Qiming Venture Partners Founder: The "DeepSeek Moment" of China's Innovative Drugs

China's AI DeepSeek is igniting the world, but a quieter revolution is taking place in the biotechnology sector. Chinese pharmaceutical companies, once focused on producing generic drugs, are now rising to become global leaders in the fast and efficient drug discovery field.

Recently, Gary Rieschel, founding managing partner of Qiming Venture Partners, engaged in a dialogue with Lizzi C. Lee, a researcher at the China Analysis Center (CCA), to discuss how China has transformed from a fast follower to a serious innovator.

Gary Rieschel pointed out that the trajectory of biotechnology development differs from that of artificial intelligence; it is a long-term accumulation process rather than a sudden explosion.

The Chinese biotechnology ecosystem—from data credibility to talent innovation spirit—is becoming increasingly complete. In this sense, the pharmaceutical industry's "DeepSeek moment" may occur when AKESO's dual-specific antibody, Ivorxi (AK112), is launched and proves to be twice as effective as Keytruda.

Rieschel believes that the licensing model is a necessary step for Chinese biotechnology companies at this stage, helping them accumulate experience and ultimately achieve globalization. Currently, China has large pharmaceutical companies like HengRui, but global distribution and trial capabilities still require time to develop.

Regarding the recent Trump tariffs, Gary Rieschel pointed out that there are few "choke points" in the biotechnology sector, making it difficult to hinder China's development by restricting a handful of companies. Additionally, China dominates the global biopharmaceutical reagent market, which the U.S. heavily relies on. Imposing tariffs could backfire, exacerbating the already low efficiency issues in the U.S. healthcare ecosystem.

Key points from the interview:

• In fact, many components must come together to create this pharmaceutical ecosystem. In this sense, the DeepSeek moment may occur when AKESO's dual-specific antibody, Ivorxi (AK112), is launched and proves to be twice as effective as Keytruda.
• China's current innovation ecosystem is very strong, but backend distribution and global trial capabilities are lacking, which will take about ten years to develop. This will take some time.
• Ten years ago, China lagged the U.S. by 20 years in the development of first-in-class drugs. Today, it is only two to three years behind. This is an astonishing compression of time in just a decade.
• I believe the ecosystem in China's biotechnology sector is approaching what I would call a self-sufficient stage. I'm not sure what it truly needs to obtain from the U.S., especially in the stage of original innovation.
• The efficiency of the U.S. healthcare ecosystem is extremely low. The price of the same drug is already ten times that in China, and the recent drug comparison is thirty times. So I'm not sure what effect tariffs will really have. All you are doing is making the problem worse in the U.S., where the cost structure and efficiency are already poor.
• When I moved to China in 2005, about 2.5% of GDP was spent on healthcare. Now you can see it's 7%-8%. The growth of the aging population is very significant. Therefore, this is a huge market demand China's problem will be how to pay for it and how to do it.
• Regarding pharmaceuticals, the real issue related to safety stems from supply chain problems. When people realize the significant diagnostic capabilities, the Chinese equipment market, and the critical mission importance of many of these products in the U.S., with only one source, and that source being in China.

The following is the full interview:

Jing Qian:

Hello everyone, welcome back to the special program of China's "Deep Exploration Moment" series. Today we have a very special guest, Gary Rieschel, who is the chairman of Each Side Center based in Northern California and Seattle, and also the host of Homework Co. Today he will host a series of programs on China's biotechnology.

Gary Rieschel is the chairman of Each Side Center in Northern California and Seattle. But Gary's identity goes far beyond that. So before we invite our interview host today, please allow me to briefly introduce him in three ways.

First, Gary is the founding managing director of Qiming Venture Partners, which he founded in Shanghai in 2006. Qiming Venture Partners is widely regarded as a leading investor in the healthcare sector in China, and Gary himself is hailed as the godfather of investment in China's biotechnology field. He is one of the most experienced and respected investors in China's biotechnology ecosystem, so he can provide many insights.

Second, in my opinion, Gary is one of the sharpest and most rational voices in the tech field between China and the U.S. As the founder of the Big Bomb Dialogue, he brings together some of the most interesting minds in the field, and he always stays ahead of the times. So we should take his views seriously.

