Here Comes the Booming Chinese Biotech Sector

You’ve heard about Chinese EVs. You’ve heard about Chinese batteries and solar panels. And recently you learned that China is near the cutting edge of AI research. Here’s another category: biotech. In 2019, the Chinese share of molecules licensed to Big Pharma companies was 0%. In 2024, it’s now 31%. On this episode we speak with Tim Opler, a biotech industry investment banker at Stifel. He explains how this industry has taken off in such a short period of time. Among the factors he cites: a generation of Chinese research scientists working in the US who hit a ceiling in terms of promotion and thus went back home to start companies. It’s also far cheaper to run clinical trials in China, due to the structure of the healthcare system. We also talk about the broad history of the pharmaceutical industry, how it’s evolved, and what impact, if any, AI will have on drug discovery. Read More:Former J&J Scientist Bets on China BiotechChinese Health Stocks Surge on DeepSeek Integration PotentialOdd Lots is coming to Washington, DC! Get your tickets for our Jones Act debate here. See omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Finance is increasingly being built on digital rails. But as the adoption of virtual assets, tokenization and stable coins grows, can regulation not only keep pace, but help accelerate it? Find out more later in the podcast.

• 0:16Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 1:00Speaker 01

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:39Joe Weisenthal?

  Hey, Odd Lots listeners, we're coming to DC.

• 1:42Tracy Alloway?

  We're finally doing it, Joe. It's going to be our first live show in Washington DC, our nation's capital. It's also finally going to be the time where we actually talk about the Jones Act.

• 1:53Joe Weisenthal?

  We've been talking about doing the Jones Act episode of Odd Lots for a long time, and it's become this recurring joke that we've never done. But we're going to do it in grand style because we're going to be doing it live in DC. And it's actually going to be a debate.

• 2:07Tracy Alloway?

  Yeah, so we have Sarah Fuentes. From the Transportation Institute, she's going to be taking the pro side. And we also have Colin Graybough of the Cato Institute. He'll be taking the against side. It's going to be really interesting to see how all of that shakes out.

• 2:23Joe Weisenthal?

  In addition to that, we're going to be speaking with Blair Levin, who was around during the telecom bubble. And we have Andrew Ferguson, the new head of the FTC, the one who's replaced Lena Kahn. We're going to be talking about mergers and acquisitions and all that stuff. So it should be a really fun night.

• 2:38Tracy Alloway?

  If you want to come and join us for that evening, it's going to be on March 12th at the Miracle Theater. Go to Bloomberg.com/oddlots and you can find the link to purchase tickets. We hope to see you there.

• 2:53Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 3:08Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 3:14Tracy Alloway?

  And I'm Tracy Alloway.

• 3:15Joe Weisenthal?

  Tracy, you know, we talk a lot about China, talk about cars and batteries. It's time for a Chinese biotech. It's time for the Chinese pharma episode.

• 3:26Tracy Alloway?

  Joe, it's just what I always wanted. Thank you so much. No, I am genuinely excited to talk about this. One reason is because this is a sector that I don't really know that much about. Another reason is it has actually been in the news quite a bit recently with the cuts to NIH funding, which we've discussed and things like that. And then more generally, it sort of sits in that nexus of policy aimed at boosting specific sectors and also competition between the US and China.

• 3:58Joe Weisenthal?

  That's exactly right. And it's like, you know, we've just gotten used to the fact that in many areas of sort of physical manufacturing, there are very, there are many industries in which China can compete and produce things either cheaper and higher quality. It seems like many areas relate to batteries and automobiles and all kinds of stuff like that. We know that. And then, of course, we had like the deep sea moment and a bunch of people like, oh, it's not just a physical things. It's not just gigantic plants. Also, a lot of competition in areas like software, particularly artificial intelligence. That raised all sorts of questions. And then lately, the drum is beating that we have to take very seriously pharma and biotech.

• 4:42Joe Weisenthal?

  And this is one of those areas that I think most people, certainly me, would say like in the year 2025, still, my conception, my head is that the cutting edge is in the US and Europe still, which I can't say that for a lot of industries at this point.

• 4:58Tracy Alloway?

  I want to know how medicines are actually made.

• 5:00Joe Weisenthal?

  I do too.

• 5:01Tracy Alloway?

  And manufactured. I read a long time ago, I read a book about the Twinkie. And it broke down every ingredient that went into a Twinkie and where it came from. And it was really interesting because it turns out a lot of those ingredients came from China. I didn't know that.

• 5:17Joe Weisenthal?

  I didn't know that either. But you know, I did where did know because we briefly touched on it in our recent episode with the two fellows from Goldman Sachs about China's role in the pharmaceutical supply chain, providing key ingredients to India, which then plays a key role. Anyway, there's a lot I want to know. I don't think I know anything. And I just want to jump into this episode because I want to learn more. In that spirit, we really do have the perfect guest. He's someone who recently put together a slide deck. And I kind of think that slide deck catalyzed some articles, the deep sea moment in biotech, got a lot of attention on social media. So we're going straight to the source. We're speaking with Tim Opler. He's a managing director in the healthcare investment banking group at Stiefel.

