Dialogue with Song Gengshen of Youcare Pharmaceutical Group: Opportunities and Challenges in the Innovative Transformation of Traditional Pharmaceutical Enterprises

In the wave of China's pharmaceutical industry, a profound transformation is reshaping the industry landscape at an unprecedented speed. Traditional pharmaceutical companies, which have long relied on generic drugs as their main lifeline, are now facing the continuous impact of the national centralized bulk procurement policy. This once "golden track" has now become a "deep water zone" for transformation and breakthrough. The drastic changes in the environment have not only squeezed the profit margins of enterprises but also forced them to transition from the past "quantity-oriented" model to a new era with "innovation-driven" at its core.

Facing severe challenges, the transformation of traditional generic drug companies is no longer an "option," but a "must" that determines their survival. Youcare Pharmaceutical Group Co., Ltd., a company that started with antibiotics and cardiovascular and cerebrovascular generic drugs, is now pioneering in the innovation "no-man's land" with a forward-thinking approach. Song Gengshen, Director and Deputy General Manager of Youcare Pharmaceutical Group as well as the Dean of its Drug Research Institute, has witnessed how this traditional pharmaceutical company broke through the industry stereotype that "generic drug companies can hardly become innovation benchmarks" through technological breakthroughs – from building eleven major technology platforms, including full-process AI drug discovery, to having 21 novel drugs under research, spanning multiple fields such as small nucleic acids, mRNA vaccines, virus membrane fusion inhibitor peptides, small molecule chemical drugs, and traditional Chinese medicine. Youcare’s transformation journey epitomizes how traditional Chinese pharmaceutical companies are breaking through towards innovation.

How Can an End-to-End AI Drug Discovery Platform Break Through the Innovation Dilemma of Traditional Pharmaceutical Companies? In cutting-edge technology fields such as small nucleic acids, mRNA vaccines, and viral membrane fusion inhibitor peptides, what accumulated advantages can traditional enterprises leverage to "overtake on the curve"? To address these questions, VCBeat’s Orange Bureau conducted a special interview with Song Gengshen, Dean of the Drug Research Institute at Youcare Pharmaceutical Group Co., Ltd. During the interview, Dean Song Gengshen used Youcare Pharmaceutical's breakthrough achievements in AI-empowered drug discovery and its solid progress in international strategic planning as examples. He provided forward-thinking insights and practical directions for traditional pharmaceutical companies seeking to break through transformation bottlenecks and embark on a path of innovative development.

Since the "4+7" pilot program in 2018, centralized procurement has become a routine system. Through the "price-for-volume" mechanism, generic drug prices have plummeted significantly, with some varieties experiencing "soul-crushing price cuts," resulting in price reductions of over 50%. For traditional pharmaceutical companies, this change has brought immense survival pressure.

Amidst the sweeping transformation of China's pharmaceutical industry, Youcare Pharmaceutical Group Co., Ltd. has been steadily advancing at the forefront of the times, decisively embracing change at critical turning points. As a seasoned pharmaceutical enterprise with over two decades of industry experience, Youcare’s transformation is not only an active response to market pressures but also stems from the profound insights and strategic resolve of its founder and chairman, Yu Weishi, regarding the future development of the industry. Over his forty-year career in pharmaceuticals, Yu Weishi has personally witnessed the industry's leap from the "golden age of generic drugs" to an era dominated by innovation. His unwavering commitment to innovation has become a key driving force propelling Youcare into a new era of biopharmaceuticals.

In the historic transformation of the pharmaceuticals industry, Chairman Yu Weishi realized early on that a profit model dependent on generic drugs would eventually come to an end. In his view, "the necessity of innovation" is not simply about increasing R&D investment; rather, it is built on a precise grasp of global pharmaceutical trends and a deep understanding of unmet clinical needs.

Song Gengshen also mentioned in the interview that Youcare's "innovative choices" and "strategic determination" are the key factors enabling the company to persist in its investments and not fear failure. Around 2018, China's pharmaceutical industry reached a critical juncture with the normalization of bulk procurement and narrowing profit margins for generic drugs. When Yu Weishi proposed "transitioning towards innovation," many raised doubts: how could a company rooted in generics tackle tough challenges like nucleic acids and AI?

However, Youcare Pharmaceutical Group clearly saw the inevitability of transformation. At that time, global pharmaceutical innovation was shifting towards frontier fields such as nucleic acids and cell gene therapy, while domestic companies were still in the early stages of laying out these sectors. "For instance, a small-molecule innovative drug traditionally takes an average of 10 years and over 1 billion US dollars from discovery to market under the conventional model. We aim to leverage AI to significantly shorten the R&D cycle and cut costs," recalled Song Gengshen. His decision to join Youcare was driven by his alignment with this strategy—not to simply follow technology but to build its own barriers in key underlying technologies.

