Cover Story | Coming to China for Medicine (AI Translation)

封面报道｜来中国“买药”

In 2023, China's pharmaceutical industry marked a significant milestone by achieving a "net export" status in innovative drug transactions for the first time, with over $45 billion in outbound licensing deals disclosed by domestic companies. This achievement comes against the backdrop of a challenging period for the sector, characterized by a two-year investment and financing "winter" and a slowdown in domestic IPOs. Despite these hurdles, the surge in license-out transactions signals a growing recognition of Chinese innovative drugs on the global stage [para. 1].

The downturn in investment and financing within China's biopharmaceutical sector is stark, with nearly RMB 600 billion ($83 billion) evaporating from market value over three years. This contraction has led to financial difficulties for many companies but also underscores the strategic importance of securing large-scale external transactions to ensure cash flow and validation from leading multinational pharmaceutical companies [para. 2].

China's increasing participation in global pharmaceutical innovation is evidenced by its companies licensing out approximately 30 drug varieties annually and contributing to 35% of drugs undergoing clinical research worldwide. This global engagement is further highlighted by significant overseas transactions like BrightGene Bio-Medical Technology’s $8.4 billion deal with Bristol-Myers Squibb and Betta Pharmaceuticals’ active role in Antibody-Drug Conjugate (ADC) sector license-out activities [para. 3][para. 4].

The landscape of ADC development has expanded beyond traditional targets, attracting attention for its potential to replace chemotherapy. The division of labor between biotech firms and large pharmaceutical corporations in mature markets like the U.S. and Europe emphasizes innovation versus commercialization, respectively [para. 5]. Notably, AstraZeneca’s acquisition of Guangzhou RiboBio Co., Ltd. for $1.2 billion represents a direct acquisition move by a multinational pharmaceutical company into the Chinese biotech space [para. 6].

Despite concerns about reduced venture capital leading to fewer innovative drug outcomes in future years, there are signs of recovery in overseas transaction enthusiasm at the beginning of 2024. Several licensing deals worth over $1 billion have already been announced, indicating sustained interest in Chinese innovative drugs on the international stage [para. 7][para. 8].

Throughout 2023, Chinese pharmaceutical companies completed over 80 outbound licensing deals, marking an approximate 60% increase from the previous year. The total amount of upfront payments for these transactions reached $4.63 billion, reflecting greater international recognition of domestically developed new drugs [para. 9]. The focus on ADC projects highlights their potential as alternatives to traditional chemotherapy treatments.

The strategic positioning within therapeutic areas allows some companies to navigate patent expirations effectively or capitalize on new opportunities like GLP-1 weight loss drugs [para. 10]. In contrast to Pfizer and AbbVie’s acquisitions aimed at establishing dominance in certain sectors, Chinese companies have leveraged ADC project license-out transactions with renowned multinational corporations as part of their strategy to compete globally [para. 11].

Chinese innovative pharmaceutical companies are increasingly engaging in cross-border project transfers as they shift towards differentiated innovation paths away from derivative drugs projects prevalent before [para. 12]. Despite challenges such as tight cash flows prompting early-stage project transfers at lower prices, these transactions represent crucial steps for Chinese firms aiming to establish themselves on the global stage while navigating financial pressures during industry downturns [para. 13][para. 14].

As Chinese innovative pharmaceutical companies continue securing more deals internationally, questions arise regarding how they can negotiate better terms amidst increased competition and ensure their assets are reasonably priced on the global market [para. 15]. The recent trend towards external business development (BD) transactions reflects both an opportunity for industry growth and a strategic response to current market conditions [para. 16].

Overall, China's innovative drug sector's "going global" efforts underscore both its growing capabilities and challenges faced within an evolving global healthcare landscape marked by intense competition and collaboration opportunities[para. 17][para. 18].