Odd Lots - Here Comes the Booming Chinese Biotech Sector

Episode Date: March 10, 2025

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.

Hey, Oddlots listeners, we're coming to D.C. We're finally doing it, Joe. It's going to be our first live show in Washington, D.C., our nation's capital. It's also finally going to be the time where we actually talk about the Jones Act. 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 on. But we're going to do it in grand style because we're going to be doing it live in D.C. And it's actually going to be a debate. Yeah.

So we have Sarah. Fuentes from the Transportation Institute. She's going to be taking the pro side. And we also have Colin Graebow 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. 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 Con. We're going to be talking about mergers and acquisitions and all that stuff. So it should be a really fun night. 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 forward slash oddlots and you can find the link to purchase tickets. We hope to see you there. Bloomberg Audio Studios. Podcasts Radio News. Hello and welcome to another episode of the Odd Lots podcast. I'm Jill Wisenthall. And I'm Tracy Alloway. Tracy, you know, I talk a lot about China. I talk about cars. and batteries, it's time for a Chinese biotech. It's time for the Chinese pharma episode. 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 U.S. and China. 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 related to batteries and automobiles and all kinds of. of stuff like that. We know that. And then, of course, we had like the deep seek moment and a bunch of people like, oh, it's not just 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. And this is one of those areas that I think most people, certainly me, would say like in the year 2025 still, my conception of my head is that the cutting edge is in the U.S. and Europe still,

which I can't say that for a lot of industries at this point. I want to know how medicines are actually made and manufactured. I've 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. I didn't know that either. But you know what?

I did wear, didn't 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 seat moment in biotech, got a lot of attention on social media. We're going straight to the source. We're speaking with Tim Oppler.

He's a managing director in the healthcare investment banking group at Steeville. Tim, thank you so much for coming on Odd Lots. Thank you. And Joe and Tracy. I really appreciate you having me. I'm very excited to be here today. What is the managing director in the healthcare investment banking group at Steeffel? I don't actually manage a lot of people.

So managing directors just the 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, basically, and get paid commissions for doing it. 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 process from there to getting into an actual physical medicine? 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 would 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, it was back as the late 1970s. Companies like Genentech and Biogen came on the scene. And so today, we have a huge biotech industry.

These are kind of like the, you might call them the Farm League, a big pharma. They're the ones that come up with the new drugs. Of course, the farmers 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 market. So there's whole groups of people that, you know, got MDs and PhDs that 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.

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 mean? Right touch banking. 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. Yeah, that's always, I just figure it's like cool.

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. original biotechs like Genentech were focused on biologic. So it's understandable that some people would associate biotech. And that's a distinct type of therapy from the traditional type of medicine that would have been developed at a Merck? 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. Can you talk about that? going right to my question about how medicine is actually made, how? 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 a pharmacy. They call it a chemist. And they would literally,

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 bugs. So you would take, for example, yeast, or you might take e-coli, or you might take what are called chow 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, chow 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. I'm sorry. Did you say Chinese hamster ovary cells? I know. We're talking about China. See, China is everywhere. Tracy, I already feel like we're going to 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.

Well, let's just jump right into it. I want to make a comment here. So China is all of a sudden starting to be very competitive with the U.S. biotech ecosystem. I personally don't think that's a surprise. I don't think that's a bad thing. And 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. Yeah. 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 U.S. biotech companies. 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 are crawling all over 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, U.S. 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. 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, etc. 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 incumbent global supply chain of key materials, ingredients, equipment for biotech, and what is China's role in that? So if you're making a small molecule, which comes down to that basic fine chemical, let's say it's liver. Okay. 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? 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 percent of China's. 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. Yeah. So just to give you a couple

stats, the API that's sourced into the U.S., I don't have the exact numbers on my fingertips, but I would say at least 25 to 50 percent of API that's being used in the U.S. generic pharmaceutical industry today is source from China. India is another big piece of that. So Indian 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, ten 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 they need access to these medicines domestically. You know, why pay the giant

