China's Biotech Licensing Boom: Where Big Pharma Now Sources Its Pipeline

Introduction

A few years ago, a Western pharma company licensing a drug from a Chinese biotech was an exception worth a press cycle. It is now one of the industry's main sources of new pipeline. Chinese drugmakers signed a record $135.7 billion of cross-border out-licensing deals in 2025 across 157 transactions, up from $51.9 billion in 2024, according to PharmCube data reported by Caixin, and IQVIA's mid-year 2026 review found that Chinese biotechs supplied 40% of all assets big pharma in-licensed in 2025.

The mechanics of a license (upfront, milestones, royalties, territory) are covered in pharma licensing deals. This article takes the market view: how large the wave has become, why buyers go to China, how deals are structured, what Washington might do about it, and what it means for US biotechs and the bankers who advise them.

The pace has accelerated again in 2026. IQVIA counted $92 billion of Chinese-originated in-licensing in the first half alone, 88% of its full-year 2025 total, and expects another record year. The deals have also moved up the value chain: early buyers took single late-stage assets, while the largest 2026 deals are multi-program portfolios in obesity, oncology and immunology.

The table shows why headline values mislead. Upfront payments run from about 4% of headline value (BMS/Hengrui) to about 7% (Novartis/Abogen), and AstraZeneca's $18.5 billion figure includes sales milestones disclosed only in CSPC's Hong Kong filing; AstraZeneca's own announcement quantifies $1.2 billion upfront and up to $3.5 billion of development and regulatory milestones. The asset at the center of that deal, SYH2082, was only entering Phase I.

Out-Licensing (Ex-China Rights)

A transaction in which a drug's originator grants another company the rights to develop and sell it in defined territories in exchange for an upfront payment, milestones and royalties. In the China model, the Chinese originator usually keeps Greater China and licenses the rest of the world to a multinational, so it can commercialize at home while a partner with global trial and sales infrastructure takes the asset to the US and Europe.

The pull starts with the patent cliff. Large pharma needs replacement revenue for the end of the decade, and Chinese biotechs now generate a large share of the world's early clinical candidates. Three features make those candidates attractive:

Not every Chinese asset goes to a big pharma partner. In a NewCo deal, US investors form a new company to hold ex-China rights, the Chinese originator takes cash plus equity, and the NewCo raises venture money to run global trials. Hengrui's obesity portfolio is the template. Kailera Therapeutics took ex-Greater China rights to Hengrui's GLP-1 candidates in 2024 for about $110 million in upfront and technology transfer payments, a roughly 19.9% stake for Hengrui and up to $6 billion in milestones, then raised $400 million and $600 million in private rounds before a $625 million IPO in April 2026, one of the largest US biotech listings on record, as covered in healthcare capital markets in 2026.

Biotech NewCo

A newly formed company, usually backed by US or European venture and crossover investors, created to develop assets licensed from another company (often a Chinese originator) outside the originator's home market. The originator receives upfront cash, milestones and an equity stake; investors get a clinical-stage portfolio with Western management, which can later be sold to pharma or taken public.

For bankers, NewCos create work at every stage: structuring the license and equity split, raising the private rounds, and later running an IPO or a sale. They also explain why some of the best-funded "US" biotechs of 2026 own pipelines discovered in China.

The main risk to the model is in Washington rather than in the clinic. In September 2025, press reports described a draft executive order that would have required review by the Committee on Foreign Investment in the United States (CFIUS) for licensing deals with Chinese companies and tougher FDA scrutiny of data generated in China; the White House said it was not actively considering the order, and it has not been signed. The legislative route is still open: the Biotech Investment National Security Act (BINSA), introduced on June 2, 2026, would add biotechnology to the outbound investment regime of the COINS Act and bring licensing arrangements into covered transactions, which could mean notification requirements or prohibitions for deals with Chinese firms. The FY2027 defense bill is its likeliest vehicle, and its path to enactment is unclear.

Regulatory acceptance is the second risk. The FDA has long required evidence applicable to US patients: in 2022 it rejected Lilly and Innovent's PD-1 inhibitor sintilimab after an advisory committee objected to a submission built on a China-only trial. Buyers therefore plan global registrational trials after licensing, which is why the multinational, not the originator, usually runs late-stage development.

The licensing boom changes competitive dynamics for US biotechs. A pharma business development team can now compare a US company's asset, priced at a takeover premium, with a Chinese asset of similar mechanism available for a modest upfront. Sell-side advisors to US biotechs, whether running a sale or a partnering process, increasingly have to show why their client's asset is differentiated from a Chinese fast follower, and buy-side work now routinely includes China diligence: data quality and site audits, IP ownership, technology transfer of manufacturing, and exposure to future US policy.

The wave also reaches capital markets. Chinese originators have used their licensing income to list in Hong Kong, part of the HKEX biotech and IPO surge, while NewCos list in New York. As long as Chinese biotechs keep producing early data faster and more cheaply, licensing from China will stay a central part of how big pharma refills its pipeline, and the open question for dealmakers is how much of that flow future US rules will allow.