• 6:02Joe Weisenthal?

  Tim, thank you so much for coming on Odd Lots.

• 6:04Speaker 04

  Thank you. And Joe and Tracy, I really appreciate you having me. I'm very excited to be here today.

• 6:10Joe Weisenthal?

  What is the managing director in the healthcare investment banking group at Stiefel?

• 6:14Speaker 04

  I don't actually manage a lot of people. So managing director is just a title. But basically, I'm a senior banker and investment bankers are in the business of putting people together, people that need money with people that have money, people that want to license something out with people that want to license something in. So I'm a middleman. And basically and get paid commissions for doing it.

• 6:32Tracy Alloway?

  With your middleman position, could you maybe describe the ecosystem of getting new drugs to market? Like, where does it tend to start? What corporate entities does it go through? And then what's the the process from there to getting into an actual physical medicine?

• 6:50Speaker 04

  It's a great question. So, you know, back in the old days, say if you rolled back the clock 50 years ago, large pharmaceutical companies, Merck, Pfizer, Eli Lilly, had these research and development groups and they would sit around and read up articles and do their own basic science and say, you know, I think we should do something to go after such and such type of virus. They would work on it for five or six years. They would come up with a drug candidate. They'd go test it in people. It would work, hopefully. And then they would get it approved and then they'd go out and market it. Things started to change. You may remember, you know, as back as the late 1970s, companies like Genentech and Biogen came on the scene. And so today, we have a huge biotech industry.

• 7:34Speaker 04

  These are kind of like the, you might call them the the farm league of big, of big pharma. They're the ones that come up with the new drugs. Of course, the pharmas are still doing their own work, too. And so biotech's become a huge part of our ecosystem. It's also become a big part of the capital markets. So there's whole groups of people that, you know, got M Ds and PhDs and went to work for funds. And they sit there, you know, does this drug candidate look like it's going to make it? I'm going to bet for it or I'm going to bet against it.

• 8:02Joe Weisenthal?

  What does biotech mean? I sometimes ask Tracy what fintech means and I still don't know the answer to that. But what is biotech?

• 8:09Tracy Alloway?

  Right touch banking.

• 8:11Speaker 04

  So I'd like to give three different answers. First of all, when people say biotech in general, what they mean is kind of the more high tech part of the pharmaceutical industry, the cool part.

• 8:20Joe Weisenthal?

  Yeah, that's always, I just figure it's like, cool.

• 8:23Speaker 04

  What I mean by biotech is the, when you have a company whose sole asset is a drug candidate that has not yet been approved by the FDA, so pre-commercial. When I say biotech, that's what I mean. Other people think it refers to biologics. And it's true, the original biotechs like Genentech were focused on biologics. So it's understandable that some people would associate biotech.

• 8:46Joe Weisenthal?

  And that's a distinct type of therapy from the traditional type of medicine that would have been developed at a mer.

• 8:53Speaker 04

  That's correct. So traditionally, there are two types of medicines. There's small molecules, those little white pills some people take every day. And then there are injectable biologics. Those are products that are much more complex, much larger molecules and are made in very different ways.

• 9:09Tracy Alloway?

  Can you talk about that, going right to my question about how medicine is actually made? How?

• 9:15Speaker 04

  Yeah, so for a small molecule, it's actually a chemical. So the pharmaceutical industry actually came out of the chemical industry. So if you go back to the history of pharmaceuticals, say like, what was going on in 1650? Well, people were literally chemists. In fact, still in England today, you can walk into what we would call pharmacy, they call it a chemist. And they would literally, you know, put together your antimony or whatever it was and serve it up to you. So that still goes on, but of course, those small molecule pills are made in giant factories of what's called API, which is really just fine chemical. The other side of the industry, though, these biologics are made typically in buckets.

• 9:55Speaker 04

  So you would take, for example, yeast, or you might take E. coli, or you might take what are called Cho cells. Those are Chinese hamster ovary cells. Why do they use them? Because they're really good at growing biologics. And you insert a piece of DNA into the DNA of that species. And then that causes that species to manufacture the protein of interest. And that's a whole other industry. And then those say Cho cells or E. coli cells or whatever they are, they're grown in these giant tanks. And so you might have like a 40,000 liter tank full of growth medium. And those cells are just swimming around and making their proteins. Then they're harvested and you pull out the protein of interest.

• 10:37Tracy Alloway?

  I'm sorry, did you say Chinese hamster ovary cells?

• 10:40Speaker 04

  I know, we're talking about China. See, China is everywhere.

• 10:44Joe Weisenthal?

  Tracy, I already feel like we're gonna have to have Tim back already, right? Because like, this is already one of those topics where like, we probably could just talk about one niche aspect of the supply chain for some ingredient. Because we're not even actually close to getting to it. But we need to build up to, we need to build up to Chinese.

