Cheng Zengjiang: Global MNCs and investment institutions are coming to China to find innovative drugs, and this development momentum is particularly strong. In less than 50 days since the beginning of this year, the overseas transaction volume has exceeded 50 billion US dollars. Is this momentum what you had anticipated?

Zhu Xun: There are several aspects to consider when it comes to new drug exports. Currently, the main way of new drug exports is through product transactions in the form of license outs, which is a relatively early stage of new drug exports. But the level of speed is indeed beyond my expectations.

Behind this, there are also several internal and external changes. Firstly, after more than a decade, especially after 2015, China's innovative drugs have rapidly accumulated several stages such as me too, biosimilar, in license rights in Greater China, and fast follow, and have undergone certain changes, which can be summarized into several levels:

Firstly, it has accumulated considerable capital. Over the past decade, the Chinese capital market has invested more than 1 trillion yuan in innovative drugs, with approximately 300-400 billion yuan still deposited in biotech companies. This money brings huge opportunities.

Secondly, and more importantly, we have established a good technology platform system and talent system. China's technology platform and talent reserve in innovative drug research and development have taken a leading position globally.

Thirdly, it has accumulated a complete supply chain and service chain system, including CRO, CDMO, etc., which has trained a large number of talents and laid the foundation for future development.

Fourthly, this kind of "internal competition" has actually created a group of products, including both product lines that are fiercely "rolled" and a group of products with differentiation potential.

The biggest surprise brought to the domestic biopharmaceutical industry by these changes is the significant improvement in drug accessibility. In the past, many international new drugs had to wait for eight to ten years to enter China after being launched. Now, with the accumulation of these capabilities, not only can domestic products quickly follow up, but the registration of overseas products in China has also greatly accelerated, making great progress in the accessibility of innovative drugs in China. This is a crucial step.

Why are international companies starting to pay attention to China? Originating from the change in overseas R&D models, a large number of R&D centers of overseas companies have been cut down, both in terms of efficiency and cost, as well as the "big enterprise disease" formed by the development of overseas companies in recent years, resulting in very low R&D output. Biotech has become the mainstay of early R&D and has become an unstoppable trend.

Although the overseas pharmaceutical industry started earlier, their efficiency, cost, supply chain, and service chain systems are not advantageous, and the entire industry chain is showing a trend of "hollowing out", making it extremely difficult to rebuild.

At the same time as these internal and external conditions change, overseas large MNCs are facing the dilemma of a large number of expired product patents and inability to keep up with subsequent pipelines, forcing them to start looking for opportunities to "borrow chickens to lay eggs" or "buy eggs" globally. This wave of China's rise is, to some extent, a result of 'unintentional interference'.

At the same time, the domestic capital market is experiencing a downturn, and primary market financing is becoming increasingly difficult, forcing these companies to obtain cash flow through business development. The interweaving of various factors has led to the rapid increase in overseas BD transactions of Chinese research and development varieties.

However, I also suggest that everyone pay attention to one thing. Nowadays, people are saying that the transaction volume is very high, but in reality, this is not the true transaction volume. Taking 2025 as an example, for transactions worth about 140 billion US dollars, the upfront payment is less than 10 billion US dollars, accounting for about 7% to 8%.

Generally speaking, in the form of international innovative drug R&D authorization cooperation, upstream payment accounts for about 10%, milestone payment accounts for 25% to 30%, and a larger portion -60% or even close to 70% - is the subsequent product sales commission, also known as Royalty. China has only completed the first step, and whether it can receive the 20-30% milestone payment in the next two to three years has become crucial.

Anyway, after this round of development, China's innovative drugs have become more rational in all aspects, and in the process of "rolling", they have also eliminated and refined a batch, leaving behind a batch of valuable things.

In the early days, PD-1 and bispecific antibodies were used ADC、 The part of the transaction that focuses on weight loss actually does not have a high level of technical content and almost no new targets. The next step of China's development is truly facing a test, how to occupy more and more market share in overseas transactions of new targets, which is a touchstone for China's truly innovative pharmaceutical research and development capabilities.

Cheng Zengjiang: Why do big MNCs such as Pfizer, Merck, AstraZeneca, etc. choose to trade on these fast follow targets instead of those new targets? Of course, on the one hand, we don't have them, and on the other hand, what I want to ask is, why do they still spend a lot of money to buy such projects?

