The drug industry is having its own DeepSeek moment

The biotech industry's DeepSeek moment came last fall. That is when Summit Therapeutics, backed by billionaire Bob Duggan, announced that its drug had outperformed Merck's blockbuster therapy Keytruda in a head-to-head lung-cancer trial.

- David Wainer

Keytruda, a $30 billion-a-year immunotherapy juggernaut, is the bestselling drug in the pharmaceutical industry and has long dominated the market. So the prospect of a superior competitor was seismic. Even more remarkable: Summit had licensed the drug just two years earlier from a little known Chinese biotech called Akeso.

The news added billions of dollars to Summit's market capitalization, catapulting it into biotech's upper ranks despite having no approved drug. While Summit's drug still hasn't received U.S. regulatory approval, the results were a watershed moment for the industry, underscoring the competitive threat emanating from China.

China's rise in biotech has been years in the making, but it is now impossible to ignore. In 2020, less than 5% of large pharmaceutical transactions worth $50 million or more upfront involved China. By 2024, that number had surged to nearly 30%, according to DealForma. A decade from now, many drugs hitting the U.S. market will have originated in Chinese labs. China's biotech boom mirrors its rise in tech. In both cases, China has moved up the value chain, from manufacturing goods to becoming a more sophisticated hub for innovation, competing in industries once dominated by the U.S.

There are several reasons for the industry's growth. For one, many top scientists trained in the U.S. have returned to China over the past decade, fueling the emergence of biotech hubs around Shanghai. And just as DeepSeek built a formidable chatbot—allegedly on a lean budget with limited access to semiconductors—Chinese biotech companies are also scrappier, capitalizing on a highly skilled, lower-cost workforce that can move faster.