• 11:01Speaker 04

  Well, let's, let's just jump right into it. I want to make, I want, I want to make a comment here.

• 11:05Joe Weisenthal?

  Okay.

• 11:05Speaker 04

  So China is all of a sudden starting to be very competitive with the US biotech ecosystem. I personally don't think that's a surprise. I don't think that's a bad thing. And here, here's what's going on. We developed the first biologics in the United States in the 1970s. Well, it's 2025, right? That was 50 years ago.

• 11:25Joe Weisenthal?

  Yeah.

• 11:26Speaker 04

  I mean, you would think that the know how of how to make those things is spread around. And it has. And so what happened was, you know, in the 1990s, 2000s, armies of Chinese people came to the United States for jobs inside all those companies. And they learned, not surprisingly, how to make what was being made then, which was biologics. You know, I don't want to call it racism. I think that's probably unfair. But for whatever reason, a lot of these Chinese personnel weren't promoted. They didn't become the SVP at some big shot US biotech company. You know, they were stuck in a director job and they got frustrated and left and went home to China. Now, here we are, 2025, and they're crawling all over

• 12:11Speaker 04

  us. Like, they know how to do exactly what we know how to do. And guess what? Just like in batteries, just like in telephones and these other sectors, they're pretty good at it. And so all of a sudden, US biotech, I think, has really woken up just in the last year or two and said, whoa. We've got competition like these guys are as good as us. I'd say they're probably better in a lot of ways.

• 12:33Joe Weisenthal?

  So I definitely want to get to where they are and why they might be better and what are the conditions that perhaps allow them to be better. One last sort of like precursor question or background question is for these chemicals, I imagine that, okay, we're going to talk about breakthroughs that are happening that are in China that are, you know, in terms of therapies or biologics, et cetera. But if we wind back a few years to where people's brains were stuck at in terms of what is the sort of global supply chain of, I mean, the Chinese hamster ovaries, what is the sort of, sort of incumbent global supply chain of key materials, ingredients, equipment for biotech? And what is China's role in that?

• 13:18Speaker 04

  So if you're making a small molecule, which comes down to that basic fine chemical, let's say it's libitor.

• 13:25Joe Weisenthal?

  Okay.

• 13:26Speaker 04

  You could probably make it for less than a place like India or Indonesia or China. So that's called API, active pharmaceutical ingredient. And in fact, China has become a huge source of API because in many ways, you know, China's really good in the chemical industry. So why wouldn't they be good in the API industry?

• 13:59Speaker 00

  What's next for virtual assets? I'm Jacob Grease, host of Economy Scale, a series exploring growth in key global sectors. And in this episode, we're diving into the digital forces shaping finance. Sean McHugh from Dubai-based Virtual Assets Regulatory Authority has this to say.

• 14:15Speaker 04

  We're seeing a lot of institutional players come in, digital asset, dedicated hedge funds, high frequency traders and that sort of thing, and folks who service institutional clients.

• 14:24Speaker 00

  As more capital enters the market, adaptive regulation is likely to become increasingly key. Rhys Merrick of Ripple says.

• 14:32Speaker 05

  A lot of regulators globally would like to keep the industry at arm's length. That's the opposite here. I think also what you'll find is that regulation and frameworks can come out, but some of them are maybe a slight iteration on some 80-year-old policy and not actually in line with what the technology can do and offer. And again, that's very different in Dubai.

• 14:51Speaker 00

  Listen to the full episode wherever you get your podcasts. This series is brought to you by Bloomberg Media Studios and the Dubai Department of Economy and Tourism.

• 15:01Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 15:44Speaker 01

  But according to recruiters, advisors and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 16:24Tracy Alloway?

  Can you contextualize some of China's, I guess, growth in this area with some specific numbers? Because we see all these headlines coming out, like 30% of major pharma licensing deals now involve Chinese companies. I think that's up from like almost zero five years ago. There are some interesting data to look at.

• 16:46Speaker 04

  Yeah. So just to give you a couple of stats, the API that's sourced into the US, I don't have the exact numbers on my fingertips, but I would say at least 25 to 50% of API that's being used in the US generic pharmaceutical industry today is sourced from China. India's another big piece of that. So India and China are both really big. What's interesting is, India has not kind of had this phenomenon of their nationals coming home and opening up local biotech companies. So China created this policy, you know, very intentionally, five, 10 years ago, saying, hey, we want to be really good in biotech. It is strategic for us as a country. It's not that they're trying to beat the United States. It's that

• 17:30Speaker 04

  they need access to these medicines domestically. You know, why pay the giant global price that some US pharma company wants to charge? Like, why don't you just learn how to make it at home? So they very deliberately attracted back what are called sea turtles. These are people that crossed the sea from the US or Europe back home to China. They were then encouraged to start their own biotech companies and apply whatever they had learned, you know, in their jobs in Bristol-Myers Squibb or Novartis or what have you. And boy, learn they had and support they got. And all of a sudden, they're churning out really interesting molecules. And so Tracy, just like you said, last year, 30% of all molecules that were

• 18:11Speaker 04

  licensed in by Big Pharma came from China, not from the United States, not from Europe, not from Japan. They came from China. And I do think that statistic, which was generated by our good friends at Dio Pharma, was really kind of a wake-up call for a lot of folks in our industry.

