Chinese Biotech Is Having A DeepSeek Moment

Summary

WSJ What’s News – Episode: "Chinese Biotech Is Having A DeepSeek Moment"
Release Date: February 7, 2025
Host: Alex Osola
Produced by: Anthony Bansi

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U.S. January Jobs Report Overview

Timestamp [01:00]
Host Alex Osola opens the episode by discussing the latest U.S. labor market data. The Labor Department reported that the economy added 143,000 jobs in January, slightly below economists’ expectations of 169,000 jobs. Concurrently, the unemployment rate decreased to 4%, also surpassing forecasts.

Timestamp [01:47]
David Wehner, WSJ Finance News Editor, provides insight into the seemingly conflicting figures. He explains, “The job market has been doing well. This isn't like 2021, when the economy was reopening. I wouldn't say that we're in a slow period for the jobs market, but we are maybe normalizing a bit more.” Wehner highlights that while job creation has slowed compared to previous months, the unemployment rate's decline indicates underlying strength in the labor market.

Timestamp [02:40]
Wehner further elaborates on the sectors contributing to job growth, noting that retail, government, and healthcare were primary contributors. However, he points out a slowdown in leisure, hospitality, and construction, areas that traditionally drive substantial employment.

Timestamp [03:30]
Discussing future implications, Wehner addresses the potential impact of former President Trump’s policies on employment. He cautions, “Economists tend to think that tariffs are bad for the jobs market because it hurts companies that depend on imports and exports.” Additionally, he mentions that changes in immigration policies could significantly affect the labor market by limiting growth if mass deportations occur.

Market Reactions and Consumer Sentiment

Timestamp [04:50]
The episode transitions to the stock market's response to the mixed jobs report. Alex notes that major indexes like the Dow and S&P 500 dipped approximately 1%, while the Nasdaq fell around 1.4%.

A University of Michigan survey revealed a 5% decline in consumer sentiment in February, the lowest since July of the previous year. Factors contributing to this pessimism include tariff threats, stock market volatility, and rapidly changing executive orders, which have raised concerns about the U.S. economic outlook.

Chinese Biotech's Ascendancy in Pharma

Timestamp [06:26]
The core focus of the episode shifts to the burgeoning Chinese biotechnology sector. Alex introduces the topic, stating, “China's biotech industry has been looking to do the same in pharma. And their moment may be here in 2020.” Citing data from Deal Phorma, he notes a significant increase in large pharmaceutical transactions involving China, from less than 5% to nearly 30% within a year.

Timestamp [07:05]
Christina Rexrode joins the discussion, outlining the factors propelling China’s biotech rise:

• Talent Repatriation: “Many of the top scientists that have trained in the US over recent decades have returned to China, and that's fueling the emergence of a biotech hub, particularly around Shanghai.” The return of skilled professionals has been pivotal in establishing robust research and development capabilities within China.

• Cost Efficiency: Christina emphasizes the cost advantages Chinese biotech companies possess. “Chinese biotech companies are a lot scrappier. They can work with really highly skilled chemists and pay them a fraction of what you would typically pay someone of that level here in the US.” This cost-effectiveness allows for more extensive and affordable research initiatives.

• Streamlined Processes: The Chinese government has actively streamlined approval and clinical trial processes, enabling faster and more cost-effective drug development. “They've streamlined the approval process and the clinical trial process, like what it takes to get a study off the ground, what it takes to get a drug approved, that sort of thing.”

Timestamp [08:00]
Alex probes into the types of treatments being developed, with Christina responding, “It's really anywhere from your cutting edge cancer medication to obesity pill.” While China is advancing in various therapeutic areas, Christina clarifies that much of the innovation builds upon existing U.S. research rather than introducing entirely new scientific modalities.

Timestamp [08:46]
Addressing the perspective of Western pharmaceutical companies, Christina notes varying strategies based on company size. “If you're a big, big pharma company, this might be a very good opportunity for you because you might think, why should I pay $10 billion to acquire a startup or a mid-sized company developing a couple of medications in the US or Europe when I could potentially look in China and pay a fraction of the cost?” Large companies may find strategic acquisitions in China more financially viable, while biotech firms must navigate data privacy and regulatory landscapes effectively.

