(L-R) Bruce Liu, Martin Slusarczyk, Selene Peng, and Jonathan Welte; all with Simon-Kucher & Partners’ life sciences division

China’s pharmaceutical innovation ecosystem has matured rapidly, positioning the country as a hub for cutting-edge drug development and a valuable source of research. A major factor in this growth is the clinical trial environment, which can offer an advantageous mix of speed, scale, and affordability over Western hubs. With regulatory changes, solid infrastructure, and a large pool of untreated patients, China is drawing increasing global attention.

To understand China’s pharmaceutical rise, we first examine key market trends and how they are shaping the sector’s growth. This sets the stage for exploring the factors behind these developments, and how they create new opportunities for international pharmaceutical companies and financial investors.

Chinese pharma deal trends

A surge has occurred in both the deal volume and number of out-licensing transactions originating from China (see figure below). These encompass cooperations, licensing agreements, asset acquisitions, and option exercises in which international investors access Chinese assets. This trend highlights the growing international interest.

Mergers and acquisitions targeting Chinese innovative drug companies, which focus on new fixed-dose combination drugs and molecular entities, have shown a considerable upward trend over the past decade (see figure below). This increase includes both domestic and cross-border transactions. Notably, the period from 2023 to 2024 witnessed more than a twofold increase in the number of deals, underscoring a heightened interest in the sector.

An analysis of outbound deal activity by trial stage reveals a clear trend: the market increase in recent years has been primarily driven by assets in the preclinical phase (see figure below). These early-stage deals have experienced significant growth, outpacing those associated with later-stage assets. This pattern indicates a growing preference toward earlier engagement in the development timeline.

Drivers of increasing global interest in Chinese pharma

Accelerated trial timelines

To accelerate time to market, there is a huge interest to streamline clinical trial timelines. In this regard, China presents several advantages that indicate trials can be completed faster here than in non-Chinese markets.

The enrollment phase in China can be two to three times faster than in non-Chinese markets.¹ The primary reason for this is the large patient population. A key factor is the large pool of treatment-naive patients who, with limited access to innovative medicines, are more readily available for trials targeting these populations. Moreover, patients in China tend to be more open to participating in clinical trials to gain access to new therapies, making it easier to recruit them through outreach efforts.²

Much of China’s population is concentrated in urban regions and therefore close to large hospitals. This allows trials to be conducted within a single institution, streamlining logistics and accelerating completion timelines.³

Beyond access to suitable study participants, clinical trials demand robust infrastructure and, crucially, personnel with the expertise to execute them effectively. Significant investment has steadily strengthened China’s clinical trial ecosystem, with major hospitals directly collaborating with pharmaceutical companies. As a result, the country now boasts a reliable trial infrastructure, supported by skilled teams and experienced professionals operating at high-quality trial sites.²

In addition, China has made significant strides in streamlining the approval process for initiating clinical trials. Regulatory reforms are being introduced to enable faster drug development while also aligning with international standards. Since China’s induction as an ICH member, average review timelines have come down by around 40%, and new pathways like breakthrough therapy designation, priority review, special reviews, and conditional approvals can help further cut the review time and expedite the development of innovative therapies.⁴ Increasingly, many innovative therapies have been achieving simultaneous approvals globally and in China, including Spevigo, Icodec, Cibinqo, and Litfulo.

More recently, in early April of 2025, the Beijing municipal government announced “Several Measures to Support the High-Quality Development of Innovative Medicines.” Among these, a key change is the expedited review timeline for trial applications: investigational drug applications will now be processed within 30 working days—down from the previous 60.⁵ This acceleration shows how China is striving to reduce the overall time needed to perform clinical trials and accelerate regulatory efficiency.