• 18:28Joe Weisenthal?

  And what, five years ago, that would have been basically zero?

• 18:31Speaker 04

  Yeah, 5%, 0 to 5%.

• 18:33Joe Weisenthal?

  How much is it? Is it genuinely novel therapies? How much is it, they're sort of an existing therapy, but they can make it a better version of it, a cheaper version of it? I understand like cheaper must be sort of a weird concept in an area where there's, I know, a lot of intellectual property, but talk about what is driving that competitiveness and market share gain?

• 18:56Speaker 04

  There's two or three different things going on. So, so the first thing is we're seeing what are called fast follower molecules. Let's just say for the sake of argument that Daiichi Senkyo comes up with something called a B7H3 antibody drug conjugate, B7H3ADC. Well, the Chinese guys see that pop up, they see the patent filing, they look at it, they're like, okay, we're going to make a B7H3, but instead of using this toxin on the ADC, we're going to use that toxin, or instead of using this linker, we're going to use that one. So those are kind of doing small twists around existing constructs. So we call those fast followers. China's really good at fast followers. The second thing that you're seeing are first in class molecules.

• 19:40Speaker 04

  And so the hottest biotech in the United States right now is a company called Summit Therapeutics. They have a $17 billion market cap as we speak. Remember, I define a biotech as a company that doesn't yet have an approved drug. So that's the highest valuation in the world of any company in the world today that doesn't have an approved drug. That molecule, which is a combination of a PD1 antibody with a FEGF modi, PD1 by FEGF it's called, is an excellent molecule. It's working really well in lung cancer. And guess what? It was invented in China. Merck didn't come up with it. Pfizer didn't come up with it. Abbott didn't come up with it. It was come up with in China, and it's the most interesting biotech molecule in the world today.

• 20:24Joe Weisenthal?

  But this is an American company, Summit?

• 20:26Speaker 04

  Right, they went and licensed it for China.

• 20:28Joe Weisenthal?

  Got it, got it.

• 20:28Speaker 04

  Just like we're seeing the big pharmas, US biotechs licensing stuff from China all day long.

• 20:34Tracy Alloway?

  How much does the difference in regulatory regimes play into here? Because one thing we often hear when it comes to outsourcing manufacturing to China, whether it's something basic, like, I don't know, clothing, or something more advanced like medicines, is that it's cheaper to make stuff in China because you don't have as many rules and regulations to either slow you down or add on to costs. Is that a factor here as well?

• 21:03Speaker 04

  That's a complicated question and a complicated answer.

• 21:06Joe Weisenthal?

  We like that.

• 21:07Speaker 04

  Yeah, so for most biologics, the Chinese will allow you to get those into patients more quickly. They have what we call phase zero studies, where you can just go to a doctor and say, okay, hey, doc, I've got people coming in that are dying of ovarian cancer. Use this drug. The FDA will not let you do that. Right, so the FDA won't let that ovarian cancer drug go into a patient until it's gone through typically a phase one study. Interestingly, China is not the only country that does that. Australia does that too. And, you know, we have kind of new sheriff in town at the FDA. It might be an interesting thing to explore,

• 21:47Speaker 04

  kind of accelerating that time to get to the first patient. So that's one place where China is ahead. But in general, their rules are just as tough as our rules. It's not like they have a, you know, a low hurdle and we have a high hurdle to jump over to get a drug approved. Their advantage is more speed to invent, speed to get into the clinic. They're just performing really well on a lot of those key performance indicators.

• 22:15Joe Weisenthal?

  What about the cost of conducting a phase one trial? I mean, these are really expensive endeavors in the United States, and you can spend millions and it goes nowhere past phase one. How does the cost compare to run the equivalent in China?

• 22:32Speaker 04

  I mean, we should pause for a moment. So the US has capitalistic medicine system, right? So doctors are for profit. So if you're a physician, of course, you're trying to care for your patients. But let's be honest, a lot of those dermatologists and endocrinologists that you see, they're running a business. The other day I was talking to a cardiologist. I said, like, how many patients do you see? A year, he's like 8,000. And I was like asking the lady at the front, like, how much like does the average patient visit bill? She's like, oh, four or 500 bucks. So you can do the math. That guy's pulling down like 5 to 10 million dollars, right? So, running a physician practice in the United States can be very lucrative. I'm not saying every doc's doing it, just to be clear. But now you're a cancer doc and

• 23:15Speaker 04

  you're at MD Anderson or Dana Farber someplace and some company shows up, GSK, and they want you to test this drug. How much are you going to charge GSK for each patient? It turns out that the average price to enroll a patient in a cancer trial in the United States is between 200,000 and 400,000 dollars.

