A policy shock and a wake-up call

In June 2025, the U.S. Food and Drug Administration (FDA) quietly introduced a new policy: any new clinical trial exporting American patients’ living cells to “countries of concern” — including China — would be put on hold or undergo immediate review. This marked more than just a regulatory tweak — it was the first time a major Western regulator drew a bright line between science and geopolitics in cell and gene therapy.

For patients enrolled in cutting-edge trials, the policy caused confusion and delays. For drug developers, it was a wake-up call that the rules of global R&D might be changing. And for investors and clients, it raised a pressing question: why would the U.S. risk slowing life-saving innovation?

This real-world policy shift sets the stage to explore a deeper story — one about the risks and rewards of drug development, China’s growing role in the ecosystem, and how rising tensions could reshape the future of new medicines.

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Introduction: A new balance of power

Across the pharmaceutical world, development and manufacturing are becoming more international, faster, and more collaborative, with China now sitting at the center of this shift. In 2024, more than 12,200 new medicines were in human testing or awaiting approval worldwide — more than double the number in 2019 — and 78 novel drugs launched globally that year.

By comparison, China listed about 7,100 trials in 2024 compared with roughly 6,000 in the U.S., according to the WHO registry. China’s share of global clinical trial activity has surged to an estimated 15–28%, making it one of the two largest hubs for testing new medicines. This reflects major investments by multinational pharma companies and China’s own growing R&D ecosystem. Western Europe holds about 25% of global trial activity, North America about 23%, but China is the fastest riser.

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Why Developing New Drugs So Risky?

Even with all this activity, developing new medicines remains high-risk. Historically, only about 10–14% of drugs entering human testing reach FDA approval. Around 63–70% pass Phase I, 30% pass Phase II, 58% pass Phase III, and about 85–90% of those that file a New Drug Application get approved. These numbers illustrate the high-risk nature of drug development and why companies look for ways to cut costs, accelerate timelines, and share risk across borders — and why China’s large and efficient trial system has become so attractive.

FDA and multi-regional trials: the new standard

Against this backdrop, the FDA’s standards must still be met for drugs destined for the U.S. market. This has led to more multi-regional clinical trials (MRCTs), which include Chinese, U.S., and European sites from Phase II onward.

Specifically, this approach not only satisfies regulators but also makes commercial sense: by testing in multiple regions simultaneously, companies can launch in more markets at once and better understand how different populations respond to a treatment.

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FDA expectations and why trial design matters

China’s trial system can deliver data quickly. However, the U.S. Food and Drug Administration (FDA) expects evidence that is both scientifically rigorous and applicable to American patients. The experience of sintilimab (a PD-1 cancer drug) illustrates this: in 2022, the FDA’s advisory committee voted overwhelmingly to demand more U.S.-relevant data because the pivotal trial had been run only in China. This rejection signaled that “China-only” pivotal trials face an uphill climb for U.S. approval.

The lesson is clear: multinational companies and Chinese partners need to design MRCTs or robust bridging plans from the start. MRCTs include sites in China, the U.S., and Europe from Phase II onward, harmonizing endpoints and standards of care across regions. This approach not only satisfies regulators but also accelerates simultaneous launch in multiple markets.

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China’s strengths across the development cycle

• Early research: Many international companies turn to Chinese contract research organizations (CROs) for early-stage work such as medicinal chemistry, animal studies and IND-enabling experiments. These services offer high quality at lower cost, reducing barriers to entry for new biotech startups.

• Clinical trials: Once a drug candidate reaches human testing, China’s clinical trial capacity becomes a major asset. Multinationals often include Chinese sites or partner with Chinese CROs to recruit patients. This is especially useful in oncology, where trial eligibility criteria can be narrow and finding enough participants quickly is critical.

• Speed advantage: Industry observers even talk about “China speed” — streamlined approvals, fast trial start-up, and accelerated enrollment — which can shave months off a study’s duration.

• Manufacturing: China also plays an essential role in the later stages. It is a leading producer of active pharmaceutical ingredients (APIs) and finished generics, and many Western drugmakers rely on Chinese contract manufacturing organizations (CMOs/CDMOs) to produce drugs or key components at scale.

