China's National Medical Products Administration approved Pfizer's (NYSE: PFE) Paxlovid, an oral COVID-19 therapy for adults who have mild to moderate COVID-19 and are at high risk of progressing to severe disease. The approval is conditional, based on Pfizer providing additional data. In December, Pfizer said final trial results showed Paxlovid reduced the chance of hospitalization or death by 89% if it is administered within three days of the onset of symptoms, and by 88% if given in the first five days of symptoms. The approval was the first foreign-developed COVID-19 product approved in China.

China's unexpected conditional approval of Paxlovid has raised the question of whether the country intends to begin lowering its rigid lockdowns that react to any breakouts of the disease. For the past two years, it has moved quickly to contain any local flare-ups and required a weeks-long quarantine for most travelers arriving from abroad. Because of its precautions, China has experienced a very low incidence of the disease, at least after the initial breakout in Wuhan two years ago. But it may be moving toward a more flexible response to the pandemic.

In the US, a course of Paxlovid costs $530, which is less than the $700 per course charged by Merck (NYSE: MRK) for a similar COVID-19 pill, molnupiravir. China has kept the daily number of new COVID-19 patients with confirmed symptoms to below 250, and sometimes fewer than 10, in the past year.

Pfizer, which has the capacity to provide the therapy to 120 million people, said it is in active discussions with over 100 countries about Paxlovid. The company expects to book  $22 billion in revenue during 2022 from the therapy, which is in short supply in the US. Just two months after it was approved in the US, there isn't a large supply available. The US has bought 20 million doses from Pfizer, the first half will be available by June and the full amount by September 30.

Pfizer has been involved in China's market since the 1980s. It remains committed to bringing novel drugs to China, although last year, it sold one of its four China manufacturing plants, a facility devoted to biosimilars, to WuXi Bio.

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Disclosure: none.