Additional News Highlights

• Nippon Steel Investment Deal: President Trump expressed support for a restructured agreement allowing Japanese steel company Nippon Steel to invest in U.S. Steel without full ownership, reversing the Biden administration’s prior blockage of a $14 billion takeover [Timestamp not specified].

• Aviation Incidents: Alaska authorities are searching for a missing commercial plane over the Bering Sea, marking the third major U.S. aviation incident in ten days. This follows prior crashes involving an American Airlines jet and a medical transport jet, heightening public concern over aviation safety [Timestamp not specified].

• Travel Tips from Dawn Gilbertson: Columnist Dawn Gilbertson shares her experience of securing a last-minute cruise spot by going on standby, offering advice on maximizing value and ensuring availability [Timestamp [11:23]-[11:59]].

Upcoming Segments and Closing Remarks

Alex Osola previews upcoming content, including:

• Bonus Episode: An analysis of major insurance companies’ strategies in response to extreme weather events like the Los Angeles wildfires and their impact on insurance costs.

• Weekly Markets Wrap-Up: Scheduled for the following day.

• What’s News Sunday: A deep dive into geopolitical dynamics in the Arctic, focusing on President Trump's interest in Greenland.

The episode concludes with acknowledgments of the production team, highlighting contributions from Anthony Bansi, Michael Kosmides, Michael Lavalle, Aisha El Musleam, Scott Salloway, Chris Insinsley, and Valona Patterson.

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Notable Quotes:

• David Wehner [01:47]: “The job market has been doing well. This isn't like 2021, when the economy was reopening. I wouldn't say that we're in a slow period for the jobs market, but we are maybe normalizing a bit more.”

• Christina Rexrode [07:05]: “Many of the top scientists that have trained in the US over recent decades have returned to China, and that's fueling the emergence of a biotech hub, particularly around Shanghai.”

• Christina Rexrode [08:46]: “If you're a big, big pharma company, this might be a very good opportunity for you because you might think, why should I pay $10 billion to acquire a startup or a mid-sized company developing a couple of medications in the US or Europe when I could potentially look in China and pay a fraction of the cost?”

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This comprehensive summary encapsulates the episode's key discussions, providing valuable insights into the U.S. labor market, market reactions, and the strategic growth of China's biotechnology sector, all while highlighting pertinent quotes and maintaining a clear, structured flow for listeners and readers alike.

Transcript

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[Alex Osola]

US hiring slowed in January but remained solid in the last jobs report of the Biden era. Plus, consumers are already souring on Trump's economy and why, a decade from now, many drugs hitting the US Market will have originated in China.

[Christina Rexrode]

Many of the top scientists that have trained in the US over recent decades have returned to China, and that's fueling the emergence of a biotech hub, particularly around Shanghai.

[Alex Osola]

It's Friday, February 7th. Alexa I'm Alex Osola for the Wall Street Journal. This is the PM edition of what's News, the top headlines and business stories that move the world today. The Labor Department released its January jobs report this morning. The US economy added 143,000 jobs in January, slightly lower than the 169,000 jobs economists had expected. The unemployment rate also ticked down to 4%, which was also a bit lower than had been expected. WSJ finance news editor Christina Rexrode joins me now to talk about what these numbers mean. So, Christina, seems like we've got some conflicting messages here. There are fewer jobs, but also less unemployment. Break this down a little bit for us. What does this mean?

[David Wehner]

This is a pretty solid report. The jobs number is a lot lower than it was in December or November. But you have to remember, like anything more than 100 is a pretty good number. The reason there's a difference between the two. This can seem really confusing. The number of jobs created can go down, but then the unemployment rate can also go down because those two numbers are based on separate surveys. The jobs number is based on a survey of businesses, and the unemployment number is based on a survey of households of families. The places that added jobs were the usual suspects, retail, government, health care. Some things that were a little surprising to me were that leisure and hospitality slowed down and construction slowed down.