Song Gengshen also pointed out that before the reform of China's pharmaceutical review and approval system in 2015, the generic drug market environment was relatively relaxed, and the domestic innovative drug R&D capability was relatively weak. Traditional pharmaceutical companies mostly focused on the "me-too" model targeting existing foreign targets. Nowadays, with the normalization of centralized procurement and medical insurance negotiations, the development logic of the industry has been completely reshaped.

He believes that true innovation stems from an accurate insight into the competitive landscape and future trends of the global pharmaceuticals industry, as well as a deep understanding of unmet clinical needs. This requires not only continuous investment in R&D but also strategic patience over a decade or even longer — innovation is a marathon, not a sprint. Youcare Pharmaceutical Group Co., Ltd. has always adhered to the core logic of "clinical value first, then market value," reinforcing its determination to fully transition towards innovative drug development.

Yu Weishi's statement, "Boldly venturing into uncharted territory requires courage," perfectly reflects the spirit of Youcare Pharmaceutical Group Co., Ltd.'s transformation journey. Demonstrating decisive dedication while others hesitated, and proactively laying the groundwork for innovation while generic drugs still generated profits—this forward-thinking strategic resolve enabled Youcare to seize the development initiative at a pivotal stage of industry transition.

Among all technical platforms, Youcare Pharmaceutical Group Co., Ltd.'s full-process AI drug discovery platform is undoubtedly the forefront of its exploration into "uncharted territory." Song Gengshen pointed out that AI technology, especially machine learning and deep learning, relies on powerful data mining and processing capabilities to efficiently shorten the drug design and screening cycle, improve R&D efficiency, break through the capability limits of human-led research, solve complex problems that are difficult for traditional manpower to overcome, and ultimately accelerate, enhance efficiency, and reduce costs in drug development.

Building a Full-Process AI Drug Discovery Platform: A Hard-Fought Battle

The key to breaking the deadlock is "making AI understand pharmaceuticals." Based on large models like Transformer and ChatGPT, the team has built an internationally leading AI algorithm model dedicated to specific drug R&D segments from scratch: for instance, using GPT to design antiviral peptide sequences, employing multimodal predictive models to evaluate drug absorption, metabolism, and toxicity, and even developing deep learning models capable of analyzing the dynamic interactions of membrane fusion proteins. Song Gengshen explained: It’s like equipping AI with a "pharmaceutical brain" — not only can it generate compounds, but it also understands "why this molecule is more effective."

Figure: Youcare Pharmaceutical Group Co., Ltd. AI Drug Research and Development Laboratory

In the "bottleneck" technology field of LNP delivery, the role of AI is particularly crucial. Youcare Pharmaceutical Group Co., Ltd.'s self-developed cationic lipid YK-009 needs to find the optimal balance among "delivery efficiency," "safety," and "scalability." Traditional screening requires testing hundreds of formulations, whereas AI models, through deep learning of the complex relationship between lipid structures and in vivo behavior, precisely identified the optimal molecular design. This made YK-009 the first LNP excipient in China to complete dual filings in both China and the United States. It has been successfully applied in multiple R&D pipelines, including the RSV mRNA vaccine YKYY025 and the VZV mRNA vaccine YKYY026.

More disruptive is the reconstruction of the R&D process. Take the YKYY018 peptide drug as an example: AI algorithms can screen active molecules from a library of millions of peptides in a short time, compressing the traditional three-year R&D cycle to just eight months. Youcare Pharmaceutical Group Co., Ltd. has also achieved a "dual-track breakthrough" in nucleic acid drug delivery technology: the ionizable cationic lipid YK-009, independently developed based on an AI platform, stands out with its groundbreaking new chemical structure. The LNP formulation prepared using YK-009 offers advantages such as biodegradability, high safety, efficient delivery, and improved stability for nucleic acid drugs. Additionally, the novel GalNAc delivery system breaks through patent barriers and significantly enhances liver tissue-targeted delivery efficiency compared to traditional trifurcated GalNAc L96. Data shows that Youcare's AI platform reduces preclinical R&D costs by approximately 40%. These technological breakthroughs directly address the "impossible triangle" of innovative drug development—high cost, high risk, and long timelines.

Against the backdrop of traditional generic drug companies facing unprecedented transformation pressures, a group of traditional pharmaceutical enterprises represented by Youcare Pharmaceutical Group Co., Ltd. are actively embracing innovation. Among these efforts, establishing AI as a core innovative technology pathway is gradually becoming an industry consensus. The choice of AI is not a temporary measure but rather a strategic decision aimed at addressing the long-standing pain points of traditional R&D, such as "long cycles, high costs, and low success rates." In the field of drug development, AI technology is breaking the inherent boundaries of traditional human-powered R&D models with breakthrough capabilities, driving a fundamental paradigm shift in the industry. It not only has the potential to generate disruptive R&D outcomes but can also inject strong and sustained new momentum into the digital and intelligent transformation of pharmaceutical companies.

