Out-licensing Deals Between Chinese Pharma and Global Companies are Heating Up

Adam Zhang Yu
Founder and CEO
Collabrium Partners

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.

In terms of total transaction volume or single-transaction size, China’s innovative drug out-licensing transactions have been increasing rapidly

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.

Large-scale transactions have emerged, and the scale of single transactions is growing

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:

• Dec. 11: Bristol Myers Squibb licensed the rights of further development and commercialization of HER3/EGFR bispecific antibody-drug conjugate (ADC) product BL-B01D1 from Chinese company Biokin Pharma for a total deal amount of $8.4 billion, including $800 million in upfront payment, $500 million in potential short-term payments, and $7.1 billion in milestone payments.
• Nov. 9: China-based Eccogene announced an exclusive licensing agreement with AstraZeneca to grant the development and commercialization rights of small molecule GLP-1 receptor agonist (GLP-1RA) ECC5004 to the latter for potential treatments, including obesity, type 2 diabetes, and other complications. According to the terms of the agreement, Eccogene will receive a $185 million upfront payment, up to $1.825 billion in future clinical registration and commercialization milestone payments, and tiered royalties on net sales.
• Oct. 20: Chinese company Hansoh Pharma entered into an agreement with GSK for the exclusive global development and commercialization rights of B7-H4 ADC HS-20089 developed by Hansoh Pharma for a total transaction amount of $1.33 billion.
• May 8: China’s BlissBio reached a joint development agreement with Eisai on HER2 ADC BB-1701. According to the agreement, Eisai will pay BlissBio upfront payment and development milestone payments for Phase II clinical trials of breast cancer globally (except in Greater China). If Eisai exercises its option, it will pay an additional upfront payment, and up to $2 billion in milestone payments and royalty fees.
• April 3: Chinese organization Duality Bio announced an exclusive licensing and cooperation agreement with BioNTech for two ADC pipeline assets, DB-1303 and DB-1311, granting global (excluding mainland China Hong Kong and Macau) development production and commercialization rights. According to the agreement, Duality Bio will receive a $170 million upfront payment and potentially over $1.5 billion in developmental registration and commercialization milestones plus royalties

More large MNCs are seeking licensing cooperation with Chinese innovative drug companies

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.

More than half of the out-licensing transactions are for early-stage pipelines

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.

Oncology is the focused therapy area

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.

Small molecule drugs and ADC pipelines are dominating the area

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.