Zhu Xun: The development of the entire field has a process, and this wave of biotechnology development is actually based on the achievements of life science theories and technologies from the 1950s to the 1970s, such as double helix, life center rule, signal transduction, genetic engineering, and monoclonal antibody technology. However, this wave of development is nearing its end. In other words, considering the entire history of innovative drug development, this wave is still considered easier to get started by everyone at present.

The advantage of MNC is no longer in research and development, but in its global Phase III clinical capabilities and marketing capabilities after entering the market. In this process, in order to quickly fill the gap in the product line, they will inevitably focus more manpower, material resources, and financial resources on this area - and this area has precisely achieved China's success. However, when the low hanging fruits are almost harvested, they may soon face challenges in the future.

Including the two fields with relatively large export volumes now - dual impedance and ADC, many products have indeed been approved, but how many can truly become heavyweight bombs and sell for over 8 billion US dollars? And these products are generally priced higher than before, but their sales have not reached the corresponding height - what does this mean? It indicates that its population penetration rate is actually not high. Among them, the truly emerging track is actually weight reduction. The field of weight loss does have a particularly large population, and it is not entirely within the scope of medicine, but also serves public health purposes.

Cheng Zengjiang: The field of weight loss is different from oncology drugs. Oncology drugs have strong dispersibility, diverse types of cancer, and a high degree of unmet clinical needs. However, once weight loss reaches a certain level, it will not continue to decrease, and there is no sustained demand for "who is thinner than others". Why can it continue to have so many transactions and layouts when its degree of dispersion and diversification is not as high as other fields?

Zhu Xun: As expected, there are not many major pharmaceutical fields in the future. The real major pharmaceutical fields are precisely those that are not directly related to malignant diseases. After years of development, many tumors have become chronic diseases, as have many autoimmune diseases. After becoming a chronic disease, it brings new fields and new demands.

Next, in the next 10-20 years, there will be significant changes in the development of innovative drugs in terms of disease types. Firstly, the indications for diseases will undergo significant changes, and secondly, drug targets will also undergo significant changes.

In recent years, drug design centered around targets has almost reached its limit, involving both small and large molecules, with over a thousand actual targets involved. Well known targets have already been extensively studied, and it is difficult to further explore these well-known targets. Moreover, with the changes in the disease spectrum brought about by aging, the opportunities for significant development in these well-known fields are becoming increasingly rare in the future.

So, which areas have opportunities? For example, for weight loss, GLP-1 has been around for many years, and there is not much room for it to be used solely as a blood sugar lowering agent. However, weight loss - although this may not be considered an unmet need or a direct threat to life - concerns too many people. The size of the population can be seen intuitively. By 2025, three of the top ten drugs in terms of sales will be weight loss drugs, totaling over six to seven billion US dollars. In fact, it is not limited to weight loss, but is closely related to metabolic syndrome, which is a large field.

The second major field is various neurodegenerative diseases. The field of neurodegeneration is simply too vast, and with the later stages, it can also be extended to the entire degenerative disease, which will be a populous and wide-ranging field in the future.

In addition, there are several special fields that have not received sufficient attention in the past, namely various types of fibrosis, including vascular fibrosis, liver fibrosis, pulmonary fibrosis, and so on. In addition, from the perspective of "disease enters through the mouth", we eat a lot of things, and after metabolism in the body, a series of things produced will be metabolized by the kidneys, so kidney diseases will be a very large field in the future.

As people age, chronic inflammation in the body increases. This chronic inflammation is not only the cause and result of many diseases, but also the main driver of their prognosis. Therefore, reducing these chronic inflammations in the body may also become a major field in the future.

Cheng Zengjiang: As mentioned earlier, this is an achievement accumulated over the past few years, and the strongest ability lies in China's fast follow capability. So, in the next step, no matter what targets or things we have, we can follow them fast. In the process of technological development in the future, does it mean that no matter what major technological breakthroughs there are, we can rely on our fast following ability to make achievements in new drug research and development, and let MNCs cooperate with us?

Zhu Xun: I don't think this process will last too long, because fast follow first requires something to come out and follow. Currently, about 50-60 new drugs are approved globally every year, with about one-third being truly first in class. From this perspective, the opportunity for fast follow will continue for some time in the future. But if you don't have a source, what are the chances of fast following someone who has already been fast followed?