[Alex Osola]

Okay, so big picture, what do these numbers tell us about the overall health of the economy?

[David Wehner]

The job market has been doing well. This isn't like 2021, when the economy was reopening. I wouldn't say that we're in a slow period for the jobs market, but we are maybe normalizing a bit more. We know from some previous data that fewer people are quitting their jobs, which could signify that they have less confidence that they could find another one. And we know that companies are hiring less overall. So it's not like we're in a period where there's a lot of layoffs. But if you're looking to switch jobs, if you're looking for a better job, if you're looking for your first job, life is a little bit harder than it was a few years ago.

[Alex Osola]

So this is the last jobs report of the Biden era. Given President Trump's policies that could have an impact on employment, from, you know, tariffs to deportations and border control, what should we be expecting looking forward and when could we potentially see some of those impacts?

[David Wehner]

I hate to say time will tell, but time will sort of tell. Economists tend to think that tariffs are bad for the jobs market because it hurts companies that depend on imports and exports. It also depends on whether tariffs are strung out over a number of months or even just the threat of tariffs is strung out over a number of months, or if we just get them all at once because companies do not like uncertainty when they're deciding whether to hire people. So there's a difference between wondering for a long time if there's going to be tariffs and just getting them and then moving on and making a plan. The immigration has been huge for the job market. And if there's a lot of mass deportations, if there is a lot of people who would have been able to come into the US but no longer can, that means a lot less growth from for the labor market.

[Alex Osola]

That was WSJ finance news editor Christina Rexrode. Christina, thank you so much.

[David Wehner]

Thanks.

[Alex Osola]

U.S. stock indexes were lower today as investors reacted to the mixed jobs report. The Dow and S&P 500 were both down about 1% and the Nasdaq fell roughly 1.4%. American consumers are feeling more pessimistic about the economy than they did before President Trump took office. A preliminary survey from the University of Michigan found that consumer sentiment fell about 5% in February, its lowest reading since July last year. Tariff threats, stock market swings and rapidly reversing executive orders are making Americans concerned about the country's financial future. And Commerce Department data shows that inventories of U.S. wholesalers fell in December. Inventories of longer lasting goods drove the decline. The gauge is a key metric in estimating the U.S. quarterly gross domestic product. Coming up, how China is developing drugs more quickly and cheaply than the U.S. that's after the break.

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[Alex Osola]

Biotech is having a deep seek moment. Just as the Chinese AI company made a splash in the US Tech sector, China's biotech industry has been looking to do the same in pharma. And their moment may be here in 2020. Less than 5% of large pharmaceutical transactions worth $50 million or more involved China, according to biopharma deal tracker Deal Phorma. Last year, that number had surged to nearly 30%. A decade from now, many drugs hitting the US market will have originated in Chinese labs. WSJ Heard on the street columnist David Wehner is here to tell us more. David, what is driving the rise of China's biotech industry?

[Christina Rexrode]

Well, for one, many of the top scientists that have trained in the US over recent decades have returned to China, and that's fueling the emergence of a biotech hub, particularly around Shanghai. Another thing, and this is similar to what's happening in tech, is that Chinese biotech companies are a lot scrappier. They can work with really highly skilled chemists and pay them a fraction of what you would typically pay someone of that level here in the US and then I would also note that over the last several years, China, as the government, has wanted to play catch up in this area and they've streamlined the approval process and the clinical trial process, like what it takes to get a study off the ground, what it takes to get a drug approved, that sort of thing. And that's allowed companies to conduct clinical trials much more quickly and at a fraction of the price as well.

[Alex Osola]

In general, what are the kinds of treatments that are being developed in China?

[Christina Rexrode]

Well, it's really anywhere from your cutting edge cancer medication to obesity pill. That's like something that isn't even on the market yet but companies are working on. So it really can be anything. What it isn't yet is it's not like new science for the most part, Right. It's not like they came up with a new modality to treat cancer. It's like a new gene therapy that no one's ever thought of. It's really that could we develop this and make an improvement off of what's already existing in the US it's really not like science that I would say at this point is more innovative than what we have in the US how.

