WEBVTT - Here Comes the Booming Chinese Biotech Sector 0:00:00.360 --> 0:00:02.400 Hey, Odd Loots listeners, We're coming to DC. 0:00:02.840 --> 0:00:04.840 We're finally doing it, Joe. It's going to be our 0:00:04.840 --> 0:00:09.200 first live show in Washington, DC, our nation's capital. It's 0:00:09.240 --> 0:00:12.440 also finally going to be the time where we actually 0:00:12.520 --> 0:00:13.640 talk about the Jones Act. 0:00:13.880 --> 0:00:17.160 Listen talk about doing the Jones Act episode of Odd 0:00:17.200 --> 0:00:19.880 Lots for a long time, and it's become this recurring 0:00:19.920 --> 0:00:21.880 joke that we've never done on But we're going to 0:00:21.920 --> 0:00:24.599 do it in grand style because we're going to be 0:00:24.600 --> 0:00:27.200 doing it live in DC and it's actually going to 0:00:27.240 --> 0:00:27.840 be a debate. 0:00:28.240 --> 0:00:28.520 Yeah. 0:00:28.640 --> 0:00:33.120 So we have Sarah Fuentes from the Transportation Institute. She's 0:00:33.159 --> 0:00:35.080 going to be taking the pro side, and we also 0:00:35.159 --> 0:00:38.600 have Colin graybou of the Cato Institute. He'll be taking 0:00:38.880 --> 0:00:42.000 the against side. It's going to be really interesting to 0:00:42.040 --> 0:00:43.880 see how all of that shakes out. 0:00:43.960 --> 0:00:46.519 In addition to that, we're going to be speaking with 0:00:46.720 --> 0:00:50.080 Blair Levin, who was around during the telecom bubble, and 0:00:50.400 --> 0:00:53.440 we have Andrew Ferguson, the new head of the FTC, 0:00:53.560 --> 0:00:55.320 the one who's replaced Lina Kong. We're going to be 0:00:55.320 --> 0:00:57.920 talking about mergers and acquisitions and all that stuff. So 0:00:58.240 --> 0:00:59.320 it should be a really fun night. 0:00:59.520 --> 0:01:02.120 If you want to come and join us for that evening, 0:01:02.240 --> 0:01:05.160 it's going to be on March twelfth at the Miracle Theater. 0:01:05.440 --> 0:01:08.399 Go to Bloomberg dot com forward slash odd Lots and 0:01:08.440 --> 0:01:10.839 you can find the link to purchase tickets. We hope 0:01:10.840 --> 0:01:11.440 to see you there. 0:01:14.120 --> 0:01:29.319 Bloomberg Audio Studios, Podcasts, Radio News. 0:01:29.600 --> 0:01:33.480 Hello and welcome to another episode of the Odd Lots podcast. 0:01:33.640 --> 0:01:36.120 I'm Jio Wisenthal and I'm Tracy Alloway. 0:01:36.560 --> 0:01:39.280 Tracy, you know, we talk a lot about China, talk 0:01:39.400 --> 0:01:44.640 about cars and batteries. It's time for a Chinese biotech. 0:01:44.840 --> 0:01:46.640 It's time for the Chinese pharma episode. 0:01:47.000 --> 0:01:47.160 Joe. 0:01:47.240 --> 0:01:50.480 It's just what I always wanted. Thank you so much. No, 0:01:50.640 --> 0:01:54.200 I am genuinely excited to talk about this. One reason 0:01:54.440 --> 0:01:56.880 is because this is a sector that I don't really 0:01:56.960 --> 0:02:00.160 know that much about. Another reason is it has it's 0:02:00.160 --> 0:02:02.560 actually been in the news quite a bit recently with 0:02:02.640 --> 0:02:06.640 the cuts to NIH funding, which we've discussed and things 0:02:06.680 --> 0:02:09.720 like that, and then more generally, it sort of sits 0:02:09.760 --> 0:02:15.000 in that nexus of policy aimed at boosting specific sectors 0:02:15.560 --> 0:02:18.840 and also competition between the US and China. 0:02:19.560 --> 0:02:21.600 That's exactly right, and it's like you know, we've just 0:02:21.639 --> 0:02:24.520 gotten used to the fact that in many areas of 0:02:24.600 --> 0:02:28.960 sort of physical manufacturing, there are very there are many 0:02:29.080 --> 0:02:33.360 industries in which China can compete and produce things either 0:02:34.400 --> 0:02:37.280 cheaper and higher quality. It seems like many areas relate 0:02:37.360 --> 0:02:40.720 to batteries and automobiles and all kinds of stuff like that. 0:02:40.760 --> 0:02:42.640 We know that. And then of course we had like 0:02:42.680 --> 0:02:44.560 the deep seek moment and a bunch of people like, oh, 0:02:44.600 --> 0:02:48.000 it's not just physical things, it's not just gigantic plants. 