• 23:35Joe Weisenthal?

  Per patient?

• 23:36Speaker 04

  Per patient.

• 23:37Joe Weisenthal?

  And how much of that goes to the doctor?

• 23:39Speaker 04

  A lot. And a lot to the hospital. I mean, this is a big issue that's just popped up.

• 23:44Joe Weisenthal?

  This is a big source of hospital and doctor profits, that they're essentially selling access to their patients.

• 23:50Speaker 04

  You bet. Especially at the big places. So, developing drugs, especially in cancer in the United States is very expensive. The other thing I'd note is there's a lot of competition for talent in our country. Again, it's a capitalist talent market. So, you know, let's say you're a doctor working at MD Anderson and then GSK comes along and says, hey, we'd like you to be our chief medical officer. We'd like you to run this cancer program. Like, is that a 150,000 dollar job? I don't think so. The average chief medical officer in the United States today is pulling down between a half million and 1.5 million dollars a year, depending on your level of experience and how good you are. So, all of a sudden, you see biotech companies that are going out to raise 100

• 24:35Speaker 04

  million dollars. Well, that's how much you need to raise to enroll the trial and pay all those people. And, you know, they have lots of posh offices as well and expensive places. And so, US biotech's not so efficient. In contrast, in China, there are no 700,000 dollar chief medical officers. There are no 200,000 dollar patients. It's a communist country, right? Doctors, you know, make 30,000 dollars a year. You don't get to go make hundreds of thousands of dollars a year for being a doctor. And you definitely don't rent out your patients.

• 25:10Joe Weisenthal?

  Tracy, I have to say, this is something I sort of became aware of in this phenomenon of doctors and hospitals renting out their patients for this episode. I had no idea that that's how it worked. And I had no idea of the scale of these numbers. Like, if there's one fact that's sort of like expanding my mind, this is the one.

• 25:32Tracy Alloway?

  I didn't know it either. We should probably do an episode just on the market for renting out cancer patients, although that sounds very dystopian.

• 25:40Speaker 04

  It sounds bad when you put it that way.

• 25:41Joe Weisenthal?

  No, but like, they're gating, right? They're profiting from the fact that you're the sort of the channel, right? They're the channel through which the drug company must find patients.

• 25:54Speaker 04

  I mean, let's just talk reality of a medicine in America right now. There are certain specialties that make money. Cancer treatment is one. Cardiology surgeries is another. In contrast, seeing people in the emergency room, seeing people in a primary care sense, you lose money doing those activities. Payments from insurance companies are poor. And so hospital systems by necessity have become for profit. They have no choice.

• 26:25Tracy Alloway?

  So one of the reasons we wanted to speak to you is because in the course of your work, you've talked to a lot of CEOs and executives on, I guess, both sides of the ocean here in China and in the US. Give us a sort of temperature check of what people are saying right now when it comes to the US versus China pharmaceutical biotech industries.

• 26:49Speaker 04

  So first of all, the pharma companies, the big pharma companies, they're thrilled that China's there. It gives them more options, right? You know, there's new molecules, they might be innovative molecules. The Chinese companies generally don't globalize on their own. One of the interesting things is there's no Chinese big pharma companies. Name the largest pharma company from China you've ever heard of. You can't do it. There isn't one, right? It might be an obscure company like King Ray or or CSBC. They're relatively small compared to our pharmaceutical companies. So it's great hunting for those guys. For the Chinese companies, access to the US pharmaceutical market is a godsend. Capital is tight, prices are low. For the US biotech company, China can be worrisome.

• 27:32Speaker 04

  But honestly, when I speak to my friends in the US biotech ecosystem, there are some concern, but most of them are in indirect line of fire with Chinese competition. It's the US investor, the US biotech investor that's kind of worried. So all those stories that you were referring to, a lot of them are sort of freaked out saying, hey, like 30% of molecules are coming from China. What about our biotech companies?

• 27:56Joe Weisenthal?

  Wait, so why wouldn't your friends in the industry be angry? I mean, presumably they're leveraged to their own stocks. If the investors, why aren't they, why aren't your friends in the industry more anxious?

• 28:06Speaker 04

  Because the Chinese, by and large, are taking older technologies and biologics and putting twists and turns on those technologies. Most US biotech companies are not in that business right now. So by and large, they've understood long ago that they need to differentiate. But that's not all of them. I mean, there are certainly some companies out there that are in direct competition. And by the way, you know, the other day I was looking at these antibody drug conjugates. So China's gotten really good in antibody drug conjugates. They're very popular. I think there's four or five major public antibody drug conjugate development companies in the US. They all have-

• 28:45Joe Weisenthal?

  The type of cancer treatment that combines a monoclonal antibody with a cytotoxic cancer killing drug. Okay, keep going.

• 28:53Speaker 04

  That's right. So an ADC is basically chemotherapy that's directed specifically to the cell. So you don't have to worry about losing all your hair or whatever if you take an ADC. So the average enterprise value, that's your market cap plus your cash of a US ADC biotech today, has gone negative. Two years ago was quite positive. And I do think that those folks have, you know, taken some heat from Chinese competition.

