A relatively unknown biotech company made waves in the biopharmaceutical industry last spring by claiming an “unprecedented” breakthrough: its experimental cancer drug appeared to outperform Merck’s Keytruda in a clinical trial.
The company, Summit Therapeutics, obtained the drug through a licensing agreement with Chinese firm Akeso Inc.
In October, a consortium of life science investors revealed a $400 million investment to establish Kailera Therapeutics, a company dedicated to developing experimental obesity drugs acquired from Chinese pharmaceutical firm Jiangsu Hengrui Pharmaceuticals.
Then, in December, Merck disclosed its plans to license a potential rival to Summit’s drug, along with a separate experimental obesity pill—both sourced from Chinese companies.
Suddenly, U.S. pharmaceutical firms are turning to China for innovative medicines. Last year, nearly 30% of Big Pharma deals with upfront payments of at least $50 million involved Chinese companies, an increase from 20% the previous year and virtually none five years ago, according to DealForma data.
“That’s stunning to me,” said Chen Yu, founder and managing partner at crossover fund TCGX. “That’s stunning.”
Yu explained that two decades ago, biopharma companies largely ignored China, viewing it as a minor market. His former firm, Vivo Capital, was among the first to explore bringing U.S. medicines into China.
Now, the dynamic has reversed, with a surge of interest in Chinese innovations—something Yu never anticipated.
Industry insiders and investors cite several factors behind this shift: Chinese biotech firms are developing superior drug molecules at an increasing pace, they can commence human trials earlier and more affordably than in the U.S., and American buyers have identified a viable business model for importing these treatments through licensing deals. Additionally, venture capital in China has dwindled, pressuring biotech firms to seek deals.
One thing everyone in the industry agrees on? This trend isn’t fading anytime soon. The broader implications for the U.S. biotech sector remain uncertain.
Some believe the shift could be detrimental to American startups, as large pharmaceutical companies can now secure promising drugs from China at a fraction of the cost.
Others argue that competition drives innovation and that U.S. companies will ultimately benefit from the influx of new medicines. Regardless, this wave of Chinese licensing deals is poised to reshape the U.S. biopharma landscape.
“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily,’” said Tim Opler, a managing director in Stifel’s global healthcare group. “We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”
Bain Capital Life Sciences started prioritizing China around 2018, according to partner Adam Koppel. The private equity firm observed a strategic shift in China’s life sciences sector, as the government and industry transitioned from focusing on copycat and fast-follower drugs to innovating new chemical entities for global markets.
Since then, Bain has executed six biopharma deals in China. In 2023, it acquired an experimental asthma drug from Hengrui and co-founded Aiolos with a $245 million Series A funding round. Just three months later, GSK acquired Aiolos for up to $1.4 billion.
Koppel noted that as more large pharmaceutical companies engage with Chinese drug developers and witness successful outcomes, their confidence in these assets is growing. Historically, buyers hesitated due to concerns that Chinese clinical data might not be globally representative or accepted by U.S. regulators.
“As they’re seeing assets then come out, they’re seeing things that are having success, and eventually, as things get approved and used on the market, I think that that concern will become lessened,” he said.
That skepticism was evident when Summit Therapeutics claimed its experimental cancer drug outperformed Merck’s Keytruda in a direct comparison—something no other drug had achieved. However, since Summit’s trial was conducted entirely in China, questions arose about whether the results would be replicable elsewhere.
When Summit’s leadership sought a drug to develop, they intentionally looked toward China, knowing that an increasing number of new medicines were emerging from the country. But in late 2022, the U.S. Food and Drug Administration had just rejected several applications for drugs tested exclusively in China, including one from Eli Lilly.
When Summit announced its licensing of the cancer drug ivonescimab from Akeso, skeptics doubted the deal’s viability given the FDA’s stringent requirements, said Summit’s co-CEO and president, Maky Zanganeh.
New Medicine Research in China (Photo: Shutterstock)“And suddenly after us, a lot of people opened their eyes,” she said.
Ivonescimab had already undergone early-stage trials and was in late-stage testing in China when Summit acquired the license. To align with FDA expectations, Summit is now conducting three global Phase 3 trials to ensure a diverse patient population is represented.
This approach could gain traction. Investors and industry experts highlight the appeal of partnering with Chinese biotech firms: U.S. companies can acquire drug candidates that have already undergone early trials at a lower cost than domestic alternatives, providing greater certainty about their potential success.
Gilead also dedicates substantial resources to identifying promising assets in China, just as it does in the U.S. and Europe, according to chief financial officer Andrew Dickinson.
He described a “substantial shift” in both the quality and quantity of Chinese drug innovations now available to American biopharma companies. “The transformation over the last five years is real and impressive,” Dickinson said.
Another factor driving the trend is the financial pressure on Chinese biotech firms. Venture funding in China’s biotech sector plummeted to just $1 billion last year, a stark decline from its 2021 peak of $6.3 billion, per data from TCGX’s Yu.
“Why would we do any early-stage development in the U.S. anymore?” Yu asked. “Why wouldn’t we just get clinical proof of concept in China and then bring it over to the U.S. for the expensive clinical development when we actually know the drug works? And I think that could be a very revolutionary new way for our industry to become more efficient.”
Depending on the perspective, this shift presents either an opportunity or a threat to the U.S. biopharma industry. Some, like Yu, see it as a means to lower prescription drug costs. Others fear it could stifle American biotech startups if major pharmaceutical companies prioritize Chinese licensing deals over U.S. acquisitions.
The impact of this shift became evident in December when Merck announced a licensing agreement for an experimental obesity pill from China’s Hansoh for up to $2 billion.
That same day, shares of U.S.-based Viking Therapeutics, a company developing obesity treatments and considered a potential acquisition target, plunged 18% as investors speculated that a key buyer had opted for a Chinese alternative.
Observers draw comparisons to the artificial intelligence sector, where China’s DeepSeek claimed to have developed an AI model as capable as those from the U.S., but at a fraction of the cost.
Former President Donald Trump or other U.S. policymakers could perceive this trend in biotech as a national security concern and take measures to curb such deals.
Yu warns of what he calls the “stroke of a pen” risk—where legislative action could abruptly halt the flow of Chinese biotech assets into the U.S. Last year, lawmakers proposed the Biosecure Act, which aimed to restrict U.S. pharmaceutical firms from partnering with Chinese contract manufacturers.
Washington has already adopted protectionist measures in industries like artificial intelligence and semiconductors, and some speculate that similar policies could extend to life sciences.
“The deeper message from DeepSeek is that we have competition in the high sciences in general, and moreover that China is making major investments to develop scientific assets,” said Stifel’s Opler. In other words, the biopharma race is in full swing.