0:02:48.480 --> 0:02:51.960 Also a lot of competition in areas like software, particularly 0:02:52.040 --> 0:02:56.400 artificial intelligence. That raised all sorts of questions. And then 0:02:56.520 --> 0:02:59.760 lately the drum is beating that we have to take 0:02:59.880 --> 0:03:03.720 very very seriously pharma and biotech, And this is one 0:03:03.760 --> 0:03:07.000 of those areas that I think most people, certainly me 0:03:07.120 --> 0:03:09.880 would say like in the year twenty twenty five. Still 0:03:10.680 --> 0:03:13.680 my conception my head is that the cutting edge is 0:03:13.720 --> 0:03:16.760 in the US and Europe still, which I can't say 0:03:16.760 --> 0:03:18.079 that for a lot of industries. 0:03:18.080 --> 0:03:20.639 At this point, I want to know how medicines are 0:03:20.680 --> 0:03:24.760 actually made manufactured. I've read a long time ago. I 0:03:24.800 --> 0:03:29.120 read a book about the Twinkie, and it broke down 0:03:29.360 --> 0:03:32.440 every ingredient that went into a twinkie and where it 0:03:32.520 --> 0:03:35.400 came from. And it was really interesting because it turns 0:03:35.400 --> 0:03:37.760 out a lot of those ingredients came from China. I 0:03:37.760 --> 0:03:38.280 didn't know that. 0:03:38.360 --> 0:03:40.440 I didn't know that either, but you know what I did, 0:03:40.640 --> 0:03:44.040 were didn't know because we briefly touched on it in 0:03:44.080 --> 0:03:47.880 our recent episode with the two fellows from Goldman Sax 0:03:48.160 --> 0:03:53.000 about China's role in the pharmaceutical supply chain providing key 0:03:53.160 --> 0:03:55.920 ingredients to India, which then plays a key role. Anyway, 0:03:55.960 --> 0:03:58.080 there's a lot I want to know. I don't think 0:03:58.120 --> 0:04:00.560 I know anything, and I just want to jump into 0:04:00.600 --> 0:04:03.720 this episode because I want to learn more. In that spirit, 0:04:03.800 --> 0:04:06.400 we really do have the perfect guest. He's someone who 0:04:06.440 --> 0:04:08.560 recently put together a slide deck and I kind of 0:04:08.560 --> 0:04:11.960 think that slide deck catalyzed some articles. The deep sea 0:04:12.040 --> 0:04:15.200 moment in biotech got a lot of attention on social media. 0:04:15.440 --> 0:04:18.280 Drowing straight to the source, we're speaking with Tim Oppler. 0:04:18.320 --> 0:04:21.679 He's a managing director in the healthcare investment banking group 0:04:21.720 --> 0:04:24.680 at Stefel. Tim, thank you so much for coming on 0:04:24.720 --> 0:04:25.279 odd Locks. 0:04:25.720 --> 0:04:28.719 Thank you and Joe and Tracy. I really appreciate you 0:04:28.800 --> 0:04:30.680 having me. I'm very excited to be here today. 0:04:31.080 --> 0:04:34.000 What is a managing director in the healthcare investment banking 0:04:34.040 --> 0:04:34.960 group at Stevefoild. 0:04:35.040 --> 0:04:37.320 I don't actually manage a lot of people, so managing 0:04:37.360 --> 0:04:40.400 directors just the title. But basically, I'm a senior banker, 0:04:40.440 --> 0:04:44.000 and investment bankers are in the business of putting people together, 0:04:44.040 --> 0:04:46.280 people that need money with people that have money, people 0:04:46.360 --> 0:04:48.520 that want to license something out, with people that want 0:04:48.520 --> 0:04:51.479 to license something in. So I'm a middleman basically and 0:04:51.520 --> 0:04:53.039 get paid commissions for doing it. 0:04:53.120 --> 0:04:57.960 With your middleman position, could you maybe describe the ecosystem 0:04:58.240 --> 0:05:01.000 of getting new drugs to market, like where does it 0:05:01.120 --> 0:05:04.760 tend to start, what corporate entities does it go through, 0:05:05.080 --> 0:05:09.200 and then what's the process from there to getting into 0:05:09.240 --> 0:05:11.000 an actual physical medicine. 