China Eats Biotech (commencing coverage)

Unleash the dogs of clinical trials because objects in the mirror may be closer than they appear

• is biotech China’s new industrial land to conquer? once you see it, it can’t be unseen

• a ‘skull graph’ moment, or mind the first derivative

• China’s strategic edge (about which reasonable minds may disagree)

• Make Biotech Great Again and the case for clinical trial YIMBYism (and, in the future, the American companies that will step into the breach)

• Bonus: China’s Trade surplus is actually bigger than it seems (maybe)

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China Eats Biotech (commencing coverage)

China is like the Elon Musk of industrial policy, but more practical, and less inspiring.

China sets its sights on something it and/or the world needs, and then just figures out how to manufacture that thing with unprecedented skill and speed. Shmatas and tchotchkes are yesterday’s news—anyone can do that. It’s the sophisticated and load-bearing stuff that China likes to build (and how it grows its economy).¹

Without making a judgment good or bad, it just is. China strategically scales advanced manufacturing, and then becomes the world-seller of whatever it has decided to manufacture, as a matter of course.

Is biotech China’s new industrial land to conquer?

First it was solar panels, then it was cars (and batteries), and now the target appears to be pharma.²

And China doesn’t just play catch-up. It accelerates so quickly, that seemingly insurmountable leads—like say, German auto manufacturing—evaporate into China’s rearview mirror before the incumbents even know what hit ‘em. I mean, China ran a trade deficit in cars just five years ago, before becoming the world’s leading EV manufacturer (with a large auto surplus).

But, back to biotech.

During my conversation with

Alex Kolicich

, one of the things we talked about was China’s ‘fast-follower’ biotech strategy. Basically, once a useful molecule is discovered, China figures out how to manufacture that puppy like nobody’s business. And not cheap knock-offs or quasi-snake-oil, but the good stuff—often better stuff—with robust clinical data to prove it.

It’s a fairly recent thing that is something of an existential reckoning for an historically complacent US biotech industry.

In Alex’s words, “China eats Bio[tech].”³

And now, once I’ve seen it, I keep seeing it everywhere.

‘Skull graph’ moment

Most recently, the incisive physicist, Steve Hsu, threaded out some charts on China’s “ferocious” advance in biotech, which (in his view), is just getting started.

Hsu calls it a “skull graph” moment:

Steve Hsu/Twitter

The first derivatives of these functions are not the same.

When the rate of change of a thing so far exceeds the rate of change a previously incomparable thing, the incomparable thing (anchored, as it is, to its own perceived benchmark for what the rate of change ought to be) has a tendency not to notice the competition, until it’s far too late.

Under those circumstances, an incomparable thing, like US Biotech, becomes a relic in less than a decade.

Is that what’s happening now?