Why Big Pharma Is In-Licensing Drugs From China

Five years ago, a Chinese molecule in a big pharma pipeline was a curiosity. Today it is a strategy. Pfizer, Merck, GSK, AstraZeneca and AbbVie have all paid large upfronts for drugs discovered in China, and the total potential value of these deals now runs to tens of billions of dollars a year. This post looks at the scale of the shift, why it is happening, the risks buyers must price in, and what it means for Western biotechs and investors.

The Scale of the Shift

The numbers have moved fast. Evaluate data reported by Fierce Biotech show Chinese licensing and acquisition deals carried a total potential value of $32.2 billion in 2022, $51.9 billion in 2024 and $92.2 billion in 2025. China’s share of global deal value rose from about 9% to 21% over the same period, and the average deal size climbed from about $546 million to about $1.5 billion (Fierce Biotech, 2025).

2026 is running hotter. Pharmcube data cited by Reuters put Greater China licensing value at $137.7 billion for 2025, almost ten times the 2021 level. In July 2026, CCTV, citing China’s National Medical Products Administration, reported 81 out-licensing deals worth about US$110 billion in the first half of the year, a record (The Standard, 2026). Different databases count deals differently, but every one points the same way.

Headline values flatter the reality. Most of the money sits in milestones and royalties that may never be paid. Upfront cash is the better signal of conviction, and it is rising too: the average upfront in early 2026 was $77.7 million, double the 2025 average (Reuters, 2026).

Deals That Defined the Trend

Deal	Asset	Upfront	Up to
Summit / Akeso, Dec 2022	Ivonescimab (PD-1/VEGF bispecific)	$500M	$5.0B
Merck / Hengrui, Mar 2025	HRS-5346 (oral Lp(a) inhibitor)	$200M	$1.97B
Pfizer / 3SBio, May 2025	SSGJ-707 (bispecific antibody)	$1.25B	$6.05B
GSK / Hengrui, Jul 2025	HRS-9821 (PDE3/4, COPD) + 11 programs	$500M	$12.5B

Summit’s 2022 deal for ivonescimab was the wake-up call. Summit paid $500 million upfront for rights in the US, Canada, Europe and Japan (Summit, 2022). In January 2026, FDA accepted Summit’s BLA for ivonescimab in EGFR-mutated non-small cell lung cancer, with a goal date of November 14, 2026 (Summit, 2026). That decision will be a key test of a China-originated asset in the US.

Merck licensed Hengrui’s Phase 2 oral Lp(a) inhibitor for $200 million upfront and up to $1.77 billion in milestones (Merck, 2025). Pfizer then set a record with $1.25 billion upfront for global rights outside China to 3SBio’s bispecific SSGJ-707 (BioProcess International, 2025). GSK followed with a 12-program pact led by a Phase 1 inhaled PDE3/4 inhibitor for COPD (BioSpace, 2025).

Why Big Pharma Is Looking East

Speed and Cost of Development

Chinese sites can enrol patients two to three times faster than many other markets, helped by large pools of treatment-naive patients. Historical figures put the direct cost per patient in a Phase III lung cancer trial at about $25,000 in China versus about $69,000 in the US (Pharmaceutical Executive, 2025). Faster, cheaper trials mean Chinese biotechs can bring human proof-of-concept data to the table early, which is what buyers want to see.

Innovation in Hot Modalities

China is no longer only a fast follower. It is strong in bispecifics, antibody-drug conjugates and obesity drugs. One adviser told Reuters that China accounts for nearly 90% of global ADC licensing activity, and AstraZeneca’s January 2026 obesity deal with CSPC was worth up to $18.5 billion (Reuters, 2026).

“Big pharma is not buying cheap molecules from China. It is buying time, and paying for it with milestones.”

Patent Cliff Pressure

GlobalData estimates more than $230 billion in revenue is at risk from blockbuster patent expiries between 2025 and 2030 (Chain Drug Review, 2025). Analysts at Macquarie note that licensing from China can cost less than building the same asset internally, which matters while companies cut costs.

Capital Needs and NewCo Structures

Chinese biotechs face a finite home market and need global capital to fund late-stage work. The NewCo model answers both. A Chinese company assigns ex-China rights to a new company, usually set up outside China and funded by Western investors. The licensor takes an upfront, royalties and often equity. Hengrui used this route with Kailera for a GLP-1 asset and with Braveheart Bio for a cardiomyopathy drug (Pharmaceutical Technology, 2025).

The Risks Buyers Must Price In

• BIOSECURE. The Act became law on December 18, 2025, as part of the FY2026 NDAA. It bars federal agencies, contractors and grantees from using biotechnology equipment or services from designated companies of concern. It does not name WuXi or BGI directly, and OMB must publish its list within a year (Ropes & Gray, 2026). It is aimed at suppliers, not molecule licensing, but it shapes CDMO and CRO choices.
• Data acceptance. FDA expects data that apply to US patients and US medical practice. Plan multiregional trials early rather than relying on China-only studies.
• Tariffs. Section 232 tariffs of up to 100% on patented drug imports applied to all branded drugmakers from September 29, 2026, with exemptions for categories such as ADCs and cell and gene therapies (Managed Healthcare Executive, 2026). Where the product is made now matters to the licence value.
• IP and diligence. Freedom to operate, patent quality and data integrity need independent review. Audit sites and data before you sign.
• Geopolitics. Rules can shift fast. Build exit and transfer terms into the agreement.

What This Means for Western Biotechs and Investors

For Western biotechs, Chinese assets are now direct competitors for big pharma’s attention and budget. A US or European program needs a clear edge: better data, a stronger regulatory package or a target that Chinese pipelines have not crowded. Some will compete. Others will partner, by in-licensing Chinese assets themselves or joining NewCo structures as the development engine.

For investors, the NewCo model opens a new deal flow, often with clinical data already in hand. The discipline is in diligence: test the data against FDA expectations, check the CMC and supply chain against BIOSECURE and tariff exposure, and value milestones with a hard eye.

Terraforme Biosciences helps biotechs, licensors and investors assess partnering opportunities, structure deals and run technical, quality and regulatory diligence on in-licensed assets. Learn more about our strategy and business development services.

The Bottom Line

China has become a core source of new drugs for the global industry. Buyers come for speed, cost and modality expertise, and they stay because the assets are good. The winners will be the companies that treat FDA data needs, supply chain rules and policy risk as part of the deal from day one.