0:05:11.480 --> 0:05:14.280 So great question. So you know, back in the old days, 0:05:14.440 --> 0:05:17.680 if you rolled back the clock fifty years ago, large 0:05:17.680 --> 0:05:23.279 pharmaceutical companies Merck, Pfizer, Eli Lilly had these research and 0:05:23.279 --> 0:05:26.080 development groups and they would sit around and read up 0:05:26.200 --> 0:05:29.080 articles and do their own basic science and say, you know, 0:05:29.680 --> 0:05:31.880 I think we should do something to go after such 0:05:31.880 --> 0:05:33.919 and such type of virus. They would work on it 0:05:33.920 --> 0:05:35.400 for five or six years. They would come up with 0:05:35.440 --> 0:05:38.159 a drug candidate, they would go test it in people, 0:05:38.600 --> 0:05:40.920 it would work hopefully, and then they would get it 0:05:40.960 --> 0:05:43.960 approved and then they go out and market it. Things 0:05:43.960 --> 0:05:47.039 started to change, you may remember, you know, as back 0:05:47.080 --> 0:05:49.919 as the late nineteen seventies, companies like genen Tech and 0:05:49.920 --> 0:05:53.359 Biogen came on the scene. And so today we have 0:05:53.440 --> 0:05:56.400 a huge biotech industry. These are kind of like the 0:05:56.920 --> 0:05:59.799 you might call them the farm league, a big pharma 0:06:00.080 --> 0:06:02.560 are the ones that come up with the new drugs. 0:06:03.120 --> 0:06:05.200 Of course, the farmers are still doing their own work too, 0:06:05.920 --> 0:06:08.840 and so biotech's become a huge part of our ecosystem. 0:06:08.880 --> 0:06:11.000 It's also become a big part of the capital market. 0:06:11.080 --> 0:06:14.160 So there's whole groups of people that you know, god 0:06:14.279 --> 0:06:17.360 mds and PhDs that went to work for funds and 0:06:17.400 --> 0:06:20.320 they sit there, you know, does this drug candidate look 0:06:20.400 --> 0:06:21.960 like it's gonna make it? I'm going to bet for 0:06:22.040 --> 0:06:23.440 it or I'm going to bet against it. 0:06:23.680 --> 0:06:24.800 What does biotech mean? 0:06:25.720 --> 0:06:25.840 Hey? 0:06:25.880 --> 0:06:28.279 Sometimes ask Tracy what fintech means, and I still don't 0:06:28.279 --> 0:06:29.000 know the answer to that. 0:06:29.279 --> 0:06:31.200 But what is biotech touch banking? 0:06:32.080 --> 0:06:35.680 So I'd like to give three different answers. First of all, 0:06:35.680 --> 0:06:38.039 when people say biotech in general, what they mean is 0:06:38.120 --> 0:06:40.679 kind of the more high tech part of the pharmaceutical industry, 0:06:40.680 --> 0:06:41.360 the cool part. 0:06:41.560 --> 0:06:43.680 Yeah, that's always I just figure it's a cool. 0:06:44.320 --> 0:06:47.800 What I mean by biotech is the when you have 0:06:47.880 --> 0:06:51.080 a company whose sole asset is a drug candidate that 0:06:51.160 --> 0:06:54.040 has not yet been approved by the FD so pre commercial. 0:06:54.480 --> 0:06:57.560 When I say biotech, that's what I mean. Other people 0:06:58.520 --> 0:07:01.479 think it refers to biologic, and it's true. The original 0:07:01.480 --> 0:07:05.200 biotechs like Genetech were focused on biologic so it's understandable 0:07:05.279 --> 0:07:06.920 that some people would associate biotech. 0:07:07.680 --> 0:07:10.920 It's a distinct type of therapy from the traditional type 0:07:10.960 --> 0:07:13.320 of medicine that would have been developed at America. 0:07:13.720 --> 0:07:17.120 That's correct. So traditionally there are two types of medicines. 0:07:17.160 --> 0:07:20.040 There's small molecules, those little white pills some people take 0:07:20.120 --> 0:07:24.320 every day, and then there are injectable biologics. Those are 0:07:24.480 --> 0:07:28.360 products that are much more complex, much larger molecules, and 0:07:28.400 --> 0:07:29.640 are made in very different ways. 0:07:30.280 --> 0:07:32.559 Can you talk about that, going right to my question 0:07:32.640 --> 0:07:36.720 about how medicine is actually made, how Yeah. 0:07:36.520 --> 0:07:39.480 So for a small molecule, it's actually a chemical. So 0:07:39.960 --> 0:07:43.760 the pharmaceutical industry actually came out of the chemical industry. 