Finally, on a personal note, Gary is an interesting and wise person. In addition to being an avid skier, golfer, fisherman, and scuba diver, he is also a mentor to countless entrepreneurs, venture capitalists, and even ordinary people like me. He has a lot to offer. I want to conclude with a quote from another equally wise person—Yuka: Gary's mind is more insightful and capable of deep thinking than theirs. I completely agree with this. Now, I would like to hand over the time to Lizzi to start the real conversation with Gary. So, please welcome Lizzi and Gary.

Lizzi C. Lee:

Thank you very much, Dean, for the wonderful introduction. Gary, thank you so much for joining our program, let's get straight to the point.

Gary Rieschel:

It's a great honor. Thank you.

China's Biotechnology: A Long-Term Accumulation Process

Lizzi C. Lee:

China's AI moment is happening as companies like Deep Seek astonish global audiences with their capabilities, while many believe these capabilities will take years to realize. Now, some are asking whether we are at a similar turning point in the biotechnology field. Gary, do you see any similarities between the rise of China's biotechnology and the breakthroughs in the AI field before? Are we really entering a similar moment where the world has completely misunderstood and underestimated China's biotechnology capabilities, and is finally coming to realize this? Gary Rieschel:

I think this is a great question, it stems from the fact that the evolution of biotechnology differs from DeepSeek. If DeepSeek were a company that people knew nothing about its research, then when DeepSeek announced its technology, other AI companies in China would be just as shocked as those in the United States, and when DeepSeek open-sourced it, they would be even more shocked. So now they are all adopting some of the different algorithms that DeepSeek has developed, and this is also true in the field of biotechnology.

So, comparing what is happening in the biotechnology field to a DeepSeek moment may not be a very good comparison. Over the past 20 years, biotechnology in China has progressed at an accelerated pace, and it is built on a very low base. When I first moved to China in 2005, healthcare spending in China accounted for about 2.5% of GDP. This prompted us to establish a dedicated healthcare business when we created Qiming Venture Partners, as the demand in the Chinese market was evident. At that time, they had the largest population of lifestyle disease patients, and this number has continued to grow explosively over the past 20 years. In almost all metrics, the number of cancer patients is the highest in the world. Therefore, you see this huge demand in the market.

What happened next was that all the major pharmaceutical companies set up laboratories in China. These laboratories were mainly staffed by individuals known as "sea turtles," who are Chinese researchers educated overseas and are very skilled and talented. They returned to China to work in these laboratories. What is fascinating is that these laboratories themselves did not create new products for large pharmaceutical companies like Pfizer, Eli Lilly, and Merck to enrich their product lines, mainly because they never really viewed these laboratories as a core part of their entire research operations. So they saw them as outposts, but they were never fully embraced by headquarters.

However, what you have is thousands of very talented people returning to China. They are working on projects, and they can see for themselves, just like all Chinese entrepreneurs, where the demand exists. So for the first four to five years, they were in the laboratories.

But starting around 2008 and 2009, they began to leave the laboratories. Because their scale and ambition were limited, they initially could not compete with the laboratories at headquarters, which hindered their ability to innovate and provide incentives for the best researchers to stay. So these researchers began to leave. So, around 2010, the seeds of knowledge began to emerge in the entrepreneurial ranks of China's biotechnology sector. So you had huge demand, and the venture capital industry had developed to provide increasing amounts of funding to support these startups. Then you ultimately had a combination of talent and capital.

Lizzi C. Lee:

So this looks like a quieter version of DeepSeek's breakthrough. Do you think China's shift from generic drugs to cutting-edge biotechnology is the result of a long-term strategy? However, in recent years, China seems to have accelerated its progress. So, besides talent factors, what other factors such as policy support, capital factors, and investment reasons have driven the development of China's biotechnology industry, especially in recent years? What other factors have contributed to this transformation?

