Innovent have left the industry breathless — even by the standards of the era of capital frenzy.

 

The global M&A market is equally vibrant: 52 pharmaceutical M&A deals were completed in the first half of the year, with Eli Lilly sweeping 9 transactions and committing over $25 billion; Sun Pharma acquired Organon for $11.75 billion; AbbVie bought inflammation upstart Apogee for approximately $10.9 billion. The industry is voting with its wallet, expressing its hunger for innovation.

 

On the other hand, the winds on Capitol Hill are shifting dramatically. Several lawmakers have proposed including biotechnology in the Comprehensive Investment National Security Act, aiming to erect institutional barriers between China and the U.S. Protectionist voices are advocating for rejecting Chinese clinical data, restricting U.S. capital from introducing Chinese projects, and even prohibiting collaboration with Chinese CROs.

 

Amid this debate that will shape the industry landscape for the next decade, a rational voice from the front lines is emerging. Long-term investors represented by RA Capital have put forward a framework that appears paradoxical yet logically coherent: the "innovation supply chain" should not decouple, while the "production supply chain" must be friend-shored. This stance may well point to a third way in U.S.-China biopharma competition.

 

The Counterforce of Protectionism

 

Evaluating the effectiveness of any policy requires reasoning through its endgame. Consider a hypothetical scenario: the U.S. passes a "Biotech Decoupling Act," completely prohibiting the acceptance of Chinese-generated clinical data in drug approvals and restricting domestic companies from collaborating with Chinese biotech firms. What would happen to the global landscape?

 

In the first year or two after the ban, the market would feel little noticeable change. Pipeline drugs already in global multi-center Phase III trials would still be submitted through the original pathways, and approval timelines would remain stable. Based on this, proponents would deem the policy to have achieved its intended effect.

 

But simultaneously, an evasion mechanism — "regulatory arbitrage" — would rapidly take shape.

 

A Chinese biotech company could complete Phase I in Australia, generate Phase II proof-of-concept data in China, and then license the asset to a European pharmaceutical company. This European company would manufacture the drug in Europe and launch a global Phase II/III trial in Europe, Japan, and other regions — but without initially including U.S. patients. Once the global dataset is mature enough to support a U.S. IND application, it would then open U.S. sites and enroll American patients in the latter half of the Phase III trial.

 

The final regulatory submission would contain no clinical data directly from China. From the perspective of local regulators, this would be a "European-developed" product, with no legal basis for rejection.

 

What would this lead to?

 

The incentive structure for accessing the Chinese market would not disappear — Chinese biotech companies would still receive upfront payments and milestone revenues. European pharmaceutical companies would become the bridge connecting China's early-stage innovation with global markets, reaping commercial benefits in the process.

 

U.S. companies, which were once active in cross-border collaborations, would be excluded from such transactions due to the ban and could gradually lose their role in this value chain. Capital, jobs, and tax revenues would flow more toward Europe than remain in the U.S.

 

Furthermore, foundational scientific knowledge continues to flow in the global public domain, and these insights would still be translated into new molecules. A ban might alter the distribution of commercial benefits, but it cannot halt the dissemination of knowledge itself.

 

The deeper paradox is this: such a ban does not eliminate the market's dependence on China's early-stage innovation. As long as China's efficiency advantages in specific links persist, drugs will still be discovered through this innovation and then enter target markets via third parties. The only difference is that the U.S.-based industry, which was originally at the center of the collaborative framework, gets bypassed.

 

Similar stories have precedents in other industries. When a major economy excludes certain globally competitive suppliers, global commercial networks rarely stop operating — they find alternative pathways. In the end, the bypassed party may find itself standing on the wrong side of new trade routes.

 

The Real "China Efficiency"

 

Some proponents of a U.S. "ban" argue that China's speed advantage in early-stage clinical trials stems from relaxed ethical standards, often citing studies claiming that "50% to 70% of informed consent forms in Chinese hospitals are not signed by the patients themselves." This claim warrants closer scrutiny.

 

The statistics referenced above primarily come from studies in routine clinical care — particularly regarding cultural practices of family involvement in cancer diagnosis disclosure — and are not analyses of registration clinical trial data.