0:07:43.760 --> 0:07:46.440 So if you go back to the history of pharmaceuticals, say, 0:07:46.480 --> 0:07:50.480 like what was going on in sixteen fifty, Well, people 0:07:50.480 --> 0:07:53.880 were literally chemists. In fact, still in England today you 0:07:53.920 --> 0:07:56.000 can walk into what we would call it pharmacy, they 0:07:56.040 --> 0:07:58.560 call it a chemist and they would literally, you know, 0:07:58.600 --> 0:08:02.000 put together your antimony or whatever it was and serve 0:08:02.040 --> 0:08:04.840 it up to you. So that still goes on. But 0:08:04.880 --> 0:08:07.880 of course those small molecule pills are made in giant 0:08:07.960 --> 0:08:10.920 factories of what's called API, which is really just fine chemical. 0:08:11.720 --> 0:08:14.640 The other side of the industry, though, these biologics are 0:08:14.720 --> 0:08:18.880 made typically in bugs. So you would take, for example, yeasts, 0:08:19.360 --> 0:08:22.320 or you might take E. Coli, or you might take 0:08:22.360 --> 0:08:25.320 what are called Chose cells. Those are Chinese hamster ovary cells. 0:08:25.440 --> 0:08:27.400 Why do they use them because they're really good at 0:08:27.440 --> 0:08:32.200 growing biologics. And you insert a piece of DNA into 0:08:32.240 --> 0:08:35.920 the DNA of that species and then that causes that 0:08:36.000 --> 0:08:40.440 species to manufacture the protein of interest, and that's a 0:08:40.440 --> 0:08:43.560 whole other industry. And then those say Chose cells or E. 0:08:43.640 --> 0:08:46.200 Coli cells or whatever they are, they're grown in these 0:08:46.240 --> 0:08:49.160 giant tanks, and so you might have like a forty 0:08:49.200 --> 0:08:52.720 thousand liter tank full of growth medium and those cells 0:08:52.760 --> 0:08:55.160 are just swimming around and making their proteins. Then they're 0:08:55.200 --> 0:08:57.520 harvested and you pull out the protein of interest. 0:08:57.960 --> 0:09:01.320 I'm sorry, did you say Chinese have overy cells? 0:09:01.400 --> 0:09:05.720 I know, and we're talking about China. See, China is everywhere, Tracey. 0:09:05.760 --> 0:09:07.720 I already feel like we're gonna have to have Tim 0:09:07.840 --> 0:09:10.360 back already, right, because like this is already one of 0:09:10.360 --> 0:09:13.400 those topics where like we probably could just talk about 0:09:13.440 --> 0:09:16.920 one niche aspect of the supply chain for some ingredient 0:09:17.160 --> 0:09:19.240 because we're not even actually close to getting to it. 0:09:19.320 --> 0:09:21.280 But we need to build up to we need to 0:09:21.320 --> 0:09:22.320 build up to Chinese. 0:09:22.360 --> 0:09:24.120 Well, let's let's just jump right into it. I want 0:09:24.120 --> 0:09:25.320 to make sure, I want I want to make a 0:09:25.360 --> 0:09:30.400 comment here. Okay, So China is all of a sudden 0:09:30.559 --> 0:09:34.559 starting to be very competitive with the US biotech ecosystem. 0:09:34.840 --> 0:09:37.559 I personally don't think that's a surprise. I don't think 0:09:37.600 --> 0:09:39.600 that's the bad thing. And here here's what's going on. 0:09:40.160 --> 0:09:42.320 We developed the first biologics in the United States in 0:09:42.320 --> 0:09:44.760 the nineteen seventies. Well it's twenty twenty five, right, that 0:09:44.840 --> 0:09:47.840 was fifty years ago. Yeah, I mean you would think 0:09:48.679 --> 0:09:50.840 that the know how of how to make those things 0:09:50.960 --> 0:09:54.679 is spread around, and it has. And so what happened was, 0:09:54.920 --> 0:09:59.959 you know, in the nineteen nineties, two thousands armies of China, 0:10:00.040 --> 0:10:02.679 these people came to the United States for jobs inside 0:10:02.679 --> 0:10:06.480 all those companies, and they learned, not surprisingly, how to 0:10:06.520 --> 0:10:09.480 make what was being made then, which was biologics. You know, 0:10:10.960 --> 0:10:12.960 I don't