• 29:40Speaker 01

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• 30:21Speaker 01

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• 31:03Tracy Alloway?

  I just want to go back to the anxiety or lack of it in the US and just focus on the investors for a moment. So the worry is that the people who actually fund some of these things, like I guess venture capital, maybe private equity, things like that, that they are going to be intermediated by pharma that's going directly to the Chinese companies.

• 31:27Speaker 04

  That's right. So let's imagine you're a venture capitalist out in San Francisco. You've got this nice life, you know, on Sand Hill Road. You come up with some ideas for some new biotech companies. You've found them and then you're waiting. You know, for Merck to come along or Genentech to come along, almost like, you know, setting a trap for the groundhog in your backyard or something like that. And the groundhog never shows up because they don't go to your backyard anymore. They've found some other place to go. And so what's happening is that pharma have learned that they can find really interesting molecules in China.

• 32:03Joe Weisenthal?

  You know, one of the themes that comes up in a lot of our conversations about Chinese industry in general is you see these stories about sort of incredible growth in manufacturing of whatever with pretty slim profits. And famously, like the Chinese stock market, it's actually, I think, the last few weeks, it's this year is kind of doing okay. But like famously, the Chinese stock market, for all the growth that they've had, for all the success in various industries, it's kind of been a dog for a long time. And part of the story is like, well, there's just so much capital intensity and you actually only stay at the cutting edge of all these capital intensive businesses if you're spending all of your money that you take in on more research. And so there isn't a lot left over for the end equity investor.

• 32:48Joe Weisenthal?

  It kind of sounds like something similar here where it's like, it's not great if you're a US equity investor in certain areas that are directly in the line of fire, but it doesn't sound like Chinese companies themselves are swimming in profits.

• 33:03Speaker 04

  Right, there's no fat cats in China, even though it might be nice to think that could be true. So I was on a trip recently to China. I was in this one building, like, you know, just one of many buildings that had biotechs in Beijing. And like every floor, like, it was like an apartment building, every floor had another biotech. And I asked one of the guys there, I said, like, how many biotechs are in this building? He said, oh, 60, 70. I said, how many biotechs are in Beijing? He said, nobody knows exactly. So, you know, the US, places like Bloomberg have phenomenal databases and stuff, they don't have that over there. Maybe that's a business for Bloomberg, I don't know.

• 33:40Tracy Alloway?

  Thank you for the suggestion.

• 33:42Speaker 04

  Yes, he said, he said. I think there's 3,000 biotechs in Beijing. In other words, there's 50 buildings like that one. And I said, well, what about the country? He said, nobody knows, but like 5 to 10,000 biotech companies. So they've got a lot of people making molecules that are competing for the attention of a relatively few large pharma companies.

• 34:04Tracy Alloway?

  So one of the things you've been emphasizing is this idea of China just moving faster than the US on this. And it does seem like they've come out of almost nowhere in recent years. How sustainable is that particular pace? Because if China got a leg up because it had a generation of researchers who came to US universities and maybe worked in the US and then took that knowledge back home, eventually, does that mean that, you know, that sort of wave of talent ebbs away and it becomes harder? Or is it a permanent shift that they're going to hold on to for a long time?

• 34:43Speaker 04

  I would say that you have to look at where their advantage is coming from. So they have a really good ecosystem for going from an idea for a new biologic to an actual drug that can be tested in patients. I don't know, Tracy, if you saw this news last year about the Biosecure Act. The US Congress, for some reason, decided that they wanted to like ban Wu Shi. I spoke to the CEO of Wu Shi. I said, like, they're saying that you're communist. He said, yeah, we have members of the Communist Party in our company. We're actually required to by law.

• 35:18Tracy Alloway?

  Yeah, as do many Chinese companies.

• 35:20Speaker 04

  And he said, by the way, have you noticed how many Teslas are in China? Has anyone called up Elon Musk, asked him, does he have anyone from the Communist Party in his company? How did Tesla get to have one third market share of electric vehicles in China? He said, of course, every company in China is allied with the Communist Party. He said, we're no different than anybody else. So Wu Shi, interestingly, came up with this concept called idea to IND in six months. That is, you give me an idea for a new biologic and I will give you a drug in six months. That seems insane, right? In the US, it's like two, three years.

• 36:03Speaker 04

  So if you ask the folks at Wu Shi, how did you get your molecule?

• 36:11Speaker 04

  To go through the system so fast, he'll say it's all volume. He said, you need to have the people that know what they're doing at each step. He said, when you're slow, it's because you're fumbling around. You don't have volume. So like, oh yeah, we don't have the right cell line. Let's go make that to the customer. They think, well, just takes a year to get the cell line going. But in fact, he said, you know, if you already have five good choices of a cell line, well, you know, you ought to be able to get that done in two weeks. So Wu Shi is behind many of those Chinese molecules. And so they're able to access a really good industrial partner. And I'm just still befuddled by like, why does US Congress want to deprive US biotech of access to Wu Shi? It's kind of crazy when you think about it.

