China is reshaping the global innovation map for the pharmaceutical industry. The country now accounts for roughly one-third of global clinical trials, surpassing Europe in several therapeutic areas, and it has become the world’s second-largest developer of new medicines after the US.
Regulatory change is reshaping the innovation playing field
Regulatory reforms have accelerated approval timelines and reduced R&D costs, enabling Chinese biotechs to move from drug discovery to human trials at a pace unmatched in many mature markets. A vast patient population further supports faster recruitment and data collection. At the same time, regulatory uncertainty in the US has added friction to traditional drug development pathways, prompting multinational companies to look to China for partnerships, licensing deals, and co-development opportunities that can help fill critical pipeline gaps and deliver cost-efficient, timely clinical development.
Cross-border deal models are unlocking access to Chinese innovation
These dynamics are leading Western pharmaceutical companies to seek access to innovation originating in China, in turn fueling a surge in deal activity structured around two complementary models: traditional license-out agreements and NewCo formations.
In the license-out model, Chinese biotechs grant rights to co-develop or commercialise drugs in other markets, allowing global partners to advance late-stage development while the originating company retains upstream value. Pfizer’s licensing agreement with 3SBio, which included $1.25bn upfront and up to $4.8bn in milestones for a PD-1/VEGF bispecific, illustrates the scale and maturity of assets now attracting global demand.
In parallel, the NewCo structure is also gaining traction as an alternative pathway for global development. Under this model, Chinese biotechs transfer assets into a newly capitalised entity alongside overseas investors, enabling global development while preserving domestic equity upside. Hengrui Pharma’s licensing of its Phase 3 cardiac myosin inhibitor HRS-1893 to US biotech Braveheart Bio illustrates the NewCo model in action, with Hengrui retaining greater China rights while securing upfront capital, milestones and royalties, and Braveheart gaining exclusive global development and commercialisation rights outside China to build a focused cardiovascular franchise.
The chart below illustrates recent trends in China’s outbound drug licensing, highlighting both deal counts and upfront payments.
