China spent decades being associated with generic medicines, active pharmaceutical ingredients and low-cost manufacturing. That description is now badly out of date.
The more important development for investors is not that China can manufacture drugs cheaply. It is that Chinese companies are increasingly discovering drug candidates, taking them rapidly through early clinical trials and licensing them to the same Western pharmaceutical groups that previously supplied China with innovation.
For Switzerland, this matters twice. Roche and Novartis face a new source of competition in one of their most valuable areas, oncology, but they can also buy Chinese innovation rather than reproduce every discovery internally. At the same time, Roche and Novartis together represent roughly one-third of the SMI and more than one-quarter of a representative SPI portfolio. Swiss pension funds retain significant home-market exposure, so changes in the economics of global pharmaceutical R&D are indirectly a retirement-portfolio issue as well as a corporate one.
Our view is more nuanced than “China threatens Swiss pharma.” China is making pharmaceutical innovation less scarce. That is potentially bad for mediocre drug pipelines and expensive early-stage Western biotech, but it may actually strengthen large global companies that are good at identifying, licensing, financing and commercialising the best molecules wherever they originate.
The question for Roche and Novartis is whether they remain among those companies.
The numbers have changed remarkably quickly
One of the strongest pieces of evidence comes not from an investment bank but from a 2026 JAMA study of early-stage global drug development.
Between 2015 and 2024, the number of early-stage programmes originating in China rose from approximately 829 to 6,145. China’s share of worldwide early-stage development consequently increased from 8.0% to 32.3%, while the US share fell from 48.2% to 37.4%. Importantly, this was not simply an expansion in conventional generic medicines: China’s share of early-stage biologics reached 35.1%.
Cancer is where the shift is particularly striking. China’s share of early-stage cancer programmes rose from 10.2% in 2015 to 37.4% in 2024, slightly above the US share of 36.5% in the same dataset. JAMA’s authors appropriately warn that the study measures the geography and quantity of development, not whether every Chinese programme is genuinely first-in-class or will eventually reach patients. Nevertheless, the change in scale is difficult to dismiss.
A separate Citeline measure cited by SWI swissinfo.ch puts China at 31% of the global drug-development pipeline at the beginning of 2026, up from 18% in 2021. China accounted for 19% of research-based biopharmaceutical companies worldwide in January 2026, compared with 13% three years earlier.
| Indicator | Earlier position | Latest evidence | Why it matters |
| China’s share of early-stage drug programmes | 8.0% in 2015 | 32.3% in 2024 | Much larger future pipeline |
| China’s share of early-stage cancer programmes | 10.2% in 2015 | 37.4% in 2024 | Direct relevance to Roche and Novartis |
| China’s share of global drug pipeline | 18% in 2021 | 31% beginning 2026 | Not merely a niche biotech story |
| Research-based biopharma companies headquartered in China | 13% in 2023 | 19% Jan. 2026 | A much broader company ecosystem |
| Chinese out-licensing headline deal value | $13.9bn in 2021 | about $137bn in 2025 | Western pharma increasingly buys Chinese innovation |
The final number needs particularly careful interpretation. The approximately $137 billion is largely headline potential deal value, including milestones that may never be paid; it is not $137 billion of cash transferred to Chinese biotechs. Nevertheless, deal count reportedly reached 186 in 2025, compared with only ten in 2016. The direction of travel is unmistakable.
From Five-Year Plans to an innovation ecosystem
China’s emergence did not begin in 2024.
Regulatory reforms accelerated from 2015, partly to clear an enormous drug-approval backlog, improve data quality and bring clinical-development standards closer to international practice. Industrial policy then reinforced this through the Five-Year Plans and associated biotechnology programmes.
The 14th Five-Year Plan for drug safety and pharmaceutical development explicitly called for transforming China from a large pharmaceutical manufacturer into a pharmaceutical manufacturing power, while accelerating clinically valuable innovative medicines and improving regulatory capabilities.
This has continued rather than stopped. Regulatory reforms announced for the period to 2027 call for faster review of innovative drugs, with particular attention to areas including cell and gene therapy and other advanced treatments. In 2025, the NMPA introduced a pathway under which eligible Class I innovative-drug clinical trial applications can be reviewed within 30 working days, including products intended for simultaneous international development.
Franklin Templeton’s healthcare analysts describe the same evolution from an investor’s perspective: industrial policy, R&D investment, laboratories, talent and large patient populations initially allowed China to become a highly efficient “fast follower”; those capabilities are increasingly being redirected toward proprietary compounds that can be licensed globally. Franklin’s Evan McCulloch reported meeting more than 50 public and private Chinese biotech companies in Shanghai in 2025 and found some advancing dozens or even hundreds of candidates towards Phase II before seeking global partners.
