Key Points
- U.S. pharmaceutical companies are licensing drugs from China more frequently. In 2024, nearly 30% of major pharmaceutical deals involved Chinese companies.
- Chinese firms offer innovative drugs at lower costs and faster development timelines.
- Some fear this shift threatens U.S. biotech startups, while others see it as beneficial competition.
- Regulatory concerns exist, with potential government intervention looming.
A little-known biotech company, Summit Therapeutics, shocked the biopharmaceutical industry last year when it announced its experimental cancer drug outperformed Merck’s blockbuster Keytruda in a clinical trial. The drug was licensed from the Chinese company Akeso Inc. This was not an isolated event—other major pharmaceutical companies, including Merck, have also turned to China to acquire promising drug candidates.
In October, investors poured $400 million into a new company, Kailera Therapeutics, to develop obesity drugs licensed from China’s Jiangsu Hengrui Pharmaceuticals. Then, in December, Merck disclosed that it had licensed a potential competitor to Summit’s drug and an experimental obesity treatment from Chinese firms.
The trend is clear: U.S. pharmaceutical companies are increasingly sourcing medicines from China. Data from DealForma indicates that nearly 30% of Big Pharma deals with at least $50 million upfront involved Chinese companies in 2024, a sharp increase from 20% the year before and none just five years ago.
Several factors drive this shift. Chinese biotech firms are developing more innovative molecules faster and cheaper than their U.S. counterparts. Additionally, venture capital funding in China has dwindled, pushing companies to strike licensing deals.
However, opinions on the trend are divided. Some believe it threatens American biotech startups, as large pharmaceutical companies can acquire promising drugs from China at a lower cost rather than investing in U.S. companies. Others argue that increased competition fosters innovation and efficiency in the industry.
The U.S. government may eventually intervene. Lawmakers have previously proposed restrictions on biotech deals with China, similar to protectionist policies in AI and semiconductors. If such regulations are implemented, they could disrupt the growing reliance of U.S. pharma companies on Chinese drug innovation.
