A growing number of domestic drug developers are setting their sights on overseas markets.
In 2023, we witnessed considerable changes in the Chinese pharmaceutical market, especially a booming market of innovative drugs and out-licensing arrangements between China-based biopharma companies and international firms. In recent years, with the vigorous development of novel drugs in China and the implementation of policies such as medical insurance cost control and centralized procurement, the single domestic market can no longer fully meet the commercialization needs of Chinese innovative drug companies. Against this backdrop, an increasing number of biopharma companies are setting their sights on overseas markets.
In 2023, the total transaction volume and amount of out-licensing deals for new drugs in China reached new heights. Last year, nearly 70 transactions of this nature occurred domestically, with the disclosed total transaction amount exceeding $35 billion in US dollars. The characteristics and drivers of this accelerated out-licensing landscape in China are outlined ahead.
From 2017 to 2019, the volume of international out-licensing for China’s innovative drugs did not exceed 10 transactions per year. However, in 2020, the number of deals surged to 39. In 2021, 43 out-licensing transactions were completed, followed by 51 in 2022.
In 2023, such agreements initiated in China reached 70, with a total transaction size of more than $35 billion. Licensing transactions on novel drugs have become another trend for Chinese pharma companies to cooperate with international life sciences organizations.
Out of the 70 out-licensing transactions that occurred last year, more than 15 exceeded $1 billion, setting a new record in recent years for both volume and transaction size. A sampling of transactions in 2023 include the following:
To seize the opportunities for the future, many global drug manufacturers have begun to seriously consider evaluating and cooperating with Chinese pharma organizations. Such MNCs include Merck, AstraZeneca, GSK, Pfizer, Takeda, and BioNTech. Among them, BioNTech and AstraZeneca have completed several large-scale licensing transactions with Chinese companies.
Drug pipelines that are in the early stages and have been licensed out to international pharma companies have promising clinical development potential. Out of the 41 out-licensing transactions, which involve nearly 50 pipelines, more than 30 of them are in the early development stages, including preclinical, Phase I, and Phase I/II clinical trials, accounting for more than 50% of the total deals.
In terms of therapeutic-area settings with the most activity, more than 70% of out-licensing transactions occur in oncology. In terms of indications, most of the pipelines are designed for the treatment of solid tumors. For example, GQ1010, an ADC asset licensed by GeneQuantum to Pyramid Biosciences, is a TROP2-targeted therapy; TROP2 is a protein widely expressed in various solid tumors. Fruquintinib, licensed by HUTCHMED to Takeda, is an oral VEGFR inhibitor approved in China for the treatment of metastatic colorectal cancer. Legend Biotech licensed a CAR-T therapy targeting DLL3 to Novartis; DLL3 is a target on the surface of cells and manifests in such conditions as small cell lung cancer and large cell neuroendocrine carcinoma. BB-1701, an ADC asset licensed by BlissBio to Eisai, is a HER2-targeted drug that is suitable for patients with locally advanced and metastatic HER2-positive solid tumors.
In terms of molecular type, small molecule drugs and ADC therapies account for more than half of all new drug candidates, while the remaining include monoclonal/dual antibodies, CAR-T cell therapy, and others.
Small molecule drugs have numerous advantages, making them indispensable in the field of treatment. In 2023, China engaged in innovative drug out-licensing transactions for more than 10 small molecule drugs that target various proteins, such as TLR8, EZH2, TYK2/JAK1, HER2, PARP1, PI3K, ROS1/NTRK, KRASG12D, GLP-1, and DPP1. These small molecule drugs include several new medications that work through a "synthetic lethality" mechanism.
Adam Zhang Yu is the founder and CEO of investment banking firm Collabrium Partners.