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Licensing deals: the preferred path for collaboration

A common way to bring Chinese innovation to global markets is through licensing deals. In this model, a Chinese biotech grants a multinational company rights to a drug candidate (often for markets outside China or globally). The agreement typically includes an upfront payment plus milestone fees as the drug progresses through development, as well as royalties on sales.

The size of these deals has grown dramatically. In 2023, the aggregate value of top China out-licensing deals exceeded $35 billion, reflecting the confidence global investors have in Chinese-developed candidates. Companies such as GSK and AstraZeneca have been repeat partners, acquiring worldwide or ex-China rights to Chinese innovations.

Beyond licensing: co-development and joint ventures

Beyond this dominant model, some companies form joint development programs, sharing responsibilities for clinical trials and later splitting profits by region. A well-known example is Johnson & Johnson’s Janssen unit partnering with China’s Legend Biotech to develop Carvykti™, a CAR-T cell therapy for multiple myeloma. This partnership successfully brought a China-origin therapy to FDA approval and shows what is possible when each partner contributes its strengths.

Still, the dominant model remains licensing with milestone payments. It allows each party to focus on what they do best: Chinese biotechs run efficient early-stage trials and generate compelling data; global pharma provides funding, regulatory experience, and commercial infrastructure to take the product worldwide.

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China’s contribution to faster development

China helps speed global drug development in two main ways:

• Rapid patient enrollment: With its huge population and concentrated hospital system, eligible patients can often be recruited in a fraction of the time compared with Western countries. Early-phase oncology trials in China can be completed unusually fast, giving companies critical human data sooner.

• Ready-to-go candidates: Chinese firms are now delivering innovative drug candidates (novel cancer therapies, biologics, and others) that attract global partners. By out-licensing these candidates, Chinese biotechs let Western pharma pipelines “skip ahead” — moving directly into Phase II/III testing internationally instead of spending years in preclinical research.

As a result, this symbiotic relationship benefits both sides: Chinese trials de-risk programs and deliver data; Western trials and regulatory know-how bring the drug to global markets faster.

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Case studies: global companies betting on Chinese innovation

Virtually every top multinational pharma company now has partnerships with Chinese firms. Here are some notable examples:

• Pfizer and 3SBio (1530 HK): Licensing of a bispecific antibody in oncology for $1.25 billion upfront plus up to $4.8 billion in milestones.

• GSK and Jiangsu Hengrui (600276 SS): Global license for multiple drug candidates with $500 million upfront and up to $12 billion in milestones.

• AstraZeneca and CSPC (1093 HK): Worldwide license for a novel small-molecule cardiometabolic drug with $100 million upfront plus $1.9 billion in milestones.

• Bristol Myers Squibb and Baili/SystImmune: Ex-China license for an antibody cancer drug for $800 million upfront and about $8.4 billion total value.

• Merck KGaA and Hengrui (600276 SS): Global license for an ADC cancer drug for $175 million upfront and about $1.68 billion total.

These deals are not just about money. They’re about compressing timelines: Western firms get de-risked, partially tested assets and avoid duplicating early work; Chinese firms gain global scale, cash infusions, and experience with FDA and EMA regulators.

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Impact on drug pipelines

Because of these partnerships, a significant portion of the global drug pipeline now originates from Chinese innovation. In 2024, there were more than 240 life science licensing deals in China, about a 50% jump from 2021, and by the first half of 2025, 32% of all global pharma out-licensing deals involved a China-made asset, up from about 21% in 2023. This shows how mainstream China partnerships have become for pipeline growth.

Collaboration helps meet FDA standards

Partnership between international pharma and Chinese biotechs can solve the FDA problem in three ways:

• Fast proof-of-concept in China: Generate initial human data (safety, dosing, biomarkers) rapidly and cheaply.

• Early expansion into U.S./EU sites: Move quickly into MRCTs using harmonized trial designs, making data acceptable to multiple regulators.

• Manufacturing and CMC planning: Set up parallel production lines — one in China for cost, another in the U.S./EU for regulatory assurance — to reduce approval and launch risk.

This “China speed plus global compliance” strategy is now a common playbook for oncology, rare disease, and metabolic drug developers.