 

In many parts of East Asia, including China, Japan, and South Korea, family members play a more active role in how and when major diagnoses are communicated to patients. This family-centered communication model differs from the Western model that emphasizes individual autonomy, but it should not be simplistically equated with disregard for patient rights.

 

In the domain of formal drug registration trials, China's current Good Clinical Practice (GCP-2020) standards are highly aligned with international norms, explicitly requiring individual written informed consent, ethics committee review with diverse membership, and rigorous serious adverse event reporting. These are the standards applied to NMPA-registered trials and have been continuously strengthened through a series of regulatory measures. The FDA has conducted GCP inspections in China — over 100 times in the past decade, with the number trending upward.

 

As for China's speed advantage in early clinical development, it can be explained by several identifiable structural factors. Since 2015, the drug review and approval reform has compressed the implied clinical trial approval timeline to 30 days; top-tier hospitals have higher patient concentrations that accelerate enrollment; and labor cost differentials contribute to operational efficiency. The competitive pressure created by these factors is prompting the global drug R&D system to re-examine its own efficiency bottlenecks.

 

Notably, the vibrancy of global BD transactions itself fully demonstrates the market's strong recognition of this efficiency. Eli Lilly has made successive moves in early-stage R&D platform collaborations; GSK has licensed siRNA pipelines from two Chinese companies; Roche Genentech acquired global rights to a Sanogen RNAi therapy for $1.5 billion. These transactions prove that China has established systematic speed and quality advantages in specific arenas.

 

Competitive pressure begets responses, and the market's own adjustment mechanisms are also at work. As China becomes a major source of proof-of-concept data, competition for top researchers intensifies, potentially slowing the initiation of some trials, with costs gradually rising. Some sponsors are turning their sights to India, South Korea, Singapore, and beyond — India is also expected to build internationally compliant clinical research capacity over the next decade. The global total supply of clinical trial capacity is expanding and cannot be indefinitely concentrated in a single location.

 

The Third Way

 

For the industry, the dependencies that truly warrant careful assessment are concentrated in the physical supply chain of drug manufacturing. Approximately 80% of global active pharmaceutical ingredient (API) capacity flows through China — a concentration level that would trigger supply chain resilience discussions in any country. As a special category of goods, drug supply security, once intersecting with geopolitical tensions, becomes an issue that neither industry nor policymakers can afford to ignore.

 

Current active BD transactions themselves provide a practical reference for "separate risk management of innovation and production." In most licensing transactions between China and the U.S. — from CSPC with AstraZeneca to Hengrui with BMS — the contract frameworks already include provisions for transferring manufacturing to the licensee's location or to third-party regions. Both parties to the collaboration are well aware that localization or regionalization of CMC deployment is a common pathway to secure approvals in major markets.

 

In other words, the emphasis on production footprint deployment is a prudent consideration shared by multiple parties in the globalized drug registration system.

Therefore, the policy proposition of "friend-shoring production" is essentially a risk management approach. It focuses on "where to manufacture," rather than severing the "where to discover" link in innovation collaboration.

 

Innovation is not a zero-sum game. Greater efficiency — whether from China, AI, or regulatory improvement — means more drugs can be developed. The absence of any single accelerant will result in fewer new drugs reaching the global market. When parents, children, or friends are stricken with serious illness, the only thing that matters is whether safe and effective drugs can reach them in time.

 

Disease knows no borders, nor does it wait for policy debates to conclude. From this starting point, the more far-sighted choice is to clearly distinguish what should be pursued together and what needs to be safeguarded separately.

 

The North Star is always there. Toward this star, the third way is clearly visible.

 

Reference Articles:

1. The paradox of biotech protectionism: Why walling off China biotech weakens America; RACAPITAL

2. The total of 52 mergers and acquisitions for the first half of 2026 reflects what analysts, industry watchers and executives are saying over and over: M&A is back.; BioSpace

3. Chinese pharma goes all out! Nearly $100 billion in out-licensing deals in just half a year; DXY Insight Database