The distinction matters. Fast following does not automatically become scientific leadership. But an industry capable of producing a good-enough molecule at half the time or cost can still radically change the economics of Western biotechnology.
MERICS reaches a similarly balanced conclusion. It finds that China has become exceptionally strong in biotechnology research, publications and patents, while remaining dependent on overseas markets, capital and partners for some of the commercial value created by that science. This dependency is simultaneously China’s weakness and an opportunity for Roche, Novartis and other multinational companies.
Suzhou: from industrial park to pharmaceutical pipeline
Suzhou illustrates how industrial policy becomes an ecosystem rather than merely a subsidy.
BioBAY in Suzhou Industrial Park opened in June 2007. Contemporary reporting described a cluster that was little more than a plan a few years earlier; by 2009 it already contained more than a hundred life-science companies. Today BioBAY says it hosts more than 620 innovative biomedical enterprises, spanning innovative drugs, medical devices, diagnostics, cell and gene therapy, RNA therapeutics and AI-assisted drug discovery.
This is significant because drug development benefits from clustering. Researchers move between companies; specialist CROs, laboratories and manufacturers are nearby; venture investors can examine many companies during a single visit; hospitals provide trial infrastructure; and unsuccessful projects recycle trained staff into the next venture.
Adagene offers one company-level example. Its Suzhou R&D operation dates from 2012, years before its 2021 Nasdaq listing. More importantly for Swiss investors, the bridge between Suzhou and Basel is no longer theoretical: Suzhou-based MediLink Therapeutics licensed YL211, a c-MET antibody-drug conjugate for solid tumours, to Roche, with $50 million in upfront and near-term payments and potential milestones approaching $1 billion, plus royalties.
The former low-cost manufacturing centre has become part of Roche’s own innovation supply chain.
Why oncology is the critical test case
Oncology combines several characteristics that helped China’s biotech model scale: large patient populations, many specialised hospitals, biomarker-defined patient groups, high commercial value and rapid development of new modalities such as antibody-drug conjugates, bispecific antibodies and cell therapies.
The quantity figures are extraordinary. GlobalData data cited by SWI suggest China was involved in 55% of oncology trials starting in 2025, compared with 14% for the United States. That statistic should not be confused with China’s share of original molecules: a multinational can conduct a trial in China without the medicine having been discovered there. The JAMA origin-of-innovation dataset is therefore the more conservative measure. But both datasets point in the same direction.
There is also evidence of improved quality rather than quantity alone. Chinese companies have become particularly visible in ADCs, bispecific immunotherapies and combinations designed to improve on PD-1/PD-L1 checkpoint inhibitors.
Roche’s January 2025 agreement with Innovent illustrates the attraction. Roche obtained worldwide rights to IBI3009, Innovent’s DLL3-targeted ADC for small-cell lung cancer. Innovent received $80 million upfront and could receive up to $1 billion in development and commercial milestones plus royalties. Its Phase I programme spans China, Australia and the United States.
This changes the competitive equation.
Twenty years ago, Roche’s advantage included its ability to finance a laboratory, discover a sophisticated biological target, develop a molecule and conduct global trials. Increasingly, the discovery may occur in Suzhou or Shanghai. Roche’s advantage then shifts toward selection, global development, regulatory expertise, manufacturing, combinations, market access and commercialisation.
That remains an advantage, it is simply a different one.
What is the risk for Roche?
Roche should not automatically be classified as a loser from Chinese biotechnology.
Its first risk is greater competition for differentiated oncology products. If several credible Chinese ADCs or bispecifics can target the same tumour biology, the scarcity value of a Western molecule declines. A drug that would once have enjoyed several years with limited competition may face alternatives sooner.
The second is R&D productivity. Cheap and fast Chinese early-stage development makes expensive Western development programmes easier to benchmark. Marginal projects become more difficult to justify.
The third is China itself as a commercial market. Roche reported 10% pharmaceutical sales growth in China in 2025, helped by products including Phesgo, Xofluza, Vabysmo and Polivy, but Chinese healthcare pricing reforms have already created pressure elsewhere in the group, including diagnostics. A technologically stronger domestic industry gives Beijing more alternatives when negotiating reimbursement and procurement prices.
But Roche also possesses perhaps the most obvious hedge against these risks: it can buy Chinese innovation. MediLink and Innovent demonstrate that it is already doing so.
This makes the situation quite different from Chinese EV manufacturers challenging a Western carmaker with a complete competing product. A pharmaceutical company can acquire or license the rights to a molecule discovered by its prospective competitor.
The danger therefore lies less in “China replacing Roche” than in Roche paying too much for external innovation, choosing the wrong compounds, or failing to convert licensed early-stage science into successful global medicines.
