By Da Cheung
In 2025, China’s innovative pharmaceutical companies quietly crossed a historic threshold, overtaking the United States in a key metric of global biotech influence. The total value of Chinese out-licensing deals — where a domestic company grants foreign partners the right to develop and sell its drugs overseas — reached $136 billion, accounting for 49% of the global total.
Chinese companies are now capable of producing their own cutting-edge drugs due to a confluence of three major factors. First is industrial policy, heavily supported by Beijing’s “Healthy China 2030” initiative. Second is the rapid pace of innovation. With a streamlined approval process and faster clinical trials, the creation of these drugs happens much faster in China than in the U.S. Finally, there is a brain trust of returning experts. These individuals acquired significant industry knowledge working at top multinationals in the U.S. and have now returned home with the dream of making it big in their native country.
The double-edged sword of licensing
For many rising biotech firms, licensing their innovations to foreign partners is a practical necessity. At present, most Chinese startups lack the commercial infrastructure, capital, and global networks required to commercialize drugs overseas themselves. By out-licensing, they can focus entirely on research and development while tapping into the vastly superior business models of multinationals.
However, these out-licensing deals can be a double-edged sword. Much of the income comes in the form of one-time, non-recurring milestone payments. A company might post massive income in one quarter, only to see it drop back down to zero a year later.
A prime example is 3SBio (1530.HK), which reported a 2025 full-year revenue of 17.7 billion yuan ($2.56 billion), an impressive 94.3% increase over 2024, alongside a net profit jump of 305.8%. Yet this was largely driven by a single global licensing agreement with Pfizer for a bispecific antibody, which contributed roughly 9.43 billion yuan. Stripping away this windfall, 3SBio’s actual product and service revenue slipped 9.3%.
Similarly, CSPC Pharmaceutical Group (1093.HK) announced a potential $18.5 billion strategic partnership with AstraZeneca earlier this year to develop long-acting weight-management treatments, focusing on GLP-1, a peptide hormone that regulates appetite and blood sugar. Despite securing a $1.2 billion upfront payment — the second largest for a domestic drugmaker — the company’s stock fell over 10% because the market had already priced in rumors of the deal months earlier.
Still, for companies with diverse pipelines, these agreements offer financial independence. InnoCare Pharma (688428.SH) reported a net income of 644 million yuan in 2025, its first-ever full-year profit. It successfully paired strong domestic sales of its core drug with significant cash injections from foreign partners like Zenas BioPharma and Prolium.
New models and geopolitical headwinds
As the industry matures, the nature of these cross-border deals is evolving. Some companies are moving past traditional licensing into cooperative “co-co” models — co-development and co-commercialization. A prime example is Innovent Biologics (1801.HK), which struck a massive agreement with Japan’s Takeda in late 2025 with a potential value of $11.4 billion. Under the agreement, the companies agreed to co-develop cancer drug candidate IBI363 globally and co-commercialize it in the U.S., while sharing development costs and profits in the American market. This landmark partnership followed a potential billion-dollar licensing deal with Roche.
Another rising strategy is the “NewCo” model, in which a Chinese biotech places its overseas rights to a drug into a newly created foreign company backed by international capital. One example came from Keymed Biosciences (2162.HK), which in 2024 licensed ex-China rights to its T-cell engager antibody CM336 to newly formed U.S. biotech Ouro Medicines. Just 16 months later, in March 2026, Gilead Sciences agreed to acquire Ouro in a deal worth up to $2.18 billion. Keymed said it expected to receive up to $320 million from the transaction through upfront proceeds and potential milestone payments.
While out-licensing remains a handy and smart win-win, outright acquisitions by foreign multinationals — like the Gilead purchase — will likely be heavily constrained by geopolitics. The COVID-19 pandemic served as a wake-up call for the U.S. government, triggering “Operation Warp Speed” — a public-private partnership to accelerate the development, manufacturing, and distribution of COVID-19 vaccines, therapeutics, and diagnostics — and a sudden realization of the vulnerability of its domestic manufacturing capabilities. Intellectual property and anything cutting-edge or proprietary consistently set off alarm bells these days.
Politics will undoubtedly get in the way of sweeping foreign acquisitions, even if the market logic makes perfect sense. However, faced with declining internal research efficiency, foreign companies are highly motivated to source innovation from China, where development costs can be 30% to 40% lower than in the U.S. Driven by mutual economic need, the integration of Chinese pharmaceutical innovation into the global pipeline appears firmly established.
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