• 36:52Joe Weisenthal?

  The talent pool in the US and the incredible salaries that you could make in normal traditional tech. And I have to imagine smart, quantitatively minded people. They're probably have multiple options. They could go to work in a high speed trading firm. They could go to work at Google. They could go to work at OpenAI. They could probably apply a lot of their skills in pharma. Have what's happened in the US to the supply of talent? And has the huge salaries that have emerged over the last, say, 15 years in traditional tech? Has that been a drain on the sort of, has that pulled people away? Who might have otherwise gone into pharma or biotech?

• 37:35Speaker 04

  I don't think so, so much. I mean, you know, there are always the folks in a culture that have, let's say, that immigrant mentality, maybe Indian heritage, something like that, where, you know, you're really motivated to be a lawyer, a doctor, whatever. I do think a lot of those folks have gone into the medical profession. And certainly more and more, they're attracted, I think, to the tech profession. But your classic sort of biotech scientist is someone who got a PhD. You know, they, they got interested in biology in college. They went off and got a PhD from some, you know, nice place. And then they got a job at industry. Those people.

• 38:13Speaker 04

  Would in general not be, you know, thinking about a programming job.

• 38:17Joe Weisenthal?

  Got it. Okay.

• 38:18Tracy Alloway?

  I know we're talking mainly about US and China, but I have to ask, is Europe in the picture at all here? I mean, the only, this is partly because I don't follow pharma that intensely, but it feels like the only European name I I hear nowadays is Novo Nordisk and it's GLP-1s.

• 38:38Speaker 04

  I mean, Europe historically was the dominant place in the world for the pharmaceutical industry. So it's only, I would say in the last 30 years that the US has taken over. Unfortunately, Europe started putting in very draconian price controls. And so that really hurt their domestic pharma industry. But nonetheless, Europe's got great universities, you know, whether talking about Gottingen, Erlangen, Leiden, Cambridge, Oxford. I mean, these are really good places. And so you can imagine the talent and ideas that are flowing out of those have have really created a very vital and successful biotech ecosystem in Europe.

• 39:15Joe Weisenthal?

  So right now, as you mentioned, the really big US pharma companies are thrilled because they have new options from which they can source or license biologics. And you mentioned there's really no at all big Chinese pharmaceutical companies. Do you think that could change? Like right now, like still like the J and Js and the Pfizer's and the other big one, like they're pretty Eli Lilly. Like, these are like pretty big chunks of the US market. And it seems like they, you know, for an investor and a diversified investor, it's a decent chunk of their holdings. You know, we've seen, for example, China is getting, taking a shot to break into the aviation duopoly of Boeing and Airbus.

• 39:59Joe Weisenthal?

  Go up the next level and actually compete at the highest level. Would you anticipate that at some point in the next few years, some company or some initiative is like, let's take it to the next level. Or we're not just licensing, but we want to be a behemoth. We want to sell into markets around the world that US multinationals are also selling into.

• 40:20Speaker 04

  You know, kind of comes back to like the core ideological conversation that we're having about China.

• 40:27Speaker 04

  Not only are there not Chinese global pharma companies, in general, there are very few global Chinese competitors, right? There's not a Chinese version of Coca-Cola, not a Chinese version of Procter and Gamble. So you know, the question quickly becomes why? And the answer is simple. The country is controlled by the Communist Party, of course. The Communist Party has one goal: survive and thrive. Well, you don't survive by going and conquering the US soft drink market. You survive by keeping the people in your country happy and supportive, right? They have had their political instability. And so that is the overriding goal. And it's for that reason that you don't see global

• 41:11Speaker 04

  commercial ambitions from China.

• 41:14Joe Weisenthal?

  Cars you do.

• 41:15Speaker 04

  Yeah, and cars, but you know, that's only because they had to like compete against Tesla because Tesla was taking over their car market. I would say this, I do think it could change. I do think that China could easily have a large globally successful pharmaceutical company. They have the people, they have the innovation, they have the domestic market. All of the pieces are there, but for whatever reason, it has not been prioritized.

• 41:47Tracy Alloway?

  I want to go back to the DeepSeek idea and ask if you could talk maybe about the connection between AI and biotech here. Because we hear people say like, AI can do these amazing things. It can generate formulas for potential new medicines. It can tell you how to manufacture them easier or streamline the manufacturing. How is that playing out in China?

• 42:11Speaker 04

  I mean, Tracy, that is such a great question. So I'll tell you. So last November, I was in China and you know, I'm a banker, like I said, you know, just brokering these deals and stuff. So you go around and you meet all the Chinese VCs. So we're seeing this one VC, but unlike all the other ones, like the guy I was talking to was like 28 years old and he's like the head of this VC. So he's attracted capital at a very young age. And I asked him just point blank. I'm like, so why are all your companies just making sort of like? You know, slightly better molecules than the Western molecules. You're essentially doing the fast follower model. He said, Tim, you haven't been to Guangdong province. He said, down there, guys my age, they've never worked in the United States before at Eli Lilly.