And Novartis?
The logic is broadly similar but the commercial exposure is worth noting.
Novartis generated approximately $4.2 billion of 2025 sales in China, up 8%. Against group net sales of roughly $54.5 billion, China represented about 7.7% of Novartis sales. It is therefore simultaneously an important growth market and a source of regulatory and pricing exposure.
Novartis has also become an active buyer of Chinese science. Its transactions extend beyond cancer into areas such as RNA therapeutics, demonstrating that China is becoming a platform source rather than merely an oncology sourcing market.
For Novartis, the deeper strategic threat is therefore not only competition with an individual Chinese medicine. It is that a larger and more efficient external innovation market can reduce the economic value of merely competent internal R&D.
The flip side is favourable. Companies with substantial balance sheets and global clinical-development infrastructure gain access to a much bigger supermarket of molecules.
In that world, scientific scouting and capital allocation become increasingly important competitive advantages.
Roche and Novartis are also a Swiss index-concentration story
This is where the subject becomes particularly relevant to Swisss readers who have no intention of buying a Chinese biotech stock.
In BlackRock’s SMI index fund holdings at 31 July 2026, Roche represented 16.88% and Novartis 16.43%. Together they represented 33.31% of the index. Nestlé added another 14.18%. Five companies — Roche, Novartis, Nestlé, UBS and ABB — accounted for almost 65%.
The broader SPI reduces but does not eliminate the concentration. Roche represented 13.13% and Novartis 12.78%, giving the pair a combined weight of 25.91%.
| July 31, 2026 | SMI tracker | SPI tracker |
| Roche | 16.88% | 13.13% |
| Novartis | 16.43% | 12.78% |
| Roche + Novartis | 33.31% | 25.91% |
| Nestlé | 14.18% | 11.03% |
| UBS | 8.87% | 6.90% |
| ABB | 8.42% | 6.54% |
| Top five combined | 64.78% | 50.38% |
These figures precede the September 2026 SMI review: Sandoz (generics) and Galderma (dermatology) have been announced as entrants effective 21 September 2026, replacing Swisscom and Kühne+Nagel, so the exact healthcare exposure will subsequently change. The larger point about concentration does not.
The less visible exposure: Swiss pension funds
An excellent UBS analysis published in June 2026 makes the concentration issue more tangible.
The average Swiss pension portfolio in its analysis held approximately 34% in equities. Of the equity allocation, 32.4% was invested in Switzerland and 67.6% internationally. Roche, Novartis, Nestlé, UBS and ABB alone represented about 16% of the average pension fund’s entire equity portfolio. Healthcare was the largest equity sector at 18%, and roughly two-thirds of that healthcare exposure came from Switzerland.
That is a useful corrective to the common belief that Swiss pension concentration risk is primarily about US technology companies.
A rough illustration shows the magnitude. If equities represent 34% of assets and 32.4% of those equities are Swiss, Swiss shares account for approximately 11% of the total pension portfolio. If that Swiss allocation resembled the broad SPI, Roche and Novartis’s 25.9% combined weight would translate into about 2.9% of the entire pension portfolio.
That is not an estimate of every pension fund’s actual Roche/Novartis allocation: pension funds use different benchmarks, active mandates and allocation policies. It demonstrates the potential order of magnitude.
The household exposure can become more concentrated still when an employee simultaneously has a Swiss-heavy pension fund, chooses a Swiss-equity-heavy pillar 3a strategy, owns an SMI ETF and holds Roche or Novartis directly.
The correct unit of diversification is the household balance sheet, not each account examined separately.
What does the Franklin FTSE China ETF actually contain?
Another useful reality check comes from the Franklin FTSE China ETF, FLCH.
The fund is a broad China equity ETF, not a biotechnology fund. According to its SEC schedule of investments at 30 June 2026, biotechnology represented only about 2.1% of net assets, within a larger healthcare allocation.
A manual count of the biotechnology section gives approximately 20 unique biotech issuers, treating separate A- and H-share holdings of the same company as one issuer. They include names such as Akeso, BeOne Medicines, Innovent Biologics, RemeGen, CanSino, Zai Lab and Sichuan Kelun-Biotech.
That distinction is important for investors tempted by the China-biotech narrative. Buying a broad China ETF is not the same thing as making a concentrated biotech investment. It provides exposure to Chinese technology, consumer, financial, industrial and other companies, while biotech remains relatively small.
Conversely, buying a specialist Chinese biotechnology portfolio removes much of that diversification and exposes the investor directly to binary clinical-trial outcomes, regulation, financing conditions and drug-specific competition.
A powerful industrial trend does not automatically imply that the most concentrated investment vehicle is the best investment.
How many biotech companies does China actually have?
