Markets & Finance: China Biotech Stirs U.S. Venture Capitalists

 

 

“Chinese drugmakers are advancing increasingly innovative medicines that challenge the U.S.'s leadership in biotechnology, forcing venture capitalists to rethink their template and driving U.S. portfolio companies to be more efficient.

 

In China, regulatory reform, widening insurance coverage for medicines and the return of Western-educated scientists have awoken its biotech sector in the past several years.

 

Once known for me-toos, China's drug industry now draws global attention. The world's top drugmakers -- operating globally and mostly headquartered in the U.S., Europe and Japan -- booked $68.7 billion in deals from Chinese companies last year, more than tripling the $22.2 billion total of 2024, according to market tracker DealForma.

 

Other research finds China's slice of global biotech venture funding expanding. In the first half of this year, Chinese biotechs raised 15% of global biotech venture capital, up from 9% in all of 2025, according to life-sciences investment bank Locust Walk. U.S. biotechs secured 58% of that venture pie in the first half, down from 64% in all of 2025, the firm said.

 

From another angle: In 2022, the top pharmaceuticals closed just two deals in China of at least $50 million paid upfront, in contrast to 30 in the U.S., DealForma said. Last year, the major drugmakers signed 19 such deals in China and 20 in the U.S. Through June 17 of this year, there were 10 such Chinese deals and nine in the U.S., the market tracker said.

 

U.S. venture capitalists are responding by trying to tap into China's innovation engine, pushing for regulatory changes from the Food and Drug Administration and financing startups with artificial-intelligence tools to streamline clinical trials.

 

"We had gotten complacent because we never had a challenger," said Dr. Rod Wong, managing partner and chief investment officer of RTW Investments. "Now we need to go faster."

 

Geoff Meyerson, co-founder and CEO of Locust Walk, said that because venture funding in China is scant compared to the U.S., the upfront payments from licensing deals prop up the country's biotech ecosystem.

 

The U.S. still has a commanding lead in discovering first-in-class drugs and in global clinical development and commercialization, he said.

 

But China has taken the lead in improving on existing drugs and concepts because of its lower costs, efficiencies and well-trained scientists. "That edge has definitely been ceded," he added.

 

It is unclear how fast the U.S. can reshape industry and regulatory practices to get safe new drugs to market more quickly.

 

Large patient pools -- China's 1.4 billion population towers over the U.S.'s 349 million -- as well as lower labor costs allow clinical trials in China to enroll participants faster and more cheaply than in the U.S.

 

At the same time, Chinese hospitals and researchers have sought to burnish their reputations by being points of entry for patients who want the cutting-edge drugs of clinical trials, said Fangning Zhang, a Shanghai-based partner with McKinsey. "Because of the intense competition in China, we see an intense mindset," she added.

 

In the U.S., investors and executives complain that regulatory hurdles slow studies with no commensurate gain in safety. In June, the FDA, acknowledging the frustration, disclosed plans to accelerate clinical research, including a proposed pilot to speed initiation of human studies.

 

The growing competition is sharpening U.S. biotechs' focus on disciplined growth and prompting some to keep discoveries quiet for longer to avoid alerting rivals in China.

 

U.S. venture investors, meanwhile, are bankrolling startups to advance compounds licensed from China -- including obesity-focused Kailera Therapeutics, which went public in April -- and looking to add Chinese drugs to U.S. portfolio companies.

 

Venture firms are also exploring ways to help their portfolio companies conduct clinical studies in China -- though language barriers and a lack of relationships with Chinese contract-research organizations, or CROs, often complicate those efforts.

 

Biotech startups need human clinical proof-of-concept data to catalyze venture financings, partnerships or mergers-and-acquisitions. To cash-strapped companies, China's efficiency is especially appealing.

 

Lee Cooper, a managing director with life sciences investor Delos Capital, said U.S. entrepreneurs with few connections to China have pitched him on the idea that they can lower costs by conducting clinical trials there.

 

"A lot of biotechs that have limited resources are recognizing that having a plan that gets them more data for less time and money might be the best way for them to survive," Cooper added.

 

Without relationships with Chinese CROs, however, it can be hard to know if a drug is getting these firms' best people. Delos recently struck a partnership with Taiwanese biotech AP Biosciences to launch U.S.-based biotechs. AP Bio can use its relationships in China and other countries to help these startups conduct clinical studies.

 

Venture firms also are investing in AI to make U.S. clinical trials more competitive.

 

One obstacle for U.S. studies is low participation. Only about 7% of U.S. cancer patients, for example, join clinical trials, in part because they typically take place at academic medical centers. Most patients, however, are cared for in community hospitals, and travel costs discourage many people from participating.

 

"The majority of clinical trials are run at centers that see the fewest number of patients," said Kent Thoelke, founder and chief executive of startup Paradigm Health.

 

Paradigm, whose investors include ARCH Venture Partners, uses AI to tunnel into the electronic records of community and rural hospitals to find patients who qualify for studies, making it easier for these centers to conduct clinical research. "Our argument has always been: The patient populations exist in the U.S., it is accessing them," Thoelke said.

 

ConcertAI, which raised a $150 million venture round in 2022, uses its algorithms to track the course of cancer patients' disease so researchers can identify people likely to switch treatments. Some might want to join a clinical trial as their next option.

 

If researchers don't spot patients at this juncture, they might go on a new treatment, such as a chemotherapy, rendering them ineligible for a trial, said Robert Zambon, vice president, product, clinical trials. "That temporal component of the right patient at the right time is critically important," he added.

 

American trials will never be as cheap as those in China, but the U.S. can make them faster, said Gaynor Anders, chief delivery officer for Trialbee, a tech-enabled patient-recruitment company.

 

"Where the U.S. is going to have to turn this around is not on price, but on speed," she said.

 

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Brian Gormley writes for WSJ Pro Venture Capital.” [1]

 

1. Markets & Finance: China Biotech Stirs U.S. Venture Capitalists. Gormley, Brian.  Wall Street Journal, Eastern edition; New York, N.Y.. 10 July 2026: B9.