Over the past month, a number of China's biotech and innovative pharmaceutical enterprises announced their annual results. Many of them had spiked their R&D spends, which didn't surprise me.

For instance, Jacobio, a Hong Kong-listed clinical-stage biotech company, said a licensing deal generated a revenue of 152 million yuan ($23.9 million) last year but its R&D investment was much more－421 million yuan, up 83 percent year-on-year.

Jacobio said it will further increase its R&D investments. A global leader in SHP2 inhibitor development, the company has finished phase-1 clinical study of an SHP2 inhibitor drug candidate and determined recommended doses of monotherapy and combination therapy with PD-1 antibody. SHP2 inhibitors are expected to have a substantial clinical effect in cancer and immunity disease treatments.

BeiGene, a biotech company that develops and commercializes innovative medicines, said its R&D spend in the fourth quarter of 2021 alone was $430.5 million, compared with $355.5 million during the same period last year. The full-year figure for 2021 was $1.5 billion, up from $1.3 billion in 2020.

The increase in R&D spends is attributable mainly to increases in headcount and costs related to investment in its discovery and development activities, including continued efforts to internalize research and clinical development activities. The increase was partially offset by lower fees paid to external contract research organizations on clinical trials, as well as decreased expenses related to upfront fees for in-process R&D, the company said.

Merely a few years ago, domestic enterprises tended to produce low-end generics that could generate near-term returns, instead of innovative or original drugs that need large R&D investments and face uncertainties in achieving success in the marketplace.

Strengthening investments and R&D to produce high-quality and even original drugs has now become a trend in the domestic pharmaceutical industry.

All of these developments have greatly benefited from the government's continuous efforts to encourage innovation for pursuing high-quality development.

For the health sector, the State Council, China's Cabinet, released a document in August 2015 on reforming the review and approval system for drugs and medical devices. This was done to promote a structural reform of the pharmaceutical industry with an emphasis on drug efficacy, safety and quality.

Over the years, the health authorities have rolled out a series of measures to encourage innovation and R&D of high-quality drugs, to be in line with global developments or to meet urgent domestic clinical demand.

Those measures include the generic consistency evaluation program, which reviews the quality and efficacy of the generic drugs as compared to the corresponding brand-name versions, the reforms of clinical trial and new drug review procedures to speed up the related process, and the volume-based procurement program that lowers drug prices and urges companies to innovate and strengthen their R&D.

At a broader level, Chinese authorities have reformed capital markets to open new funding channels for enterprises while stepping up efforts to attract talent from overseas. Such endeavors have paid off.

As a result, innovative pharmaceutical and biotech companies have mushroomed over the past few years, making China a growing force in the arena of global new drug development.

According to the IQVIA Institute for Human Data Science, China-headquartered companies are estimated to be developing 18 percent of all early-stage oncology drugs, up from 6 percent in 2015.

What's even more striking is that China's share is already 13 percent for all next-generation oncology biotherapeutics.

Quite a few Chinese enterprises, including Jacobio and BeiGene, have licensed out self-discovered drugs or drug candidates to large global companies.

According to Wei Dong, CEO of EdiGene, biotech enterprises are growing rapidly in China and their focus is expanding to diverse domains－from small molecule and macromolecule to cell and gene therapies.

Biomedicine innovation hubs are emerging in the Yangtze River Delta region, the Beijing-Tianjin-Hebei region, the Guangdong-Hong Kong-Macao Greater Bay Area and other regions, driven by favorable policies and market forces that incentivize quality. In addition, there are a growing number of partnerships between local biotech or biopharma enterprises, he said.

Perhaps reasonably priced first-in-class medicines produced by domestic enterprises are just around the corner to help treat not only Chinese patients but also those in other countries.