Trial cost advantages

China also offers a significant cost advantage for conducting clinical trials, a crucial factor as trial expenses account for a growing share of drug development costs and have steadily risen over the past decade.⁶

Historically, significant cost differences have been observed. For instance, in Phase III of non-small cell lung cancer trials, the direct cost per patient was reported at approximately $69,000 in the US, compared to just $25,000 in China.¹

One factor driving lower clinical trial costs in China are the comparatively lower wage levels. Even highly trained and experienced clinical trial personnel command significantly lower compensation than their counterparts in the US or Europe.⁷

This difference also extends to the wide range of clinical research and supporting services required to run a clinical trial. The contract research organization sector in China has seen strong growth with both multinationals such as Covance and Paraxel and local majors such as TigerMed and Wuxi AppTec quickly expanding their capacities and capabilities. For example, TigerMed continued to invest in and launch its artificial intelligence-based clinical trial platform to enhance the efficiency and accuracy of clinical trial document handling and service quality, thereby enabling shorter trial cycles and reducing long-term marginal costs.As a result, costs for essential services such as lab testing, biostatistics, bioanalytics, and data management are significantly lower, further reducing overall trial cost.⁷

The previously mentioned ability to conduct trials centrally within large hospitals enables economies of scale, reducing the cost per patient. Additionally, the accelerated pace of conducting trials contributes to further cost savings.

More importantly, investigator initiative trials (IITs) can translate into substantial timeline and cost advantages for China. Many cell and gene therapies have been leveraging the IIT for fast proofs of concept, with Legend Biotech’s Carvykti and Ablaze’s Lu177-PSMA-I&T emerging as the early movers in their respective spaces.

Diversification of Chinese research

In addition to attractive cost structures and timelines, another reason for the growing interest from international pharma companies is the increasing diversification of Chinese research. This means that potential buyers now have a broader selection of therapeutic areas to choose from.

Oncology has historically held the largest share of Chinese out-licensing activity. Between 2019 and 2023, 197 out of 401 recorded deals (49%) were in oncology, underscoring its dominant role.⁸

In contrast, the largest deals from 2024 highlight significant high-value targets beyond the oncology space. When ranking Chinese out-licensing deals by deal size, only four oncology-related deals appear in the top 10 and just one of them ranks within the top five. The largest deal came from the obesity sector, reflecting the growing interest in this therapeutic area, followed by cardiovascular.⁹

These insights highlight that Chinese innovation is no longer confined to oncology but is increasingly expanding across a broader spectrum of therapeutic areas.

How can investors make the most of Chinese trial advantages?

Given the benefits of China’s clinical trial environment and the trajectory of its research ecosystem, the key question is how financial investors and pharma companies can effectively capitalize on these opportunities.

Inorganic: Strategic acquisition of emerging innovation

Acquisitions allow companies to tap into the country’s highly active research environment. This strategy is becoming increasingly important as the looming patent cliff draws nearer. Among the top 10 pharma companies, up to 46% of revenue could be lost in the next decade due to expiring patents.¹⁰ With China’s expanding coverage across therapeutic areas, it has become one of the premier innovation hubs to source from. Innovation coming out of China offers pharma companies the opportunity to not only replenish but also diversify their portfolios.

Currently, there is still a limited cost arbitrage for deals with Chinese companies, but this advantage is bound to narrow. Therefore, international drug manufacturers are exploring other options to de-risk deals.

The first emerging option is a focus towards deals involving earlier-stage assets. This strategy helps counteract rising valuations by acquiring assets before their intrinsic value is fully reflected in the market price. Though early engagement has its own uncertainty, smaller deal costs enable greater diversification. Early engagement also provides the opportunity to influence trial design, ensuring it meets the necessary standards for later approval in non-Chinese markets. Although the quality of Chinese trials has significantly improved in recent years, early engagement can still be valuable for mitigating risks.