Song Gengshen believes that, compared with emerging innovative drug companies, traditional pharmaceutical enterprises have unique and irreplaceable advantages in embracing AI. Years of deep industry accumulation have enabled them to amass massive amounts of high-quality research data, structurally rich compound libraries, systematically standardized clinical trial data, and mature production validation data—these valuable "digital assets" are the "core fuel" for training and optimizing AI models. By seamlessly integrating AI technology into an end-to-end R&D platform, companies can achieve leapfrog development in the "uncharted territory" of innovative drugs with higher efficiency and more precise strategies.

The efforts of venturing into "uncharted territory" are now paying off handsomely. Currently, Youcare Pharmaceutical Group Co., Ltd. has deeply integrated AI technology with research and development projects and platform technologies, creating an all-in-one AI drug discovery platform that covers the entire drug R&D chain, including target discovery, drug design, compound screening, chemical synthesis, process development, and parameter optimization. In several key technical fields such as peptide drugs, cationic lipids, mRNA capping analogs, MHC molecules and epitopes, and siRNA drugs, the company has been granted 12 AI algorithm invention patents, reaching internationally leading standards and establishing a core patent portfolio. Additionally, it has obtained two national computer software copyright registrations and published four SCI papers on AI drug algorithms in the internationally renowned journals *Viruses* and *J Mater Chem B*, marking international firsts. Leveraging its self-developed series of advanced AI algorithm models, the company has de novo designed multiple original innovative drugs with differentiated advantages.

Youcare Pharmaceutical Group Co., Ltd. has as many as 21 new drug projects under research and development. In the field of biopharmaceuticals, its broad-spectrum coronavirus peptide drug YKYY017 has been approved for clinical trials in China, the United States, and Australia. Currently, Phase III clinical trials in China are about to commence, offering the potential for a revolutionary new product in the treatment of coronaviruses. The company’s independently developed CT102, the first domestic ASO drug for liver cancer, has completed Phase IIa clinical trials. The ultra-long-acting lipid-lowering siRNA drug YKYY015 and the ultra-long-acting antihypertensive siRNA drug YKYY029 have received clinical trial approvals in both China and the U.S., with Phase I clinical trials ongoing domestically. These drugs may require only two injections per year to achieve highly effective lipid reduction and potent blood pressure control, respectively. The siRNA drug YKYY013 for functional cure of hepatitis B has submitted IND applications in both China and the U.S. … The innovative drug R&D projects have formed a strong pipeline, ensuring that every year, new drugs will be approved for clinical trials and market applications.

Figure: Youcare Pharmaceutical Group Co., Ltd. Laboratory

Behind these achievements lies Youcare Pharmaceutical Group's continuous and steadfast strategic investment in technology, talent, and capital. Looking ahead, Youcare Pharmaceutical Group will further deepen its innovation strategy by systematically laying out a differentiated product pipeline through independent research and development, collaborative development, and rights licensing, among other diverse approaches. As Song Gengshen emphasized, enterprises need to form a virtuous cycle: from R&D to commercialization, and then using commercialization to feed back into R&D. This closed loop not only provides momentum for continuous innovation but will also become the core support for Youcare to maintain its leading position in a highly competitive market.

During the transformative process of innovation, skepticism has never been absent. "Some say we are too aggressive in crossing boundaries, while others think traditional pharmaceutical companies adopting AI are just following the trend," said Song Gengshen. He frankly admitted that, in the view of Youcare team, strategic innovation is the key to sustainable corporate development: once the exploration of cutting-edge directions is missed, when more competitive treatment methods enter clinical practice, traditional businesses may face the challenge of being replaced by the market.

Facing the wave of industry transformation, Song Gengshen emphasized: "Transformation is by no means blindly following trends; it is a long marathon that requires strategic determination and systematic planning." Enterprises must clearly grasp the technological direction, avoiding falling into homogeneous competition in target selection. They should actively deploy in high value-added frontier fields such as nucleic acid drugs and AI research and development to build true differentiated competitive advantages. Only then can they establish a firm foothold in the fierce market competition and truly achieve a magnificent transformation from "follower" to "leader."

In the era of AI empowerment and biopharmaceutical transformation, Youcare Pharmaceutical Group Co., Ltd. has written an innovative legend of boldly venturing into the "uncharted territory" of drug development with extraordinary vision and unwavering determination. As a mature company with over two decades of deep cultivation in the industry, Youcare did not remain entrenched in the comfort zone of traditional business but resolutely turned its focus to future innovative technologies with disruptive potential, such as artificial intelligence and nucleic acid drugs, demonstrating the forward-thinking vision and responsibility of an industry leader through concrete actions.

In Song Gengshen's view, "protecting life" has always been the fundamental and unshakable core value of the pharmaceutical industry. Any form of technological innovation should revolve around this central mission to reflect the essential significance of the industry. He firmly believes that, with the continuous empowerment of national policies and the concerted efforts of all pharmaceutical professionals, China's pharmaceutical industry will surely achieve a leap from being a "generic drug giant" to an "innovation powerhouse." This transformation will bring more innovative drugs with high clinical value and accessibility to patients worldwide, contributing to the protection of human health.