China Biotech Scaling, Korea Automotive Niche

China’s rapid advancement in biopharmaceuticals presents a significant challenge, shifting from incremental progress to a structural and globally impactful transformation.

The US National Security Commission on Emerging Biotechnology has cautioned that the United States has a limited timeframe to proactively maintain its global leadership position in the face of China’s burgeoning biotech sector.

For South Korea, which prioritizes biotechnology as a key driver of scientific sovereignty, this development is particularly concerning. The disparity with China is no longer hypothetical; it’s a substantial and growing gap.

Experts suggest that South Korea should focus on establishing a specialized niche, emphasizing innovation, capital efficiency, and regulatory adaptability, rather than trying to directly compete with China’s scale.

The sheer numbers highlight the considerable difference.

In 2025, South Korea’s drug industry secured $14.5 billion in out-licensing deals, a notable increase from $5.5 billion the previous year, according to the Korea Pharmaceutical and Bio-Pharma Manufacturers Association. In contrast, China reported $135.7 billion in out-licensing deals in 2025, following $51.9 billion in 2024, as reported by the Chinese National Medical Products Administration.

However, the scale is just one aspect. China’s increasing competitive edge stems from its accelerated innovation capabilities.

Over the last decade, China has revamped its clinical trial system. In 2018, it implemented a revised investigational new drug (IND) system, allowing trials to commence automatically if regulators don’t raise concerns within a defined review period. Since 2015, it has expanded investigator-initiated trials to expedite early data generation and proof-of-concept results. China also joined the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use in 2017, aligning its standards with international norms.

This has resulted in a significantly shortened development timeline.

“China is reducing the time required from initial drug discovery to IND application by 50 to 70 percent,” stated Oh Ki-hwan, head of the Bio-Economic Research Center at the Korea Biotechnology Industry Organization. “They can also rapidly assemble large patient groups for Phase I trials.”

China has effectively established one of the world’s largest and fastest clinical trial platforms, making it a major attraction for global pharmaceutical companies seeking rapid validation.

“It’s challenging for Korea to compete head-to-head,” Oh said. “China possesses distinct advantages in new drug development capabilities and the speed of clinical progress.”

Against this backdrop, Korea’s biotech ecosystem presents a complex picture.

The top 20 pharmaceutical and biopharmaceutical companies in the country achieved record combined sales of approximately 25 trillion won ($17 billion) in 2025, representing a 15 percent year-on-year increase. Major players like Samsung Biologics, Celltrion, GC Biopharma, Chong Kun Dang Pharmaceutical, Kwangdong Pharmaceutical, and Daewoong Pharmaceutical reported strong financial performance.

However, beneath these figures, smaller biotech ventures, which are vital for pipeline diversification, face significant challenges.

“Since the second half of 2022, rising interest rates have negatively impacted investment in biotech ventures,” explained Jon Sang-yong, a professor of biologics sciences at KAIST and founder of three startups.

“Only a few companies managed to secure funding. Those already conducting clinical trials struggled to continue due to a lack of capital. Without achieving milestones, attracting investment became even more difficult, creating a negative cycle.”

A survey conducted by the Korea Biotechnology Industry Organization revealed that 70 percent of biotech firms reported facing serious financial difficulties as of May last year.

Jon contends that incremental increases in government funding are inadequate. The budget for the Korea Drug Development Fund increased by 13.3 percent to 154.8 billion won this year, but he believes that a significant portion will be allocated to ongoing projects rather than supporting new ventures.

“Biotech startups require considerably more capital than IT startups,” he emphasized. “If both receive 500 million won in support, the impact is drastically different.”

He advocated for a bio-specific version of the Tech Incubator Program for Startup (TIPS) – Korea’s public-private funding model – tailored to the capital intensity and extended timelines of drug development.

Experts largely agree that Korea cannot compete with China’s spending or scale in biotechnology. Instead, they suggest a structural approach focusing on regulatory reform, sustained capital flow, and global integration.

Ahn Joon-mo, professor of public administration at Korea University and president of the Korean Society for Innovation Management and Economics, emphasized the urgency of regulatory reform.

“Korea’s bio regulations are among the most stringent globally,” he stated. “Talented researchers are leaving the country because the startup environment here is not competitive.”

Ahn cited restrictions on data sharing in hospitals and slow approval processes as major obstacles. He called for more aggressive deregulation, expanded fast-track pathways for innovative drugs, and more flexible utilization of medical data.

The National Academy of Engineering of Korea has also recommended changes to Kosdaq listing rules. Under the current regulations, companies risk delisting if losses from continuing operations exceed 50 percent of equity and 1 billion won for more than two of the past three years.

“For biopharmaceutical firms requiring long-term R&D investment, meeting general profitability requirements soon after listing is challenging,” the academy stated in a January letter.

In contrast, the US Nasdaq does not impose ongoing profitability requirements, enabling innovative companies to prioritize R&D over short-term earnings.

The academy also criticized Korea’s R&D tax credit system, noting that many biotech startups, which often operate at a loss, cannot fully utilize the credits due to limited corporate tax liability.

It recommended implementing a cash refund mechanism for unused credits to enhance liquidity and sustain R&D spending.

Some experts suggest that Korea’s strategy should leverage China’s strengths rather than trying to bypass them.

Oh from KBIO proposed a “parallel clinical trial” approach: capitalizing on China’s scale and speed to generate early data while simultaneously conducting trials in the United States or the European Union to meet US Food and Drug Administration standards.

This dual-track model could accelerate development while ensuring access to global markets.

Another increasingly popular strategy is the “NewCo” model, widely used by Chinese biotech companies. This involves spinning off promising pipelines into new entities established in more investor-friendly locations to attract global capital.

“Unlike traditional venture creation, this approach secures funding and management resources from the outset,” stated Yoon Hee-jung of the Korea Institute of Science and Technology Evaluation and Planning.

Yoon noted that while Korea has instances of major drug companies collaborating with academics, it lacks a robust ecosystem for adopting the NewCo model, particularly due to a weak presence of venture capital and accelerators in the biotechnology sector.

“Given Korea’s high-quality pipelines, clinical trial data, and rapid research and production capabilities, (the NewCo model) can be an effective strategy to accelerate R&D and improve the chances of success,” she concluded.

As China accelerates in scale, capital, and regulatory speed, Korea’s challenge is less about matching quantitative gains and more about establishing a sustainable competitive position.

This could involve specializing in specific therapeutic areas, strengthening manufacturing-led partnerships, refining regulatory frameworks to retain talent, and ensuring consistent capital flow through the clinical “death valley” that threatens numerous startups.

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