Gary Rieschel:

I think it is equally important to understand that without a very strong diagnostics business, you cannot have a biotechnology industry, nor can you conduct truly innovative or top-tier molecular research work. So, within the timeframe of 2004, 2005, and 2006, this business began to establish itself in China. You need to have a reagent business, which was also established in China during that period. Then, perhaps most importantly, you need to have world-class clinical trial capabilities.

So there was a company, Doctor Yee, who had worked at Roche and founded a company called Tigermed in 2004. Tigermed is China's first company, which they refer to as a CRO (Clinical Research Organization), that operates at a truly world-class level. Qiming Venture Partners was fortunate to be the only investor before Tigermed went public. So, for several years, initially, 95% of Tigermed's business was generic drug trials. In 2005, only one new compound was approved for market entry in China, so it was not a very strong ecosystem at all. However, once you start to have diagnostic capabilities, you have laboratories, and then Tigermed essentially provided world-class data review and data analysis, comparable to Quintiles in the U.S. Then, you suddenly really began to form this ecosystem where research could actually be conducted in China, and these trials received world-class respect.

So, in fact, many parts must come together to create this ecosystem, some of which are not very exciting. Diagnostics are not considered very exciting, but you need to have this capability to further research cancer and some lifestyle diseases that have become so prevalent in China.

Ivosidenib defeats Keytruda: DeepSeek moment in China's biotechnology industry

Lizzi C. Lee:

Thank you very much for your insights. One of the biggest shifts I see now is that Western pharmaceutical companies are increasingly turning to China. So, why are so many American and European pharmaceutical companies looking for drugs in China? This shocks me.

Gary Rieschel:

Yes, you are right. I think in the past three to four years, foreign pharmaceutical companies have paid nearly $100 billion in licensing fees to Chinese companies. So, when you look at why this is happening, there are several reasons.

First, you can now trust the data and the execution of trials in China. So pharmaceutical companies, when they license something, they must know that what they are licensing is real. Before 2010, you could not do this in China. The quality of trials and the quality of data analysis were simply not good enough. Now it has become world-class. Its operational standards are the same as those in the EU, Japan, the U.S., and other countries The second thing is that talent is crucial, but people forget the innate entrepreneurial spirit of many Chinese researchers and scientists. So you have a huge market demand, you see the cancer incidence rates across China, you see the incidence of lifestyle diseases. So you are involved in something, and the domestic market is starting to drive this demand. The domestic market has always been key to the success of every Chinese tech company. Very few companies, whether in technology or biotechnology, have successfully started overseas. Their foundation is the huge domestic market. So you have a huge domestic market, researchers turning into entrepreneurs, and you have other ecosystems. But it's interesting because this is not led by the central government. This is a demand being met, fulfilled by researchers and entrepreneurs. They are starting to feel comfortable, and again, the creation of the entire ecosystem can facilitate this.

Then large foreign companies, their own labs, such as Merck Labs, Pfizer, etc., begin to pay attention to what is happening in China and realize that this capability is indeed very important. Then they start to do licensing, but it wasn't until around 2019 that you began to see the number of licenses becoming very interesting in terms of their significance for funding these Chinese startups and these Chinese entrepreneurs. But the driving force behind all this is that there are hundreds of billions of dollars worth of drugs globally about to lose patent protection, and the pharmaceutical companies' own product lines cannot fill their own product lines, so they have to look elsewhere. So now in China, you can bring drugs to market faster because of China's large population, a population that has not gone through many trials before. Then you have researchers, you have the talent to analyze things.

So the entire ecosystem has been waiting for this moment. In this sense, the moment for DeepSeek may occur when the bispecific antibody developed by AKESO, known as Ivosidenib (AK112), comes out and its efficacy is twice that of Keytruda. Then, you will find it interesting that at that time it was not reported that way, but you have a drug that doubled the life expectancy of lung cancer patients. It was independently developed in China, with all the technology and all the intellectual property. Completely developed by China. This is a shock to the global biopharmaceutical market. I think this accelerated its effectiveness.

Chinese Biotechnology: Licensing Model and Globalization

Lizzi C. Lee:

I want to talk about some controversies surrounding the Chinese model. This was actually a concern raised by an industry professional working in China. She believes that China's licensing model, while it has indeed helped China become a biotechnology powerhouse, may also pose a risk that, in the long run, Chinese companies may be positioned as suppliers rather than global leaders. What do you think about this? Is the licensing model beneficial for China in the long run, or will it actually harm China?