global price that some U.S. 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 U.S. 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 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 DOFORMA, was really kind of a wake-up call for a lot of folks in our industry. And what, five years ago, that would have been basically zero? Yeah, 5%. Zero to 5%. How much is it, is it genuinely novel therapies? How much is it? There's 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. There's two or three different things going on. So the first thing is we're seeing what are called fast follower molecules. Let's just say for the

sake of argument that Daichi Sanquio comes up with something called a B7H3 antibody drug conjugate, B7H3 ADC. 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 construct. So we call those fast followers. Okay. China's really good at past followers. The second thing that you're seeing are first-in-class molecules. 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 is 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 VEGF Modi, PD1 by VEF, 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.

Habit didn't come up with it. It was come up within China. And it's the most interesting biotech molecule in the world today. But this is an American company summit. Right. They went unlicensed it for China. Got it. Just like we're seeing the big pharma's U.S. biotex licensing except from China all day long.

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? That's a complicated question and a complicated answer. We like that. 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, we'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's 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, 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 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. What about the cost of conducting a phase one trial? I mean, these are really expensive endeavors in the United States. States and you can spend millions and it goes nowhere past phase one. How does the cost compare to run the equivalent in China? I mean, we should pause for a moment. So the U.S. 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 the year? He's like 8,000. And I was out, like, asking the lady at the front of the, like, how much, like, does the average patient visit bill? She's like, oh, four or five hundred bucks. So you can do the math. That guy's pulling down, like, five to ten 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 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. Per patient. And how much of that goes to the doctor? A lot, and a lot to the hospital.

I mean, this is a big issue that's just popped up. This is a big source of hospital and doctor profits that they're essentially selling access to their patients. 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 in MD Anderson and then GSK comes on 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 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 a year, depending on your level of experience and how good you are. So all of sudden, you see biotech companies that are going out to raise $100 million. 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 U.S. biotech is not so efficient. In contrast, in China, there are no $700,000 cheap medical officers. There are no $200,000 patients. It's a communist country, right? Doctors, you know, make $30,000 a year. You don't get to go make hundreds of thousands dollars a year for being a doctor. And you definitely don't rent out your patients. 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. 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. It sounds bad when you put it that way. Yeah, but like they're gating, right? They're profiting from the fact that they,

that you're the sort of the channel, right? They're the channel through which the drug company must find patients. 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. So one of the reasons we wanted to speak to you is because in the course of your work, you talk to a lot of CEOs and executives on, I guess, both sides of the ocean here. China and in the U.S. Give us a sort of temperature check of what people are saying right now when it comes to the U.S. versus China pharmaceutical biotech industries.

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 CSPC. They're relatively small compared to our pharmaceutical companies. So it's great hunting for those guys. For the Chinese companies, access to the U.S. pharmaceutical market is a godsend capital as tight prices are low. For the U.S. biotech company, China can be worrisome. But honestly, when I speak to my friends in the U.S. biotech ecosystem, there are some concern, but most of them aren't in direct line of fire with Chinese competition. It's the U.S. investor, the U.S. 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?

Wait, so why wouldn't your friends in the industry be, I mean, presumably they're leveraged to their own stocks? If the investors, why aren't your friends in the industry more anxious? Because the Chinese, by and large, are taking older technologies and biologics and putting twists and turns on those technologies. Most U.S. biotech companies are not in that business right now. So by and large, they have 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 antibodies drug conjugates. They're very popular. I think there's four or five major public antibody drug conjugate development companies in the U.S. They all have... A type of cancer treatment that combines a monoclonal antibody with a cytotoxic cancer-killing drug. Okay, keep going. 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 U.S. 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 Jenny's consciousness.