There is no reliable single current number because definitions differ substantially.
A peer-reviewed industry review cited approximately 1,600 biotechnology companies registered in China by 2021. That number should not be presented as a 2026 census. Citeline’s more recent and narrower measure instead says that 19% of the world’s research-based biopharma companies were headquartered in China in January 2026.
For investment purposes, those numbers are less useful than the ecosystem indicators: thousands of drug programmes, rapidly expanding early-stage clinical capacity, hundreds of companies concentrated in specialist hubs, increasing international licensing and a growing number of medicines capable of competing globally.
Suzhou’s progression from a newly opened BioBAY in 2007 to more than 620 resident biomedical enterprises today illustrates the scale more meaningfully than an arbitrary national company count.
What could derail the China-biotech story?
The bullish narrative has important weaknesses.
China still needs international regulatory acceptance, late-stage clinical expertise and access to global commercial markets. Data generated largely in Chinese patient populations may require additional global trials. Drug quality, trial execution and regulatory inspection remain potential points of scrutiny. Chinese firms also face intense domestic price competition, while many biotechs have yet to demonstrate sustainable profitability.
The sector is crowded. The enormous expansion in programmes includes genuinely novel science but also large numbers of “me-too” and “me-better” programmes. Being faster than a Western competitor does not matter if twenty Chinese competitors are pursuing the same target.
Capital is another vulnerability. Domestic venture funding has weakened, one reason Chinese companies have become so eager to out-license internationally and increasingly approach European partners.
Geopolitics could be even more consequential. Restrictions on US-China biotechnology relationships could fragment clinical development, capital markets and licensing. European and Swiss companies may benefit from being less politically constrained than US rivals, but they are not insulated from US regulation when seeking FDA approval or operating globally.
Finally, Roche and Novartis are not static incumbents. They have enormous R&D budgets, clinical-development organisations, regulatory experience, manufacturing systems and global sales infrastructure. China can commoditise parts of drug discovery without necessarily commoditising the entire pharmaceutical business.
Guidefinances view: the threat is real, but it is not where investors may first look
China’s biotechnology development is sufficiently advanced that dismissing it as “copycat pharma” is no longer credible. The academic data, clinical-trial evidence and licensing transactions all point toward a structural change in where new medicines originate.
Oncology is probably the clearest early warning. China’s share of early-stage cancer programmes has moved from roughly one-tenth to more than one-third of the global total in less than a decade. Roche and Novartis will face more competitors, shorter periods of scientific scarcity and greater pressure to justify expensive internal development.
Yet the large Swiss pharmaceutical companies may be better positioned than smaller Western biotech companies to absorb this disruption. Roche does not have to beat every Suzhou laboratory at discovering an ADC. It can license one. Novartis can do the same. Scale, global trials, regulation and commercialisation become more valuable when the supply of promising molecules increases.
The more immediate investment lesson for a Swiss household is therefore not necessarily to buy Chinese biotechnology.
It is to recognise existing concentration.
A Swiss investor may already own Roche and Novartis through an occupational pension, pillar 3a assets, the SPI or SMI, individual shares and Swiss-focused funds. China biotechnology represents one more reason to examine whether that aggregate exposure is intentional.
Diversification remains cheaper and more reliable than predicting which laboratory in Suzhou, Basel, Boston or Shanghai will discover the next blockbuster.
China’s biotech boom deserves attention. It does not require a speculative portfolio response.
Selected sources
- Academic evidence: Kang & Ji, JAMA, “Geographic Shifts in Early-Stage Biopharmaceutical Innovation”, March 2026, with accompanying JAMA editorial on the new US-China innovation geography.
- Swiss investigative/data journalism: SWI swissinfo.ch, “The numbers behind China’s pharma rise”, September 3, 2026, and its companion report on Chinese companies seeking European growth.
- Policy and regulatory sources: China’s NMPA 14th Five-Year pharmaceutical plan, 2025 regulatory reform programme and 30-working-day innovative-drug trial pathway.
- European policy analysis: MERICS, “Lab leader, market ascender: China’s rise in biotechnology”, April 2025.
- Investment-industry perspective: Franklin Templeton/ClearBridge analysis of China’s biotech ecosystem and Franklin Equity Group’s 2025 field research among more than 50 Chinese biotech companies.
- Swiss portfolio concentration: UBS, “Concentration risks in pension portfolios”, June 2026; BlackRock/iShares SMI and SPI holdings; Franklin FTSE China ETF SEC holdings schedule.
Research and portfolio data reviewed 6 September 2026. Index weights, clinical pipelines and ETF holdings change over time. The discussion is intended as investment research and portfolio education rather than an individual recommendation to buy or sell Roche, Novartis or Chinese biotechnology securities.
Guide Finances 