Gary Rieschel:

This is a very good and very interesting situation in the global pharmaceutical industry. American startups, like Chinese startups, have almost no chance of bringing drugs to market on their own. The cost of running large pivotal trials, which is at the backend of the drug process, makes it unaffordable for almost all American startups, and certainly for Chinese startups as well So you could say, you could say that this will hinder them. But this licensing phase is a necessary step to reach a level where some major Chinese pharmaceutical companies can actually handle global distribution, global trials, etc. Now, there is HengRui. I mean, two of the 30 largest pharmaceutical companies in the world are in China. So this is not a strong, at this stage, this is not a strong ecosystem. China's current innovation ecosystem is very strong, but the backend distribution and global trial capabilities are lacking, which will take a decade. It takes some time.

Lizzi C. Lee:

This is very helpful, thank you very much. Also, regarding the breakthroughs China has made in the biotechnology field, the current discussions around Chinese-style technology often focus on efficiency, that is, drugs are faster and cheaper, but not necessarily pioneering breakthroughs in their class. One resistance I heard from an American practitioner is that China is still in a catch-up phase and is not more innovative in the traditional sense. But my question is, if Chinese companies can bring better and safer versions of existing drugs to market at a faster pace and lower cost, would that redefine what we value as innovation? Should global pharmaceutical companies change their approach to innovation? Or is what China is currently doing, in some sense, not true innovation?

Gary Rieschel:

This is very interesting compared to the tech industry. The Chinese tech industry is now widely accepted as innovative. It didn't create the smartphone, nor did it create electric vehicles, but due to rapid iteration and the ability to improve things over and over again, it has become an innovator. The Chinese are perhaps the best in the world at this, if not the best. The tech sector has overcome the bias against non-innovation and now recognizes that this is indeed innovation. In fact, most of the business benefits come from this.

The situation in biotechnology is exactly the same. So, you haven't created pioneering breakthroughs in your class yet, but if all your efforts can make those pioneering breakthroughs better in the next three to five years, that would be a huge benefit to society as pioneering breakthroughs rarely become best-in-class drugs after ten years or more. Going back to Ivosidenib, that drug that surpassed Keytruda, it could become the best-in-class drug through the very strong protein engineering capabilities of Chinese companies. Now, 25% of new drug development is in China, 40% in the U.S., and last year's licensing deal volume exceeded $40 billion.

One has to say that China's ecosystem is creating real value. When I talk to respected researchers in the U.S., they say, ten years ago, China lagged the U.S. by 20 years in the development of pioneering drugs. Today, it only lags by two to three years. In just ten years, this is an astonishing time compression. So, I think it's fair to say that we will soon see this, especially in some antibody-chemotherapy combinations, where you will see real innovation from China, real pioneering drugs from China that have not been developed anywhere else in the world

Biotechnology: A New Battleground in Technological Competition?

Lizzi C. Lee:

I would like to talk a bit about policy. Surprisingly, unlike artificial intelligence or semiconductors, biotechnology has not yet become a primary target in the US-China technological competition or US-China technology competition policy. Is biotechnology considered so crucial to national health security that it cannot be severed? Or do you think tightening policies in the future is inevitable?

Gary Rieschel:

I have been involved in some discussions regarding the "Biotechnology Security Act" and have spent a lot of time on some other technology-oriented US policy work. I would say that those in Washington, D.C. are quite frustrated because they really want to have the same choke points in biotechnology as they do in the semiconductor industry. If you choke four or five companies, like Tokyo Electron, ASML, etc., you can really stop someone from developing. Or you can certainly slow them down.

The biotechnology industry does not have these choke points. Some of the world's top gene editing companies are already on par with Illumina. So there is no single place to say, we can stop doing this.

