China’s footprint on the global pharma landscape has been growing.
In December, Merck & Co. tapped China-based biotech Hansoh Pharma to license an investigational, preclinical, oral small molecule GLP-1 receptor agonist in a deal that could be worth up to $1.9 billion. The deal sparked headlines not only because it marked a move into the GLP-1 space for Merck, which is broadening its pipeline as Keytruda’s patent cliff looms. It’s also part of a bigger story about China’s rise as a potential innovative superpower in pharma.
Across the industry’s total clinical pipeline, at least one-fifth of development programs involve a Chinese company, according to data from Evaluate Pharma. In terms of clinical trials, China is No. 2 behind the United States.
But larger geopolitical forces could throw cold water onto these types of licensing deals — from the in-limbo Biosecure Act, which would require U.S. companies to sever contracts with some Chinese manufacturing and research organizations, to the impact of increased tariffs on manufacturing costs and Chinese-American relations.
As U.S.-based and multinational pharma companies look to leverage the cutting-edge technologies emerging from China, here are four key factors at play.
Bispecifics, CAR-T among China’s developmental strengths
Chinese companies are flexing their drug development muscles across technologies and disease states. Among them is bispecifics, as evidenced by ivonescimab, a drug discovered by China-based biotech Akeso that bested Keytruda in slowing lung cancer progression in results from a phase 3 trial released last year.
China-based companies are also strong in the CAR-T cell therapy space. A review of the industry’s CAR-T pipeline showed that more than 50% of the candidates were China-originated or China-partnered. Among those companies is CARsgen Therapeutics, which announced positive phase 2 data for its advanced stomach cancer treatment in December.
Chinese firms are also making waves in CRISPR gene-editing, thanks to companies like HuidaGene Therapeutics, which scored an IND from the FDA in November for the first CRISPR/Cas13 RNA-editing therapy in macular degeneration.
Other bustling areas of R&D in China include oncology, particularly antibody-drug conjugates, obesity, immunology, and cardiometabolic, said Alan Montgomery, partner and co-head of pharmaceuticals at law firm Herbert Smith Freehills.
Government funding is stronger than VC backing
Not only is there “a lot of interesting science being developed in China,” but the sector benefits from significant investment from the Chinese government, Montgomery said.
“It's been a deliberate strategy of theirs, particularly investing in R&D and technological innovation, so there's been a huge amount of capital being put into the space by the Chinese government,” he said, noting that the situation offers the Chinese pharma industry lower costs and faster turnarounds.
“Chinese companies have been able to scale up and push [into] clinical trials more quickly than other jurisdictions,” he said.
Unlike the U.S., venture capital funding is not the same in China, making licensing deals especially appealing to Chinese companies.
“They want to access liquidity, they want to access cash to push forward R&D programs,” he said.
Licensing deals are happening earlier
In 2022, Eli Lilly and Innovent Biologics were thrown bad news from the FDA, which rejected their China-developed cancer immunotherapy sintilimab. The key criticism was that the pair’s phase 3 clinical trial was conducted solely in China and was “not reflective of the diverse ethnic subgroups within the U.S. population,” the agency said. It recommended that the companies conduct an additional multiregional clinical trial.
Now, companies are seeking licensing deals earlier in the drug development process when they can craft a clinical trials plan more in line with the FDA’s requirements. The Merck-Hansoh deal is a recent case in point.
“Catching something at an earlier stage is more affordable, it allows you to take more bets [and] diversify a bit more, and it allows you to influence the development program and clinical trials,” Montgomery said.
Intensifying trade wars could complicate the picture
While tariffs and the Biosecure Act are top of mind in pharma, China’s export control regulations also restrict or prohibit exports of certain critical technologies, such as its ban on rare earth extraction and separation technologies.
“China has prohibited categories and restricted categories in terms of items that cannot be exported or can only be exported with a permit,” Montgomery said.
While Montgomery hasn’t seen these restrictions apply to the pharma industry more broadly, he said, “there’s a question as to whether the regulations might be extended to the export of other technologies, too.”
“I don’t think anybody knows the answers to these questions,” he said.