want to call it racism. I think that's 0:10:12.960 --> 0:10:15.960 probably unfair. But for whatever reason, a lot of these 0:10:16.080 --> 0:10:20.120 Chinese personnel weren't promoted. They didn't become the SVP at 0:10:20.160 --> 0:10:24.040 some big shot US biotech company. You know, they were 0:10:24.080 --> 0:10:26.880 stuck in a director job, and they got frustrated and 0:10:26.960 --> 0:10:30.120 left and went home to China. Now here we are 0:10:30.160 --> 0:10:33.360 twenty twenty five, and they're crawling all over us like 0:10:33.679 --> 0:10:35.360 they know how to do exactly what we know how 0:10:35.400 --> 0:10:38.320 to do, and guess what, just like in batteries, just 0:10:38.360 --> 0:10:41.120 like in telephones and these other sectors, they're pretty good 0:10:41.160 --> 0:10:44.080 at it. And so all of a sudden, US biotech 0:10:44.120 --> 0:10:45.960 I think has really woken up just in the last 0:10:46.040 --> 0:10:49.480 year or two and said, WHOA, we've got competition. Like 0:10:49.559 --> 0:10:51.840 these guys are as good as US. I'd say they're 0:10:51.840 --> 0:10:53.880 probably better in a lot of ways. 0:10:54.120 --> 0:10:57.000 So I definitely want to get to where they are 0:10:57.000 --> 0:10:58.880 and why they might be better and what are the 0:10:58.920 --> 0:11:01.760 conditions that perhaps allow them to be better. One less 0:11:01.840 --> 0:11:06.600 sort of like precursor. Oh yes, und question is for 0:11:06.679 --> 0:11:09.280 these chemicals, I imagine that. Okay, we're going to talk 0:11:09.320 --> 0:11:13.000 about breakthroughs that are happening that are in China, that 0:11:13.040 --> 0:11:15.960 are you know, in terms of therapies or biologics, et cetera. 0:11:16.320 --> 0:11:19.240 But if we wind back a few years to where 0:11:19.280 --> 0:11:22.440 people's brains were stuck at in terms of what is 0:11:22.480 --> 0:11:26.640 the sort of global supply chain of I mean the 0:11:26.840 --> 0:11:29.600 Chinese hamster over is, what is the sort of sort 0:11:29.640 --> 0:11:35.760 of incumbent global supply chain of key materials, ingredients, equipment 0:11:35.880 --> 0:11:38.560 for biotech and what is China's role in that. 0:11:39.480 --> 0:11:43.400 So if you're making a small molecule which comes down 0:11:43.480 --> 0:11:46.760 to that basic fine chemical, let's say it's libatare, Okay, 0:11:47.000 --> 0:11:48.880 you could probably make it for less than a place 0:11:48.960 --> 0:11:52.240 like India or Indonesia or China. So that's called API, 0:11:52.320 --> 0:11:55.720 active pharmaceutical ingredient. And in fact, China has become a 0:11:55.960 --> 0:11:59.560 huge source of API because in many ways, you know, 0:11:59.640 --> 0:12:02.360 China's really good in the chemical industry. So why wouldn't 0:12:02.360 --> 0:12:08.880 they be good in the API industry? 0:12:20.920 --> 0:12:25.560 Can you contextualize some of China's I guess growth in 0:12:25.600 --> 0:12:28.480 this area with some specific numbers, because we see all 0:12:28.520 --> 0:12:32.320 these headlines coming out, like thirty percent of major pharma 0:12:32.480 --> 0:12:36.760 licensing deals now involve Chinese companies. I think that's up 0:12:36.800 --> 0:12:40.120 from like almost zero five years ago. There are some 0:12:40.320 --> 0:12:42.120 interesting data to look at. 0:12:42.640 --> 0:12:45.200 Yeah, So just to give you a couple stats the 0:12:45.440 --> 0:12:48.400 API that source into the US, I don't have the 0:12:48.440 --> 0:12:51.640 exact numbers on my fingertips, but I would say at 0:12:51.679 --> 0:12:55.040 least twenty five to fifty percent of API that's being 0:12:55.200 --> 0:12:58.640 used in the US generic pharmaceutical industry today is sourced 0:12:58.679 --> 0:13:01.080 from China. India is another big piece of that. So 0:13:01.120 --> 0:13:05.720 Indian China are both really big. What's interesting is India 0:13:05.760 --> 0:13:10.120 has not kind of had this phenomenon of their nationals 0:13:10.160 --> 0:13:14.680 coming home and opening up local biotech companies. So China 0:13:14.760 --> 0:13:20.199 created this policy, you know, very intentionally five ten years ago, 0:13:20.280 --> 0:13:22.120 saying hey, we want to be really good in biotech. 