Another option is to say, well, we won't import Chinese drugs into the US. Then you have to tell American patients with certain cancers that China has solutions, and then say, well, you have to die because we won't import drugs from China. This is not good news for humanity or politics. So I think you have to recognize that. Artificial intelligence is also hard to find. The choke points in artificial intelligence and biotechnology are those fields that have outstanding talent, all the capabilities, all the necessary skills, and a large domestic market, which limits China's development. Secretary of Commerce Raimondo used the term "stupid job," and I completely agree.

Lizzi C. Lee:

But now, we see President Trump threatening to impose new tariffs on China and US trading partners. If the US indeed implements trade restrictions on Chinese biotechnology, can you help us analyze what this would mean for licensing deals and global supply chains?

Gary Rieschel:

That's a very interesting question. You can impose tariffs on reagents. China has over 70% of the global biopharmaceutical reagent market, the US is highly dependent on China, and the whole world is also very dependent on China, because it is a defined chemical substance. If China starts rolling out many first-in-class, best-in-class drugs, and Trump wants to say, this is the licensing fee, then you can definitely impose tariffs on it. Tariffs on the drug, so you have to pay some tariffs. I'm not sure how they will define it. Even if they define it.

What is concerning for the US is that the efficiency of the US healthcare ecosystem is extremely low. The prices of the same drugs are already 10 times that of China, and the recent drug comparisons are 30 times. So I'm not sure what effect tariffs would really have. All you are doing is making the problem worse in the US, in terms of cost structure and efficiency, which is already bad Lizzi C. Lee:

So, what about investment restrictions or export restrictions on China? How will this affect Chinese biotechnology companies?

Gary Rieschel:

I believe the ecosystem in China's biotechnology sector is currently approaching what I would call a self-sufficient stage. I'm not sure what it really needs to obtain from the U.S., especially in the pioneering innovation phase. If you think doing so aligns with humanitarianism, then perhaps some of China's development can be restricted. Of course, this raises a broader discussion about whether it is truly right to do so for humanity. As for other export restrictions, you will only hurt American companies again. Because once drugs are sent to China, it is difficult to reverse-engineer them. It takes a lot of time, and I'm not sure if Chinese companies are really focused on doing that.

Regarding investment restrictions, if this had happened 20 years ago and you said that funds could not be invested in Chinese biotechnology companies to help them grow, develop, and provide expertise, then perhaps it could have limited China's development, or at least slowed it down.

The challenge now is that two significant changes have occurred. First, almost all venture capital firms in China are Chinese. So, if you say, "We do not welcome Americans," American laws do not apply. They are not Americans; they are Chinese. Funding has primarily shifted from being focused on dollar-based innovation to now being mainly in renminbi, which is also foreseeable in a rapidly developing domestic market. Therefore, I think the impact of U.S. restrictions on venture capital firms investing in the biotechnology sector is, first, difficult to define.

Second, I believe this will not have a meaningful impact on slowing down China's current biotechnology investments.

Biotechnology Data Security: Trust and Cooperation

Lizzi C. Lee:

Speaking of China's domestic ecosystem, we talked about sector investments, domestic venture capital, and domestic innovation. What about policies? Considering China's focus on the silver economy and an aging society, how will this change the landscape or shape of the Chinese biotechnology industry?

Gary Rieschel:

As I mentioned earlier, when I moved to China in 2005, about 2.5% of GDP was spent on healthcare. Now you can see it is 7%-8%. The growth of the aging population is very significant, just like in every country; this is a huge market because lifestyle diseases, cancer, dementia, and all these long-term chronic diseases will emerge. Therefore, there is a huge market demand. The question for China will be how to pay for this and how to do it.

Global pharmaceutical companies will ultimately address pricing issues, so China will become one of the places where you see the actual tension for patients: American patients pay X, Chinese patients pay 1/10X, or the cost paid by Americans is ten times that of China, and I think this will really challenge some global pharmaceutical models. This is an area where both the U.S. and Chinese governments can reach some sort of agreement and come to some understanding. But for the pricing issues of these drugs, addressing the health issues of aging populations in both the U.S. and China or around the world will make pricing a major issue Lizzi C. Lee:

Returning to policy-making, you know that policymakers in Washington, D.C. have been emphasizing national security issues, focusing on the dependence of large pharmaceutical companies on Chinese drug innovation, which is related to cost factors, as we discussed. Can you help us understand this concern? Should U.S. regulators view this as a risk similar to dependence on Chinese manufacturing? Or is this more of a political statement rather than a true national security statement? I think it is.