I just want to go back to the anxiety or lack of it in the U.S. and just focus on the investors for a moment. So the worry is that the people who actually fund some of these things, 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. 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. You know, one of the themes that comes up in a lot of our conversations about Chinese industry in general, so 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 a, or 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, 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. It kind of sounds like something similar here where it's like it's not great if you're a U.S. 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. Right. There's no fat cats in China, even though there 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, it said, 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 U.S., 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. Well, thank you for the suggestion. Yes. 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. Wow.

So they've got a lot of people making molecules that are. competing for the attention of a relatively few large pharma companies. So one of the things you've been emphasizing is this idea of China just moving faster than the U.S. 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 U.S. universities and maybe worked in the U.S. 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?

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 Biosicure Act. The U.S. Congress, for some reason, decided that they wanted to, like, ban Wushi. I spoke to the CEO of Wushi.

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. Yeah, as do many Chinese companies. And he said, by the way, have you noticed how many Teslas are in China? Has anyone called up Elon Moll?

asked him, does he have anyone from the Communist Party in his company? How did Tesla get to have one third market share of the electric vehicles in China? He said, of course, every company China's allied with the Communist Party. He said, we're no different than anybody else. So, Wu Xi, 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 U.S., it's like two, three years. So if you ask the folks of Wushi, how did you get your molecule 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 U.S. Congress want to deprive U.S. biotech of access to Wu Xi? It's kind of crazy when you think about it. The talent pool in the U.S. and the incredible salaries that you could make in normal traditional tech. And I have to imagine smart, quantitatively

minded people. They 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. What's happened in the U.S. to the supply of talent and has the huge salaries that have emerged over the last, say, 15 years in traditional? 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? 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,

or 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 scientists is someone who got a PhD, you know, 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 would in general not be, you know, thinking about a programming job. Got it. Okay. I know we're talking mainly about U.S. 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 hear nowadays is Novo Nordisk and it's GLP-1s. 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 U.S. 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, whether you're talking about Gondgen, 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 really created a very vital and successful biotech ecosystem in Europe. So right now, as you mentioned, the really big U.S. 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&Js and the Fisors and the other big one,

like they're pretty, Eli Lilly. Like these are like pretty big chunks of the U.S. 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 taking a shot to break into the aviation duopoly of Boeing and Airbus, 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.

We're not just licensing, but we want to be a behemoth. We want to sell into markets around the world that U.S. multinationals are also selling into. You know, kind of comes back to like the core ideological conversation that we're having about China. 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 or not a Chinese version of Procter 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 U.S. 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 commercial ambitions from China. Cars you do.

Yeah, and cars, but, you know, That's only because they had to compete against Tesla because Tesla was taken 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. I want to go back to the deep seek 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?

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 ask 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. He said, the folks there, they learned AI, like they grew up with AI. They know all about AI. And he said, you're going to see a whole generation of biotech coming out of China. It's going to be first in class AI-driven innovation.

You quickly get into the next conversation, which is this AI any good at developing drugs. And, you know, I would say like a lot of things, maybe the first couple generations aren't so good, but AI is getting really good at developing drugs. Because I can never tell I was like, you always say, oh, AI's going to be so great at developing drugs. I can't tell if that's just one of those things people say, but you think it's real. 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. because 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. They're like, you know, saying, hey, Uber's going to 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 invidia chips in the world.

You can't do it. 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.

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's so great to have you on. Tim Oppler, fantastic discussion, truly the perfect guest. Thank you so much for coming on Oblox. Joe, thank you so much. And Tracy, thank you. Tracy, that was obviously a great episode. There's 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. But the point about a major profit center for the entire U.S. 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. Absolutely. The other thing I was thinking about is this sort of gets to the idea that U.S. 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 seems to be the case. I guess I'm wondering also what happens with the Bios Security Act with the Trump administration because it's still in a legal limbo. It would be interesting. There's so many more angles, you know, it would be interesting to learn more about this sort of generation of Chinese research scientists in the U.S. that felt they had hit a ceiling on how far they were allowed to progress within the U.S. 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 of, 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. 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 all of this. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Allaway. And I'm Jill Wisenthall.

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