• 42:56Speaker 04

  He said, the folks there, they learned AI, like they grew up with AI. They know all about AI. And he said, you're gonna see a whole generation of biotech coming out of China. It's gonna be first in class, AI driven innovation. You quickly get into the next conversation, which is, is AI any good at developing drugs? And you know, I would say like a lot of things, maybe the first couple of generations aren't so good, but AI is getting really good at developing drugs.

• 43:24Joe Weisenthal?

  Cause I can never tell, I was like, you always say, oh, AI is gonna be so great at developing drugs. And I can't tell if that's just one of those things people say, but you think it's real.

• 43:32Speaker 04

  I mean, here's my theory of AI. If you go to London 20 years ago, you get in a taxi and you'd say, take me to Paddington Station. No matter where you were in London, the guy would know exactly where to go.

• 43:45Joe Weisenthal?

  Right.

• 43:45Speaker 04

  Cause he'd memorize the street system, the knowledge. Well, then one day came along this thing called a sat nav. And all of a sudden, you didn't need that guy anymore. He was obsolete overnight. Uber moved in, like they're like, you know, saying, hey, Uber's gonna crash you in the Thames River. Of course, that was false. And pretty soon the market changed fundamentally. That's a medium dimensional problem. In other words, a human being can figure out how to navigate London with, you know, four years of training, but a computer can do it in four microseconds. Well, coming up with all the drug possibilities against a potential target, that's a high dimensional problem. That's too hard. The computer actually can't do it. At least today, you can have all the Nvidia chips in the world, you can't do it.

• 44:30Speaker 04

  But in contrast, these biologics that we're talking about, even though they're more complex molecules, it's their complexity that lowers the dimensionality of the problem. Because biologics have to fold and fit in a very specific way. So all of a sudden it starts to look like the London street map. And so what we're seeing are These new companies coming out of places like Google that are focused on making biologics with AI and they're really good. So we're going to see some excellent AI based molecules.

• 44:59Joe Weisenthal?

  Tim, when you get out of here, we're going to just like rebook you for the next time. We have you on because there's so much stuff here I want to ask you about, but it is so great to have you on. Tim Opler, fantastic discussion, truly the perfect guest. Thank you so much for coming on Opler.

• 45:13Speaker 04

  Joe, thank you so much and Tracy, thank you.

• 45:29Joe Weisenthal?

  Tracy, that was obviously a great episode. There are so many different interesting things there. We're definitely going to have to have Tim back. I like actually, like I'd love to just talk about that last point he made about complexity and but the point about a major profit center for the entire US healthcare system is the cost is borne by the pharmaceutical companies to get access to the patients is just like, to me, that reveals so much. Like that says so much right there about the sort of tension between the profit motive and frankly, speed of innovation.

• 46:08Tracy Alloway?

  Absolutely. The other thing I was thinking about is this sort of gets to the idea that US protectionism of strategic industries can sometimes backfire. This is like the line that a lot of China has been taking, this idea that, well, if you cut China off from key technologies, key developments, it's just going to accelerate its own progress. It's going to, I guess, kick its research and development into high gear. And I mean, it kind of, kind of seems to be the case. I guess I'm wondering also what happens with the Biosecurity Act with the Trump administration because it's still in a legal limbo.

• 46:47Joe Weisenthal?

  It would be interesting. There's so many more angles, you know, it'd be interesting to learn more about this sort of generation of Chinese research scientists in the US that felt they had hit a ceiling on how far they were allowed to progress within the US companies. And then they formed the basis of this booming industry. There's interesting parallels in just this idea of like sheer scale, right? And sheer scale of the number, you know, China is a gigantic country with thousands and thousands of companies and the advantage that affords you both in terms of cutting edge research, but also doing lagging edge production of various things at size and at low cost. There's a lot of interesting angles there.

• 47:31Tracy Alloway?

  There is a lot, and I expect we're going to record a few more episodes at least on this. We're going to fast follow.

• 47:37Joe Weisenthal?

  Yeah.

• 47:38Tracy Alloway?

  All of this. Shall we leave it there?

• 47:39Joe Weisenthal?

  Let's leave it there.

• 47:40Tracy Alloway?

  This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 47:46Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at theStalwart. Follow Tim Opler at Tim Opler. Follow our producers, Carmen Rodriguez at Carmen Armadash, Joe Bennett at Dashbot, and Kel Brooks at KelBrooks. For more Odd Lots content, go to Bloomberg.com/oddlots, where we have all of our episodes and a daily newsletter. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 48:10Tracy Alloway?

  And if you enjoy Odd Lots, if you like it when we talk about Chinese hamster ovarian cells, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

• 48:56Speaker 06

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• 49:32Speaker 07

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