China's innovative drugs enter the "deep water zone": how can the supply chain shift from "empowerment" to "co-creation"?

Why is AI · China’s innovative drug supply chain shifting toward a deep collaboration model?

21st Century Business Herald Reporter Ji Yuanyuan

As China’s innovative drug pipeline accounts for 30% of the global share, and China is no longer just receiving overseas licenses but becoming a key source for major global pharmaceutical companies to introduce assets, the entire industry ecosystem’s supply and demand relationship is subtly shifting.

At the just-concluded 11th BioChina Biotechnology Industry Conference (BioChina 2026), this change was particularly evident. In the past, multinational giants’ narratives in China often focused on “bringing global innovation into China.” Today, upstream suppliers are repeatedly emphasizing, “China needs it, we deliver.”

Since 2026, many multinational giants have announced increased investments in the Chinese market. For example, on March 11, Eli Lilly announced plans to invest a total of $3 billion over the next decade to expand its supply chain capacity in China, building a domestic production and supply system for oral solid formulations, focusing on the production capacity of the new generation oral small molecule GLP-1 receptor agonist orforglipron.

On January 29, AstraZeneca announced plans to invest over 100 billion RMB (about $15 billion) in China by 2030 to expand its layout in drug manufacturing and R&D. These investments will deepen AstraZeneca’s research and development presence in China, including global strategic R&D centers in Beijing and Shanghai, which collaborate with over 500 clinical hospitals and have led numerous global clinical trials in the past three years. Meanwhile, the company will upgrade its manufacturing bases in Wuxi, Taizhou, Qingdao, and Beijing, and will announce plans for new production facilities as appropriate.

This year, the government work report listed biomedicine as a “new pillar industry,” alongside integrated circuits, aerospace, and the low-altitude economy. Additionally, the report pointed out efforts to deepen reforms in foreign investment promotion systems, ensure national treatment for foreign-funded enterprises, implement a new industry catalog encouraging foreign investment, promote reinvestment of foreign capital domestically, and expand localized production. It also emphasized strengthening services for foreign enterprises and enhancing the “Invest in China” brand.

This also means that in 2026, when financing environments tighten, compliance requirements increase, and competition for going global intensifies, Chinese biopharmaceutical companies need not only “selling seedlings” but also partners capable of navigating cycles together.

Li Lei, President of Cytiva China, told 21st Century Business Herald that China is increasingly becoming an important source of innovative therapies globally, and transforming innovative results requires systemic capacity building starting from the R&D source.

How to solve the “efficiency business” problem?

What is the core anxiety in the industry now? It’s no longer just about “encouraging innovation,” but about how to realize value after innovation.

Several industry insiders pointed out that China’s innovative drug industry is experiencing a painful transition from “quantity expansion” to “source innovation.” On one hand, the drug regulatory authority is speeding up review and approval processes, but quality and safety supervision are tightening simultaneously. On the other hand, the enormous pressure of medical insurance payments makes it difficult for companies to balance “soulful price negotiations” with commercial returns.

Against this backdrop, pharmaceutical companies’ demands on upstream supply chains are fundamentally changing. Li Lei observed that companies are no longer simply seeking to lower procurement prices but are pursuing “cost reduction and efficiency improvement across the entire lifecycle.”

“The industry needs not low-price competition but ‘co-creation’ and ‘upgrading,’” Li Lei said in an interview. This judgment is directly reflected in Cytiva’s recent strategic release: launching a locally developed new brand “Ruiyu” tailored for the Chinese market, and a new bioreactor platform, Xcellerex X-platform.

Take the X-platform as an example. This bioreactor increases cell culture density to 1×10⁸ cells/mL. In the current tightening financing environment for biopharmaceuticals, high-priced equipment often faces market acceptance challenges. Li Lei explained, “Cost reduction and efficiency are not just about the absolute price of a device or material but depend on the optimization of the entire production system.” He believes that high-density cultivation, which improves efficiency, the intelligent platform that offers better process controllability, and process analytical technology that provides data traceability are fundamentally long-term investments.

This also addresses the industry’s deeper logic regarding “domestic substitution of equipment.” Currently, substitution is not simply about pursuing lower costs but about reconstructing supply chain costs under the same or even higher quality standards. It is reported that in 2026, Cytiva plans to launch more than ten new products in China, over half of which will be domestically manufactured, with the “Ruiyu” brand leveraging China’s supply chain advantages, adhering to global quality standards, and seeking a balance between “stability” and “inclusiveness.”