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Impact of U.S.–China tensions on drug development

Yet geopolitics looms large. In recent years, U.S. authorities have scrutinized Chinese involvement in pharma supply chains and research collaborations more closely. A proposed law called the BIOSECURE Act aimed to restrict U.S. biotech companies from working with Chinese CROs and service firms on national security grounds. If enacted, such measures could limit deal-making and complicate global clinical trials, potentially slowing the pace of new drug development.

In practice, even without full legislation, the political climate itself has had a chilling effect. Surveys have found U.S. pharma/biotech firms’ confidence in China-based CRO partners dropped sharply after Washington floated restrictions on these partnerships.

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Sample movement restrictions

Another flashpoint emerged in mid-2025: the FDA temporarily halted some trials that would send American biological samples to “hostile” countries (implicitly including China), under President Trump’s administration. This kind of action can delay international studies and add red tape, especially for cell and gene therapy (CGT) programs that relied on overseas processing steps.

While the full scope is still evolving, companies are already adapting their logistics, moving cell-handling to the U.S. or allied countries and strengthening consent forms and data protections. The clear trend is toward more domestic processing for U.S. patients’ samples.

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Tariffs and the supply chain challenge

Trade tensions also threaten the smooth exchange of materials and data. The U.S. imports over $200 billion in pharmaceutical products annually, and for low-cost generics it leans heavily on China and India for production. Such measures could have real-world impacts — public health experts warn that tariffs on these imports would almost certainly raise costs and jeopardize supply.

Generics operate on thin profit margins; if faced with a 25% import tariff, many foreign manufacturers might find it uneconomical to continue supplying the U.S. market at current prices. This could prompt cost-cutting elsewhere (raising quality risks) or even withdrawal from the market, leading to shortages.

The U.S. already struggles with periodic shortages of essential generics, and 70% of current drug shortage issues involve generics. Broad tariffs on Chinese pharmaceutical ingredients or generics would likely increase U.S. drug costs and risk significant shortages unless domestic manufacturing scaled up dramatically — a shift that would take years.

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How companies are responding

Despite the turbulence, companies are adapting. Some are:

• Partnering via third countries: Setting up trial sites or manufacturing in Singapore, South Korea, or Europe to route around regulatory bottlenecks.

• Stockpiling ingredients: Importing APIs and finished drugs from non-tariffed countries to hedge against possible price spikes.

• Enhancing compliance: Upgrading data-handling policies to satisfy both Chinese and U.S. rules, including China’s Personal Information Protection Law (PIPL) and the U.S.’s stricter data privacy expectations.

In short, U.S.–China tensions inject uncertainty and modest delays into drug development but have not yet stopped collaboration outright. The full impact will depend on how far restrictions and tariffs ultimately go.

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Opportunities amid the challenges

It’s easy to focus on the risks, but there are also opportunities:

• Faster early-phase development: Even with restrictions, China remains an unparalleled place for early clinical trials in many therapeutic areas.

• Innovation sourcing: As Chinese biotechs produce more first-in-class and best-in-class candidates, international companies can access a richer menu of options for pipeline refresh.

• Cost flexibility: Manufacturing diversification does not necessarily mean abandoning China; many firms will keep a dual supply strategy (China plus one other hub) for cost optimization.

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Looking ahead: what to watch in 2025–2026 and beyond

• Regulatory convergence: China continues aligning with ICH standards, which could make its data even more acceptable abroad.

• New deal waves: Expect more licensing in cutting-edge areas like antibody-drug conjugates (ADCs), bispecific antibodies, and cardiometabolic drugs.

• Policy developments: Keep an eye on the BIOSECURE Act’s progress in Congress and on any permanent FDA rules around sample exports.

• Tariff decisions: Broad tariffs on APIs or generics would be a major shock to the U.S. drug supply chain; so far they remain a risk, not a reality.

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Conclusion: China as an innovation hub, not just a workshop

As the industry adapts, China’s role in the pharmaceutical sector has evolved dramatically. Once seen mainly as a low-cost manufacturing base, it is now a driver of innovation, a partner in multi-regional trials, and a source of first-in-human data that can accelerate global drug development.

For clients, the opportunity is to leverage China’s strengths while mitigating its risks. Partnerships that combine China’s speed and scale with Western regulatory know-how and diversified supply chains are likely to remain a cornerstone of drug development for years to come.

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