In addition to 'first in class', another word that I often mention may not be of much interest to many, called' novel approach ', a completely new path. In fact, the emergence of antibody drugs was a completely new path back then, as before this, small molecule and hormone drugs, including nucleic acids, mRNA, etc., were also completely new paths. During this process, there were many opportunities to face.

China has established such a good technology platform system and talent system. If we always adhere to the existing strategy, or if most companies follow this path, I personally think it is difficult to go long-term. For startups in the biotech industry, it may make sense, but for companies that have reached a certain level and scale of development, it may not be the leading choice to release many things.

Two or three years ago, I once said that if China's innovative drugs and biotechnology cannot make money domestically or globally, then the development of China's biotechnology is not sound. Currently, China has a large amount of foreign authorization, but how much money can we ultimately get? How many products can be approved to enter the market? How much value can we gain after entering the market?

Of course, there are some large companies that I highly appreciate now, such as the cooperation between Xinda and Takeda last year, which I am very optimistic about. This cooperation is not simply an out license, and the upfront payment is mainly invested in the subsequent development of the product. Once the product is successfully developed, both parties have 50% equity, which is an indirect "borrowing a ship to go abroad".

From the current perspective, there are already quite a few varieties that have been released, but how many projects are truly being promoted on a large scale to the middle and late stages of clinical practice? What is the proportion? In other words, many of these collaborations may not necessarily target future product launches, but rather aim to clear out these disruptors and eliminate competitors at a small price.

China is a major country, and in the next step, I hope the country can strengthen some guidance in this regard to promote China's innovative drugs to receive appropriate compensation domestically.

Cheng Zengjiang: Speaking of this point, this year's government work report refers to the biopharmaceutical industry as an "emerging pillar industry". How do you interpret this "pillar industry"?

Zhu Xun: The field of biomedicine is very important from the perspective of national economy and people's livelihood, but its industrial chain is not long enough, the driving force is not large enough, and the products are particularly loose. In fact, it is not a problem for any biopharmaceutical drug to be supplied globally by a Chinese company. However, several or even dozens of companies are currently producing and competing with each other, which makes it crucial for biopharmaceuticals to go global.

I often emphasize that the Chinese biopharmaceutical industry chain is a trilogy of "Chinese consumption, Chinese manufacturing, and Chinese creation". Currently, in terms of Chinese consumption, the accessibility of drugs has been achieved, but it has not generated the expected commercial benefits. The realization of these commercial benefits will lay the foundation for us to promote internationally.

Many companies currently do not have more products available, it's not that they don't want to do it, they really want to do it, but truly doing this requires huge financial support, and relying on the domestic market to support this part is not affordable. This is a serious challenge we are currently facing.

Chinese consumption has been completed, and as for Chinese manufacturing, whether it is made in China or manufacturing in China, I believe it is crucial. Drugs are special commodities for any country, requiring pre-approval and market access.

Among them, there is currently no product in the world that has such strict standards as FDA and the United States as drugs. In the past two years, I have visited several countries and basically mentioned that if the FDA approves, we can consider it. If the FDA does not approve, we must conduct large-scale trials.

For enterprises, they do not have a large market and have to conduct so many experiments, which most Chinese companies cannot accomplish. This requires government intervention, such as entering these countries through the "the Belt and Road".

In recent years, I have also suggested through various channels that the country should set up a "health branch" at the same time when the "the Belt and Road" Summit is held. If 20 or 30 overseas leaders can bring their directors of drug administration and ministers of health, they will take them to these enterprises to have a look at our standards, our conditions, and our drug use. On the basis of real recognition of China, they will give some pilot policies for rapid approval. The details can be determined again.

Overall, relying on any individual enterprise to export on its own, especially in the field of formulations, will not be very efficient. Therefore, this step of development is crucial for the overall development of China's biopharmaceutical industry.

The next step is to truly enter the stage of China's creation. The pharmaceutical industry has a particularly long cycle, and scientific breakthroughs often come with a series of papers. In recent years, many targets and pathways have been thoroughly studied, but many have not been developed into drugs. Why? Because it requires a technical platform system to support and a lot of trial and error to complete, which is precisely China's advantage.