Gary Rieschel:

Now, distinguishing between political statements around security and genuine statements around security is a very difficult challenge. Both countries have accepted the idea that almost anything can become a national security issue. I think, regarding pharmaceuticals, the real issue related to security stems from supply chain issues. When people realize the significant diagnostic capabilities, the Chinese equipment market, and the critical mission importance of many of those products in the U.S. with only one source, which is in China. You will see companies starting to diversify their supply chains, such as reagents used for drug development. If China simply chooses to say, like with rare earth metals, we just won't support the export of reagents, then they will shut down a significant part of the global pharmaceutical industry.

Clearly, this then becomes a humanitarian issue, not just a geopolitical issue. So I think there is a genuine concern about supply chain diversification. I think many large pharmaceutical companies are worried about the direction of policy. Personally, I don't think so. I have some thoughts on this. I think we will stand on the side of humanitarianism, doing what is right for humanity, rather than trying to wrap everything under the umbrella of security issues.

But I think security is not the main concern here. I think supply chain diversification is, and I think security issues will ultimately emerge here.

Lizzi C. Lee:

What about data integrity? Or when it comes to safety standards for Chinese-developed drugs entering the U.S. market, there has been discussion in some policy-making areas as well.

Gary Rieschel:

In the past, the trial data conducted in China was not reliable. But that is no longer the case. There is a gentleman named Bobby, who is at Memorial Sloan Kettering Cancer Center in New York. He is one of the first to bring Chinese drugs to the U.S. and get them through the entire process. This provides considerable credibility and makes you realize that if you collaborate with professional institutions in China and work with the right trial partners, you can trust this data.

Artificial intelligence is somewhat leading this trend, as everyone is concerned about what kind of information they are collecting about you and me. Who can use the data? The healthcare industry has always had very strict limitations on access to patient data. Artificial intelligence will lead to some rethinking of this issue and what it actually means. I actually believe that you can ensure the complete security of patient data, but everyone will always point out cases of one in a million or one in a billion We look forward to it.

Future Choices for Multinational Corporations

Lizzi C. Lee:

Finally, let's talk about multinational corporations. For multinational companies in the pharmaceutical industry and related sectors, given your deep expertise in China and the decades you've spent there, what risks should they be aware of when it comes to China? What opportunities do you think they currently face? What feasible strategies would you suggest or recommend to them?

Gary Rieschel:

I think the feasible strategy they started implementing 20 years ago was to establish laboratories to understand what China was developing. But they haven't fully capitalized on that. Now, you see many companies that are actually world-class companies, and they are right in China. So now pharmaceutical companies are figuring out what licenses they need and how to leverage potential products from China to enrich their product lines.

The next generation of drugs, which we have discussed, are better drugs. So they have already started. The biggest issue they face now is what their investments in China are. In other words, they will have to decide whether the Chinese market is a place where they want to reach some compromise to introduce drugs into China rather than withdrawing from China. I think this will be a painful discussion because doing business in China will be expensive for them.

The competitive landscape for Chinese pharmaceutical companies is very different. If it's a device company, it is still a good market or a good environment. Competing with the Chinese is almost impossible. The Chinese are better, faster in almost all devices, and have reached world-class scale. So pharmaceutical companies still have an advantage, but they will have to figure out what their engagement strategy is.

Currently, it's about licensing. Will there be more mergers and acquisitions? Because there is actually no merger and acquisition market in the pharmaceutical or technology sectors in China. This is a huge weakness in the structure of the Chinese capital market. Therefore, foreign companies have an advantage there, but they will have to decide whether to do so, and there will be geopolitical concerns regarding acquiring Chinese companies. How do you conduct due diligence on this process? But I think that's the next step. They have to decide whether to take that step.

Lizzi C. Lee:

Wonderful. Gary, this has been a fantastic conversation. Thank you very much for sharing your insights.

Gary Rieschel:

My pleasure. Thank you very much