0:13:22.160 --> 0:13:24.480 It is strategic for US as a country. It's not 0:13:24.520 --> 0:13:26.640 that they're trying to beat the United States so that 0:13:26.679 --> 0:13:29.960 they need access to these medicines domestically. You know, why 0:13:30.679 --> 0:13:33.960 pay the giant global price that some US pharma company 0:13:34.000 --> 0:13:35.679 wants a charge? Like, why don't you just learn how 0:13:35.679 --> 0:13:39.600 to make it at home? So they very deliberately attracted 0:13:39.640 --> 0:13:42.640 back what are called sea turtles. These are people that 0:13:42.760 --> 0:13:45.520 crossed the sea from the US or Europe back home 0:13:45.559 --> 0:13:48.360 to China. They were then encouraged to start their own 0:13:48.360 --> 0:13:51.400 biotech companies and apply whatever they had learned, you know, 0:13:51.400 --> 0:13:53.800 in their jobs in Bristol Meyers squib or An Artists 0:13:53.880 --> 0:13:56.439 or what have you, and Boyd learned they had and 0:13:56.840 --> 0:13:59.960 support they got, and all of a sudden they're churning 0:14:00.080 --> 0:14:04.640 out really interesting molecules. And so Tracy, just like you said, 0:14:04.800 --> 0:14:08.439 last year, thirty percent of all molecules that were licensed 0:14:08.480 --> 0:14:11.719 in by big Pharma came from China, not from the 0:14:11.840 --> 0:14:15.560 United States, not from Europe, not from Japan. They came 0:14:15.559 --> 0:14:18.720 from China. And I do think that statistic, which was 0:14:18.840 --> 0:14:22.040 generated by our good friends at deal Forma, was really 0:14:22.120 --> 0:14:23.680 kind of a wake up call for a lot of 0:14:23.720 --> 0:14:24.680 folks in our industry. 0:14:24.840 --> 0:14:27.480 And what five years ago that would have been basically. 0:14:27.120 --> 0:14:29.720 Zero, yeah, five percent, zero to five percent? 0:14:29.840 --> 0:14:30.560 How much is it? 0:14:30.640 --> 0:14:30.720 Is? 0:14:30.720 --> 0:14:35.400 It genuinely novel therapies. How much is it? There's sort 0:14:35.400 --> 0:14:37.920 of an existing therapy, but they can make it a 0:14:37.920 --> 0:14:41.520 better version of it, a cheaper version of it. I understand, 0:14:41.560 --> 0:14:44.600 like cheaper it must be sort of a weird concept 0:14:44.680 --> 0:14:46.320 in an area where there's I know, a lot of 0:14:46.360 --> 0:14:50.560 intellectual property. But talk about what is driving that competitiveness 0:14:50.600 --> 0:14:51.520 and market share game. 0:14:52.240 --> 0:14:56.000 There's two or three different things going on. So the 0:14:56.040 --> 0:14:59.400 first thing is we're seeing what are called fast follower molecules. 0:14:59.480 --> 0:15:02.760 Let's just say for the sake of argument, that Daichi 0:15:02.800 --> 0:15:05.400 Senkio comes up with something called a B seven H 0:15:05.480 --> 0:15:09.400 three anti body drug conjugate B seven H three ADC. Well, 0:15:10.440 --> 0:15:13.440 the Chinese guys see that pop up, they see the 0:15:13.480 --> 0:15:15.600 patent filing, they look at it, and they're like, Okay, 0:15:16.160 --> 0:15:18.040 we're gonna make a B seven H three, but instead 0:15:18.040 --> 0:15:20.720 of using this toxin on the ADC, we're gonna use 0:15:20.760 --> 0:15:22.400 that toxin are instead of using this link or we're 0:15:22.400 --> 0:15:25.000 gonna use that one. So those are kind of doing 0:15:25.080 --> 0:15:28.960 small twists around existing constructs. So we call those fast followers. 