Summary of Key Points
RuiGe Medicine, a Chinese innovative pharmaceutical company that has made a fortune from two major drug licensing deals, is involved in a legal dispute in the United States due to disagreements between founder Qiu Xiayang, COO Zhong Min, and investors over whether to distribute the profits or continue with research and development. This controversy exposes new challenges within China's Biotech industry (small innovative pharmaceutical companies): when companies receive a large amount of cash from licensing deals for the first time, there is a fierce conflict between the founders' long-term vision of becoming world-class pharmaceutical enterprises and the capital's short-term desire for immediate returns. It also reflects the industry's transition from being able to develop drugs to being able to manage companies effectively.
I. A Power Struggle Triggered by Dividends: From “Sharing Money” to “Going to Court”
The story of RuiGe Medicine is a classic example of the difficulty in sharing success after years of hardship:
- Background: Founded in 2018 by former Pfizer employees Qiu Xiayang and Zhong Min, the company licensed a weight-loss and diabetes drug (GLP-1) to Eli Lilly in 2021 for an upfront payment of $50 million (with a total transaction value of $1.55 billion); in 2024, it licensed another cancer drug (CDK inhibitor) to Genentech for an upfront payment of $850 million, setting a new record. These two deals have brought nearly $1 billion into the company's coffers, making it a star in the industry.
- Disagreement Escalates: Qiu Xiayang wants to reinvest the money in research and development (the company has 30 drugs in various stages of development, half of which are in clinical trials), with the goal of becoming a world-class pharmaceutical enterprise. Zhong Min and the investors, however, prefer to distribute the profits ($428 million) after years of investment.
- Confrontation: The board of directors of RuiGe's holding company, CARD, decided to distribute the dividends, but Qiu Xiayang used his veto power to reverse the decision. This led to a power struggle: Zhong Min ordered Qiu to leave the office, suspended his duties, and removed his authority to sign bank transactions. In response, Qiu filed a lawsuit, accusing Zhong Min of tax violations and installing surveillance, resulting in a complete breakdown in their relationship.
II. Founder’s Vision vs. Capital’s Reality: The Soul-Striking Question After Rapid Success
The essence of this lawsuit is the clash between two different approaches:
- The Founder’s Long-Termism: Qiu Xiayang believes that RuiGe was always meant to become a world-class company and focuses on tackling the most challenging research topics. For him, licensing deals are not the end goal but a starting point for using the funds to develop the next generation of drugs, given that innovative pharmaceuticals require significant investment.
- Capital’s Practical Needs: Investors (such as venture capital firms) have their own backers (LPs), and the funds have a limited lifespan (usually 7-10 years). They need to recoup their investment within this period. Having invested for several years, they naturally want to receive dividends as part of their return on investment, which is in line with business logic.
- The Root of the Conflict: In the past, Biotech companies were all focused on surviving and developing drugs; now that they are making money for the first time, there is a divergence of opinions: should they continue to take risks with research and development or secure their profits?
III. New Issues Amid the Surge in License-Outs: China’s Biotech Industry Has Money for the First Time
RuiGe is not an isolated case; it represents a broader change in the industry:
- Industry Context: Previously, the typical path for Chinese Biotechs was “financing → research and development → clinical trials → additional financing → IPO.” However, in recent years, there has been less funding in the primary market, and IPOs have slowed down. More companies are surviving by licensing their drugs to larger corporations. In the first half of 2026, the total value of drug licensing deals in China reached $11 billion, 80% of the annual total for 2025—many small companies now have several hundred million or even over a billion dollars in their accounts.
- New Challenges: Previously, the main concern was securing funding; now, the challenge is how to allocate it. How much should be used for research and development? How much should be distributed to shareholders? These issues, which were never considered before, have become urgent problems that must be addressed.
IV. The Pitfalls of Corporate Governance: Why Didn’t the Veto Power Protect the Founder?
RuiGe’s structure consists of a Cayman Islands holding company, U.S.-based research and development facilities, and Chinese operations. Qiu Xiayang had a veto power on the board of directors of CARD, but why was he still removed from his position?
- Governance Design Flaws: A veto power can only prevent dividend distributions; however, the other party can use other reasons (such as unauthorized research projects) to suspend someone’s duties. This shows that when designing corporate governance structures, Biotech companies need to consider not only how profits will be distributed but also who will have the authority to guide the company and where the founder’s powers lie. Otherwise, even success can lead to internal conflicts.
- Implications: In the future, Biotech companies should establish clear agreements in advance regarding when dividends can be distributed, the percentage of distributions, and the extent of founders’ investment authority. These details must be documented to avoid disputes later on.
V. The Industry’s Future: From Developing Drugs to Managing Companies Effectively
Over the past decade, the challenge for Chinese innovative pharmaceutical companies has been whether they could develop drugs; in the future, the focus will be on whether they can manage those companies effectively:
- RuiGe as a Warning: As more Biotechs generate revenue through licensing deals, similar disagreements are likely to increase. Some teams may resolve them peacefully, while others might end up in court like RuiGe.
- Lessons to Be Learned: Biotech companies need to learn to balance the needs of investors with their own research and development funding. They must also respect the founders’ ambitions while establishing sound governance mechanisms. After all, developing innovative drugs is a long-term endeavor that requires clear rules for profit distribution and growth.
This lawsuit serves as a reflection of the inevitable transition in China’s innovative pharmaceutical industry from rapid growth to maturity and regulation. Making money is easy; distributing it properly is difficult. Developing drugs is challenging, and managing companies effectively is even more so. However, this also marks progress in the industry, as it moves from just surviving to striving for better performance.