The number and total value of business development (BD) transactions in China have reached record highs, establishing China as a global exporter of biotech innovation pipelines.
License-out transactions (domestic to international) have shown substantial growth in both volume and value, surpassing license-in transactions (international to domestic) for the first time in 2023. Since 2021, the value of license-out transactions has grown at a compound annual growth rate of 70.41%.
Domestic transactions also saw recovery after a dip in 2022, with a total domestic transaction value of $3.574 billion in 2023, about 8.5% of the total value of external licensing deals. Notably, only two of the top 10 transactions secured global rights, as many buyers have limited financial capacity, with rights often restricted to Greater China.
Currently, China’s biotech research is expanding globally; however, local pharmaceutical companies still lack strong international commercialization capabilities. While domestic biotech companies focus primarily on the Chinese market due to significant local demand, the path to international expansion remains limited. Structurally, Chinese biotech firms with a greater focus on clinical trials and commercialization in international markets tend to have a higher overseas revenue share than larger Chinese pharmaceutical firms.
China’s clinical trials are primarily concentrated in the U.S., with increasing global alignment in clinical standards. Trials are also attractive in countries like Australia due to regulatory efficiency and cost considerations. Between 2016 and 2022, license-out agreements in China grew significantly, especially in oncology and anti-infective areas, with antibody drugs being predominant.
The price of medications in developed countries is significantly higher than in China, attracting Chinese companies to pursue high-profit margins through license-out deals. Despite a relatively small international market share, Chinese innovations are gradually gaining global recognition, presenting immense potential for market growth. Regulatory acceleration has enabled faster market entry, although domestic reimbursement pressures have hindered local sales, prompting Chinese companies to target international markets actively.
The limited relevance of clinical data to target patient groups in new markets has been a primary factor in the limited success of Chinese pharmaceutical companies abroad. Tailoring strategies to specific local needs is critical for establishing a lasting international presence. Furthermore, niche therapeutic areas, although challenging, may not be the easiest pathway to approval abroad, necessitating alignment with the company’s internal pipeline.
By focusing on market demand adaptation, developing commercialization capabilities, and meeting international standards, Chinese pharmaceutical companies can better leverage license-out models to enter high-margin markets and enhance global competitiveness.