0:15:29.440 --> 0:15:32.840 China's really good at past followers. The second thing that 0:15:32.880 --> 0:15:38.040 you're seeing are first in class molecules and So the 0:15:38.080 --> 0:15:41.400 hottest biotech in the United States right now is a 0:15:41.440 --> 0:15:44.760 company called Summit Therapeutics. They have a seventeen billion dollar 0:15:44.800 --> 0:15:47.920 market cap as we speak. Remember I define a biotech 0:15:48.000 --> 0:15:50.120 a company that doesn't yet have an approved drug. So 0:15:50.680 --> 0:15:53.160 that's the highest valuation in the world of any company 0:15:53.240 --> 0:15:56.120 in the world today that doesn't have an approved drug. 0:15:57.040 --> 0:15:59.880 That molecule, which is a combination of a PD one 0:16:00.040 --> 0:16:03.800 antibody with the VeVe jef modi PD one by Vegef 0:16:03.800 --> 0:16:08.880 it's called is an excellent molecule. It's working really well 0:16:08.880 --> 0:16:12.320 in mun cancer. And guess what it was invented in China. 0:16:12.560 --> 0:16:14.800 Mert didn't come up with it, Advisor didn't come up 0:16:14.800 --> 0:16:16.920 with it. Habit didn't come up with it. It was 0:16:16.960 --> 0:16:19.040 come up with in China. And it's the most interesting 0:16:19.040 --> 0:16:21.000 biotech molecule in the world today. 0:16:21.040 --> 0:16:23.400 But this is an American company, Summer, right, They went 0:16:23.440 --> 0:16:26.200 and licensed China got it, just like we're seeing the 0:16:26.200 --> 0:16:29.680 big pharmaus US biotechs licensing stuff from China all day long. 0:16:30.440 --> 0:16:34.440 How much does the difference in regulatory regimes play into here, 0:16:34.480 --> 0:16:36.560 because one thing we often hear when it comes to 0:16:36.640 --> 0:16:41.280 outsourcing manufacturing to China whether it's something basic like I 0:16:41.280 --> 0:16:47.200 don't know, clothing or something more advanced like medicines. Is 0:16:47.240 --> 0:16:51.320 that it's cheaper to make stuff in China because you 0:16:51.360 --> 0:16:54.680 don't have as many rules and regulations to either slow 0:16:54.720 --> 0:16:57.320 you down or add on to costs. Is that a 0:16:57.320 --> 0:16:58.400 factor here as well. 0:16:59.240 --> 0:17:03.680 That's a comp located question and a complicated answer. So yeah. 0:17:03.760 --> 0:17:10.720 So for most biologics, the Chinese will allow you to 0:17:10.760 --> 0:17:14.240 get those into patients more quickly. They have what we 0:17:14.359 --> 0:17:16.800 call phase zero studies where you can just go to 0:17:16.920 --> 0:17:19.960 a doctor and say, okay, hey, doc, you've got people 0:17:20.000 --> 0:17:24.080 coming in that are dying of ovarian cancer, use this drug. 0:17:24.440 --> 0:17:27.040 The FDA will not let you do that, right, So, 0:17:27.160 --> 0:17:30.120 the FDA won't let that ovarian cancer drug go into 0:17:30.160 --> 0:17:35.000 a patient until it's gone through typically a Phase one study. Interestingly, 0:17:35.080 --> 0:17:37.280 China's not the only country that does that. Australia does 0:17:37.280 --> 0:17:39.720 that too, and you know, we have kind of new 0:17:39.760 --> 0:17:41.359 sheriff in town at the FDA. It might be an 0:17:41.359 --> 0:17:47.840 interesting thing to explore kind of accelerating that time to 0:17:47.880 --> 0:17:50.720 get to the first patient. So that that's one place 0:17:50.720 --> 0:17:54.800 where China is a head. But in general, their rules 0:17:54.840 --> 0:17:56.520 are just as tough as our rules. It's not like 0:17:56.680 --> 0:17:58.639 they have a you know, a low hurdle and we 0:17:58.680 --> 0:18:00.720 have a high hurdle to jump over to get a 0:18:00.800 --> 0:18:05.159 drug approved. Their vantage is more speed to invent, speed 0:18:05.200 --> 0:18:08.520 to get into the clinic. They're just performing really well 0:18:08.520 --> 0:18:11.080 on a lot of those key performance indicators. 0:18:11.359 --> 0:18:16.000 What about there's the cost of conducting a phase one trial. 0:18:16.040 --> 0:18:20.080 I mean, these are really expensive endeavors in the United States, 0:18:20.080 --> 0:18:22.960 and you can spend millions and it goes nowhere past 0:18:23.160 --> 0:18:26.600 phase one. How does the cost compared to run the 0:18:26.640 --> 0:18:27.840 equivalent in China? 