Chinese biotech and the shift in global pharma deals

The historical western approach of relying on internally-developed blockbuster drugs to drive growth is now under strain. Patent expiries across major biologics franchises, rising research and development costs, and slower growth in mature markets have intensified the search for external sources of innovation. Increasingly, that innovation is being sourced from China.

This trend aligns closely with the UK government’s renewed emphasis on economic engagement with China, particularly in high-value, innovation-led sectors such as life sciences, advanced manufacturing and technology. As the UK positions itself as a global hub for complex cross-border transactions, the life sciences sector provides a clear example of how deeper commercial ties with China are already being formed.

China is no longer viewed simply as a manufacturing base or a downstream commercial market. Over the past decade, regulatory reform, sustained capital investment, and the return of western-trained scientists have driven the rapid development of a sophisticated biotech ecosystem capable of producing globally competitive assets. Western pharmaceutical companies are responding not only by licensing Chinese innovation, but with deeper investment in long-term strategic collaborations and joint ventures.

The technologies

Much of the innovation emerging from Chinese biotech has historically focused on highly optimised next-generation assets within validated therapeutic classes (so called “me-better”), rather than entirely novel assets. These assets frequently offer improvements in pharmacokinetics, target selectivity, manufacturability or combination potential rather than introducing entirely new mechanisms of action. This has proven particularly attractive to western pharmaceutical companies seeking to enhance its offering with a relatively lower risk profile.

The key areas of strength seeing the most interest for pharmaceutical investment are:

• next-generation biologics, including bispecific and multispecific antibodies;
• metabolic and cardiovascular therapies, including GLP-1 receptor agonists and related incretin-based combinations, often designed to improve efficacy, dosing convenience or safety relative to first-generation products; and
• immuno-oncology assets, including differentiated checkpoint inhibitors and antibody-drug conjugates (ADCs) targeting both established and emerging tumour antigens.

That said, the Chinese biotech ecosystem is increasingly viewed as a credible source of genuinely first-in-class programmes, and deals are rapidly evolving to reflect this. Around 2020, most Chinese out-licence transactions focused on registration- or commercialisation-stage assets, but intensifying competition for these proven, late-stage assets coupled with growing confidence in the quality of early Chinese research pipelines has prompted multinational pharmaceutical companies to begin taking bets on earlier-stage assets: by 2024, preclinical-stage deals accounted for over 60 percent of total transactions.

Crucially, Chinese biotechs are offering these technologies alongside truly game-changing reductions in drug development timelines and costs.  According to a recent McKinsey report, China’s fast-paced approach to drug development has meant that now the drug development timeline between early discovery to Investigational New Drug (IND) stage is 50% to 70% faster in China in comparison to the rest of the world – owing principally to China’s large and concentrated patient populations, its dense network of CROs, various regulatory initiatives, a fast-growing talent pool - and above all, “a culture of executional intensity”.

Licensing as the primary gateway

Licensing remains the principal mechanism through which western companies access Chinese innovation, allowing western companies to use their experience in global commercialisation with Chinese assets. These licences have, until recently, typically involved the grant of ex-China rights in return for upfront payments, development, regulatory and sales-based milestones, and tiered royalties on net sales. 

However, traditional territorial carve-outs are becoming more nuanced. Some recent licences grant broader territorial rights that include China, or adopt hybrid structures such as co-commercialisation arrangements in China (often on a profit and loss sharing basis) coupled with a traditional licensing model in the rest of the world. This is particularly common where:

• the parties engage in joint research or global development collaborations;
• the western partner commits to building local development, manufacturing or distribution capacity in China; or
• the transaction forms part of a broader strategic partnership rather than a single-asset licence.

There are also recent examples of global licences granted over Chinese assets. For example, Roche’s recent licensing agreement with Qyuns Therapeutics, under which Roche committed up to US$1 billion in upfront and milestone payments for global rights to a clinical-stage bispecific antibody targeting TSLP and IL-33 for respiratory indications. The deal also reflects a growing willingness to deploy significant capital at earlier stages of development where the scientific rationale is compelling and the competitive landscape is well understood. 

Beyond licensing: M&A, asset purchases and strategic collaborations

Licensing sits within a wider landscape of western investment into Chinese life sciences innovation. Targeted acquisitions and asset purchases are often used where full control over development and commercialisation is strategically justified, particularly for late-stage or near-approval assets. 

Joint ventures and long-term strategic collaborations are also gaining traction. These arrangements allow western pharmaceutical companies to embed themselves within Chinese innovation ecosystems, and gain early access to discovery programmes and the innovative R&D platforms of the Chinese partner (such as AI-driven drug discovery engines, or specific ADC technologies). In some cases they may also facilitate commercialisation or co-commercialisation in China, helping global pharmaceutical companies to navigate regulatory requirements that favour domestic participation. 

These strategic collaborations often involve multiple programs (frequently, target or drug discovery programs) - with a governance structure that is nimble enough to keep abreast of the high speed of development in China, whilst also allowing more oversight and control by the global pharma company, which brings (amongst other things) invaluable drug development and disease-area expertise to the partnership. It is common for these deals to be structured with option-based mechanisms to license or acquire assets at defined milestones.  In the case of joint ventures, a new model has been emerging in recent years in the form of NewCo spin-outs, for more on which please see our previous article here. 

Other direct investment into China, including AstraZeneca’s global strategic research and development centre in Beijing, illustrates a long-term commitment to China as a source of discovery rather than solely a commercial territory. Similar initiatives across the sector reinforce China’s role as a core contributor to global innovation pipelines.

Other commercial considerations in cross-border transactions

In the case of most agreement structures, a pharmaceutical deal will involve detailed consideration of intellectual property ownership, exclusivity, commercialisation rights, and program control. However, there are also certain issues for western pharmaceutical companies to be aware of when contracting with Chinese entities – one of which is the complex, ever-changing compliance landscape. 

The transfer of data and materials presents particular challenges. There are different compliance pathways to navigate for the cross border transfer of clinical data out of China (depending on the scale and type of data in question), and the transfer of human biological samples and genomic data from China is subject to the most stringent regulatory controls and government approvals. At the same time, the United States is tightening restrictions on outbound data transfer, for example by fully prohibiting the export of bulk sensitive personal data (which may arise from clinical trials, for example) to “countries of concern”, including China, under the US Department of Justice’s Final Rule that came into effect in April 2025. While there is an exemption under this US regime for the export of data required for regulatory approval of pharmaceutical products in countries such as China, in practice this is narrow and requires the outlay of significant resources on a compliance program that will meet the conditions that are attached to the exemption. 

These changes demonstrate the increasing difficulties that are associated with international data transfers which, in certain circumstances, may require parallel clinical investigations for products intended for global commercialisation, significantly adding to complexity and cost. They also highlight the challenging regulatory landscape more generally, which is ever-evolving and highly political, making careful structuring and forward-looking drafting essential.

Conclusion

The global flow of life sciences innovation is no longer one-way. Chinese biotech companies are now a significant source of scientifically robust and commercially attractive assets, which western pharmaceutical companies are using to leverage their capital, global development expertise and commercial infrastructure for novel and complex targets.

As the UK seeks to deepen its economic relationship with China, life sciences licensing and commercial transactions provide a clear and practical illustration of how closer engagement is already being realised. Well-structured agreements and a strong understanding of the regulatory landscape will be central to enabling this next phase of collaboration as the geography of innovation continues to evolve.