If the commercialization phase is about “cost reduction and efficiency,” then in early R&D, Chinese pharmaceutical companies face the challenge of technological breakthroughs from zero to one. Especially in cutting-edge fields like mRNA and in vivo CAR-T, patent barriers and process scale-up risks are like Damocles’ swords hanging over companies.

Li Lei admitted that Chinese companies are very agile in deploying in mRNA and in vivo CAR-T fields, but this acceleration reflects the challenge of moving from “fast follow” to “differentiated competition.” “In the future, those who can beat the track are not necessarily the earliest storytellers but those who are the first to connect technology, processes, and regulatory pathways.”

Li Lei described that in cooperation with local company Xinye Shengwei, Cytiva provides support in LNP delivery, process development, and purification optimization. According to related companies, this cooperation mode saves about 1 to 2 years of development time and reduces investment by hundreds of millions of yuan.

This “teach a man to fish” model is actually an inevitable choice for deep integration of supply chain enterprises into local innovation—only when clients’ pipelines are globally competitive and free of patent issues can upstream suppliers’ market space continue to expand.

From “selling seedlings” to global competition

At the beginning of 2026, the Morgan Stanley Healthcare Conference spotlighted Chinese pharmaceutical companies. According to the NextPharma database, by December 31, 2025, the total transaction amount of Chinese innovative drug licensing and outbound authorization reached $135.655 billion, with an upfront payment of $7 billion, and a total of 157 transactions, hitting record highs across all metrics.

However, behind this wave of going global, concerns remain: many deals are still early-stage licenses akin to “selling seedlings,” with limited share in the global commercialization chain. Moreover, as transaction scales rapidly expand, some licensing agreements have not been fulfilled upon maturity, with many projects terminated early after several years of execution, and some cases involving disputes leading to arbitration or litigation, sounding alarm bells for the industry.

Li Cheng, partner at Simmons & Simmons and head of healthcare and life sciences for Greater China, previously told 21st Century Business Herald that Chinese pharmaceutical companies should proactively establish risk prevention systems covering the entire transaction process, strengthen awareness of contract performance and potential disputes, and actively prepare for dispute prevention and resolution. They should also consciously enhance internal teams’ and external professionals’ coordination capabilities in dispute and crisis management, rather than passively remedy after problems occur.

Otherwise, once a crisis erupts, companies will inevitably fall into a passive and unprepared situation, with impacts not only on existing collaborations but also on ongoing or planned strategic layouts (such as equity financing and listings) and daily operations, further affecting team stability and employee morale.

How to help Chinese innovation gain more initiative in going abroad? Li Lei believes this requires companies to align CMC (Chemistry, Manufacturing, and Controls), quality systems, and compliance documents with international standards early in R&D.

Li Lei said that supply chain companies are playing the role of “bridge for going global.” By leveraging their production and R&D networks in over 40 countries, they can help Chinese pharmaceutical companies early on avoid potential regulatory risks.

During this year’s two sessions, National People’s Congress deputy and Huahai Pharmaceutical President Chen Baohua also proposed that improving patent systems could clear obstacles for Chinese innovative drugs going abroad, such as adding “export exemptions” during patent compensation periods. In practical terms, every detail from process development to equipment validation could become a variable in future FDA or EMA approvals.

2026 is seen as a “year of differentiation” for China’s biopharmaceutical industry. On one hand, policies have officially listed biomedicine as a new pillar industry; on the other hand, the market is scrutinizing each company’s cash flow and R&D efficiency more rigorously.

In this environment, the localization strategies of multinational supply chain giants are also evolving. Merely shifting manufacturing no longer suffices; deeper “capability co-building” has become a consensus.

Li Lei revealed that Cytiva plans to increase the proportion of local manufacturing support revenue to over 50% within the next 3 to 5 years. More importantly, this localization is extending into R&D.

“We are not content just to be product and service providers but aim to be long-term partners and capability co-builders for Chinese innovation,” Li Lei emphasized. From expanding capacity at the Beijing and Tonglu bases, to providing end-to-end process support at the Shanghai Sci-Tech Innovation Center, and linking global resources through the “Sailing Plan,” Cytiva is building an empowerment system covering the entire “R&D-Manufacturing-Going Global” chain.

This system’s value is especially prominent in the current industry cycle. When capital recedes, companies no longer have unlimited resources to try and fail; partners who can provide certainty, shorten R&D cycles, and reduce process risks become scarce resources.

For companies, internalizing external technological resources into core competitiveness is key to cycling through challenges and reshaping the global innovation landscape. As China’s innovative drugs enter the “deep water zone,” the role of the supply chain is being rewritten. It is no longer just reactive and service-oriented but proactive and co-creative.