The second option for de-risking a deal lies in its structure. One common approach is to incorporate more milestone-based payments. These are only required if the asset achieves specific stages, helping to minimize the risk of overspending on an unsuccessful candidate. This shift is evident in the fact that, over the past five years, while total deal value has increased significantly, fixed upfront payments have only risen slightly.¹¹

To limit geopolitical risks, a “NewCo” model can be used, in which a new company is established outside of China. The Chinese company transfers the rights to this newly formed entity, while the partner contributes financing. This structure offers several advantages in terms of derisking. First, it allows the two partners to share the risk, and second, it contains the risk within the NewCo, limiting potential repercussions for either parent company. Additionally, by transferring the rights and further development outside of China, the model can help avoid potential cross-border regulatory issues.

Although the Chinese pharmaceutical market has undergone significant transformation and is becoming a key hub for innovation, it is still not fully mature. This makes sourcing high-quality innovation more complex and hands-on due to fewer intermediaries and limited centralized data. Therefore, having strong local networks and a physical presence in the region is essential to identify and access the most promising opportunities.¹²

Organic: Fast track to proof-of-concept

Another way international pharma companies can benefit from China’s favorable clinical trial conditions is by conducting clinical trials and IITs in China. This approach is particularly attractive for generating early proof-of-concept data quickly and cost-effectively. One example of an organic approach is the Belgian biotech company EsoBiotec. The company is developing a novel in-vivo CAR-T therapy for multiple myeloma, with its current lead candidate being ESO-T01. In December 2024, EsoBiotec announced the initiation of an IIT in China. By early January 2025, it reported that the first patient had been dosed, with initial results showing promising efficacy and safety. This early proof-of-concept was followed in March 2025 by the announcement that AstraZeneca would acquire EsoBiotec in a deal valued at up to $1 billion.^13,14,15.

Wrap-up

China has become a key force in global drug development, offering fast trials, lower costs, and a broad range of research areas. These strengths make it an increasingly attractive partner for international pharma companies and financial investors. Nevertheless, a strategic approach and thorough due diligence are essential for navigating this dynamic landscape and unlocking the full potential of Chinese innovation.

Bruce Liu, Martin Slusarczyk, Selene Peng, and Jonathan Welte; all with Simon-Kucher & Partners’ life sciences division

- Juan Valencia S., Senior Product Marketing Manager, PharmCube, provided the data for this report.

References

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9. Liu, B., Slusarczyk, M., Peng, S., & Wallace, J. (2025, February 12). Navigating Cross-Border Pharma Deals: Key Trends and Lessons Out of China. Retrieved from Pharmaceutical Executive: https://www.pharmexec.com/view/navigating-cross-border-pharma-deals-key-trends-and-lessons-out-of-china

10. Parrish, M. (2023, June 14). How steep is pharma’s patent cliff? Retrieved from PharmaVoice: https://www.pharmavoice.com/news/pharma-patent-cliff-Merck-Keytruda-Pfizer-Seagen-Humira/652914/

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12. Bell, J. (2025, Jan 16). Roche’s new deals head tries to navigate a more ‘complicated’ and ‘expensive’ biotech world. Retrieved from biopharmadive: https://www.biopharmadive.com/news/roche-deals-business-development-zaitra-china-oncology/737531/

13. EsoBiotec. (2024, Dec 11). EsoBiotec Begins Clinical Trial of In Vivo BCMA CAR-T Candidate ESO-T01 for Multiple Myeloma. Retrieved from EsoBiotec: https://www.esobiotec.com/press-release-investigator-initiated-trial/

14. EsoBiotec. (2025, Jan 8). EsoBiotec Doses First Patient in Investigator Initiated Trial of In Vivo BCMA CAR-T Candidate ESO-T01 for Multiple Myeloma. Retrieved from EsoBiotec: https://www.esobiotec.com/esobiotec-doses-first-patient-in-investigator-initiated-trial-of-in-vivo-bcma-car-t-candidate-eso-t01-for-multiple-myeloma/

15. Kemp, A. (2025, March 17). AstraZeneca to acquire EsoBiotec to advance cell therapy ambition. Retrieved from AstraZeneca: https://www.astrazeneca.com/media-centre/press-releases/2025/astrazeneca-to-acquire-esobiotec.html