China's innovative drugs are fully capable and have the opportunity to occupy a very important position on the international battlefield through long-term layout, steady development, appropriate policy support, and nationally oriented export channels. I think the probability of surpassing the United States in this field may be greater than in other fields.

Only with the baptism of Chinese consumption and the nurturing of appropriate commercial returns can Chinese innovative drugs promote their entry into overseas markets. Once they enter overseas and grow rapidly, they can give us a say in the international pharmaceutical business rules.

China has the largest population of innovative drug users, with approximately one-third of the global population having access to innovative drugs, and over 50% of this third being in China. Recently, I have been to a series of countries, including Egypt, Vietnam, Malaysia, Laos, etc. Many drugs, including some biosimilars, are basically unavailable. So, despite facing significant challenges, we should have full confidence in the development of Chinese medicine.

Last December, I gave a report in Shanghai with a different title than before: How Chinese innovative drugs go from research and development stories to profit stories. Chinese innovative drugs cannot complete the entire closed-loop process by only telling research and development stories. We must turn research and development stories into profit stories.

If you look at MNCs, you will find that many companies make more profits every year than our pharmaceutical company's sales. MNCs are using their profits for subsequent research and development BD， We are currently in the stage of being chosen by others, and after most drugs are selected, how will this project develop in the future?

Most importantly, during this process, the most potentially valuable stakeholders of the project are no longer in your hands, and you have little control over the future development of the project. Therefore, starting from October 2025, BD has become a "killer" for many companies' stock prices.

Cheng Zengjiang: I don't think that's the case. It's more about the rotation of the capital sector in the capital market, where they take advantage of this opportunity to sell, rather than saying they don't have a good outlook.

Zhu Xun: We cannot rule out this possibility, but there is still an underlying logic behind it. Currently, there are over 100 companies listed on the Hong Kong Stock Exchange's 18A, Science and Technology Innovation Board, and Nasdaq in the United States, of which about 30 have products entering the market.

Except for a few very top companies, all of these more than 30 companies have sales, but if you look at their stock prices, those companies that have not sold have relatively strong stock prices. In other words, they can still tell stories without sales, but once the product enters the market and the boots land, the story cannot be told.

Of course, you are talking about one of the factors, and the other factor behind it is that as we have seen, products cannot support high market value solely on the domestic market. Therefore, if you sell the most valuable part of the BD overseas, investors will think that your value will be greatly discounted.

Cheng Zengjiang: But without BD, how can I prove my strength? And now, when it comes to BD going global, it actually sells the overseas rights of its products, which, especially in the European and American markets, is not something that most Chinese companies are good at.

Zhu Xun: Which field are we good at? In other words, the Chinese market is large, but PD-1 sells for over 40 billion US dollars globally in a year. What is the proportion of several drugs together in China? Our usage accounts for half of the world's total, but our sales account for less than one tenth of the world's total. In this process, China will have to take this step sooner or later, and it cannot be achieved overnight. Medicine is a long-term industry.

For BD, the next step should not only focus on BD itself, but also on its trends, directions, and transaction structure. Currently, there is a good opportunity as overseas large companies' R&D has been cut, and overseas small biotech companies have particularly low efficiency. They will inevitably come to China. When many multinational companies focus on China, it will to some extent enhance the bargaining power of these Chinese companies.

On this basis, how to make Chinese companies not only tell the story of research and development, but also the story of profitability? Whoever can first tell the story of profitability represents the future development trend of Chinese biotechnology.

Moreover, what people are talking about more now is actually the 'entrepreneurial story'. But the threshold for entrepreneurship seems to have lowered, especially with the help of AI, where one person can start a business, as if anyone can tell a story. As long as you can make some money, it's a good story, which has also given rise to the "investment story" behind it.

Recently, a similar situation has also emerged in the pharmaceutical field of BD. Some small companies do not use the money received after completing BD for subsequent research and development, such as requesting that the money be used to distribute dividends to shareholders first. What about after dividing the red? No one cares about what the company will do next. So, many investment agreements now come with various commitments and additional clauses.

Actually, in the end, all stories have to come down to one fundamental point - you have to become a good product. Making a good product is much more difficult. A good product must be produced. To launch a product, you need to have sales revenue, sales profit, and market share. To reach this point, it is difficult to achieve significant sales and profits solely in the Chinese market.

The next step, even more difficult, is to become a good company. In fact, in any field internationally, the top companies are generally within 20.