[Alex Osola]

Are Western pharma companies thinking about China's growing biotech scene?

[Christina Rexrode]

Well, it really depends where you are in the spectrum, right? If you're a big, big pharma company, this might be a very good opportunity for you because you might think, why should I pay $10 billion to acquire H startup or, you know, a mid level, mid sized company developing a couple of medications in the US Or Europe when I could potentially look in China and pay a fraction of the cost? So I think it's an opportunity for pharma companies and they're starting to realize we're starting to see a lot of deals. If you're a biotech company, you might need to like take care of your data, make sure it's really private, you know. And b, before you get started on your drug, you got to like be aware of what's going on in China.

[Alex Osola]

That was heard on the street. Columnist David Wehner. David, thank you.

[Christina Rexrode]

Thank you so much. It was a pleasure.

[Alex Osola]

In other news, President Trump said he supported an emerging agreement that would allow the Japanese company Nippon Steel to invest in US Steel without fully owning it. Last month, the Biden administration had blocked Nippon's proposed $14 billion takeover of the Pittsburgh based company. The details of the potential reworked agreement weren't immediately clear. Trump said he would meet with Nippon Steel's leaders next week to discuss the deal. A Nippon Steel spokeswoman didn't immediately respond to a request for comment. And authorities in Alaska are searching for a commercial passenger plane that went missing over the Bering Sea. It's the third major US aviation incident in the past 10 days. The Alaska Department of Public Safety said that the single engine plane operated by regional carrier Bearing Air, had nine passengers and a pilot on board when its position was lost at around 3:20pm local time yesterday. The Coast Guard, Air Force and National Guard are involved in a search for the plane. The incident comes just over a week after 67 people were killed in a mid air collision between an American Airlines passenger jet and a Black Hawk army helicopter in Washington, D.C. two days later, seven people died when a medical transport jet crashed in a fiery explosion near a mall in Northeast Philadelphia. The recent crashes have stirred fears among some fliers. And finally, one thing about me is when I go on vacation, I love to have as much planned ahead of time as humanly possible. Well, columnist Dawn Gilbertson took essentially the opposite approach. She found out just days ahead of time that she was able to get on board a cruise after going on standby. And even though it was kind of stressful, she says for a total of about $700, it was totally worth it. She told our you Money Briefing podcast about how to make sure you're getting your money's worth if you try to swing a last minute deal.

[Dawn Gilbertson]

I mean, first of all, if you get on this particular standby list, make sure you're available that date, right? Because if they pick you and you're not in that thing, you lose that money. So in my case, it would have been almost $1,400. But the other things to do is do the math because last minute I got a good deal. But if you book a cruise in advance and you're a pretty savvy travel shopper, you can find a lot of deals that include a bunch of extras like I've been on cruises before where you get free WI fi, you get a free beverage package, you know, so you have to be really savvy about looking at promotions whether you're doing it yourself or through a travel agent. They stay on top of these pretty well.

[Alex Osola]

To hear more about Don's last minute cruise, listen to today's episode of youf Money Briefing. And that's what's news for this week. In case you missed it, we've got a bonus episode out today in what's News and Earnings. We're looking at the big insurance companies, how they're navigating the Los Angeles wildfires and other extreme weather events and what it could mean for the cost of insurance. You'll find it in your what's News feed just before this podcast. Tomorrow you can look out for our weekly markets wrap up, what's News in Markets? Then on Sunday, we'll be looking at Greenland, why President Trump says he wants it, and what it shows about the changing geopolitical dynamics across the Arctic. That's in what's New Sunday, and we'll be back with our regular show on Monday morning. Today's show was produced by Anthony Bansi with supervising producer Michael Kosmides. Michael Lavalle wrote our theme music. Aisha El Musleam is our development producer. Scott Salloway and Chris Insinsley are our deputy editors. And Valona Patterson is the Wall Street Journal's head of news audio. I'm Alex Osola. Thanks for listening.