0:18:28.160 --> 0:18:30.320 I mean we should pause for moments. So the US 0:18:30.440 --> 0:18:35.120 has capitalistic medicine system, right, So doctors are for profits. 0:18:35.119 --> 0:18:36.960 So if you're a physician, of course you're trying to 0:18:37.000 --> 0:18:39.800 care for your patients. But let's be honest, a lot 0:18:39.840 --> 0:18:43.280 of those dermatologists and endochronologists that you see, they're running 0:18:43.320 --> 0:18:46.199 a business. The other day I was talking to a cardiologist. 0:18:46.280 --> 0:18:49.880 I said, like, how many patients do you see the year? 0:18:49.880 --> 0:18:52.679 He's like eight thousand, and I was out like asking 0:18:52.720 --> 0:18:54.760 the lady at the front, like, how much like does 0:18:54.800 --> 0:18:58.280 the average patient visit bill? She's like a four or 0:18:58.320 --> 0:18:59.800 five hundred bucks. So you can do the math that 0:18:59.800 --> 0:19:02.760 guy pulling down like five to ten million dollars, right, 0:19:02.840 --> 0:19:05.880 So running a physician practice in the United States can 0:19:05.920 --> 0:19:08.280 be very lucrative. I'm not saying every doc's doing it, 0:19:08.600 --> 0:19:11.520 just to be clear. But now you're a cancer doc 0:19:11.560 --> 0:19:14.080 and you're an MD Anderson or Dane Farber someplace, and 0:19:14.160 --> 0:19:18.199 some company shows up GSK and they want you to 0:19:18.240 --> 0:19:21.800 test this drug. How much are you going to charge 0:19:22.040 --> 0:19:25.920 GSK for each patient? It turns out that the average 0:19:26.000 --> 0:19:28.040 price to enroll a patient and a cancer drial in 0:19:28.080 --> 0:19:30.680 the United States is between two hundred thousand and four 0:19:30.760 --> 0:19:33.159 hundred thousand dollars per pat per patient. 0:19:33.280 --> 0:19:36.200 How much of that goes to the doctor. 0:19:36.560 --> 0:19:38.560 A lot and a lot to the hospital. I mean, 0:19:38.560 --> 0:19:40.240 this is a big issue that's just possed up. 0:19:40.200 --> 0:19:43.680 A big source of hospital and doctor profits that they're 0:19:43.840 --> 0:19:47.040 essentially selling access to their patients. 0:19:46.480 --> 0:19:52.160 You bet, especially at the big places. So developing drugs, 0:19:52.320 --> 0:19:55.679 especially in cancer in the United States is very expensive. 0:19:56.320 --> 0:19:58.639 The other thing I'd note is there's a lot of 0:19:58.640 --> 0:20:01.880 competition for talent in our country. Again, it's a capitalist 0:20:02.160 --> 0:20:05.879 talent market. So you know, let's say you're a doctor 0:20:05.960 --> 0:20:08.200 working in m D Anderson and then GSK comes along 0:20:08.200 --> 0:20:10.160 and says, hey, we'd like you to be our chief 0:20:10.240 --> 0:20:14.760 medical officer. We'd like you to run this cancer program. Like, 0:20:14.920 --> 0:20:17.520 is that a one hundred and fifty thousand dollars job. 0:20:17.760 --> 0:20:20.200 I don't think so. The average chief medical officer in 0:20:20.240 --> 0:20:22.240 the United States city is pulling down between a half 0:20:22.280 --> 0:20:25.080 million and one point five million dollars a year, depending 0:20:25.119 --> 0:20:27.000 on your level of experience and how good you are. 0:20:27.520 --> 0:20:30.240 So all of a sudden, you see biotech companies that 0:20:30.280 --> 0:20:32.400 are going out to raise one hundred million dollars. Well, 0:20:32.480 --> 0:20:35.280 that's how much you need to raise to enroll the 0:20:35.280 --> 0:20:37.720 trial and pay all those people. And you know they 0:20:37.720 --> 0:20:41.400 have lots of posh offices as well, and expensive places, 0:20:41.440 --> 0:20:44.800 and so US biotech is not so efficient. In contrast, 0:20:44.840 --> 0:20:47.800 in China, there are no seven hundred thousand dollars chief 0:20:47.880 --> 0:20:50.480 medical officers. There are no two hundred thousand dollar patients. 0:20:50.520 --> 0:20:55.760 It's a communist country, right. Doctors, you know, make thirty 0:20:55.800 --> 0:20:58.880