Big Pharma's $18.3B Secret: Why U.S. Drug Giants Are Flooding China With Licensing Deals
U.S. pharma is turning east. Fast. Through June, American drugmakers have inked 14 licensing deals with China-based biotechspotentially worth $18.3 billion. That's not a typo: up from just two a year ago. The logic? Rebuild pipelines before $200 billion worth of current drugs lose patent protection. Pfizer (NYSE:PFE) paid $1.25 billion upfront for a cancer drug from China's 3SBio in May, in a deal that could balloon to $6 billion. Regeneron (NASDAQ:REGN) followed with an $80 million obesity drug deal from Hansoh Pharmaceuticals. Licensing gives U.S. firms faster, cheaper access to promising therapieswithout bearing the full cost of R&D. That's proving too good to ignore.
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What's changed? Chinese biotech isn't just catching upit's producing world-class assets. Targeted therapies, first-in-class cancer drugs, and obesity treatments are all coming out of labs in Shanghai and Suzhou. Jefferies notes a shift away from traditional small molecules toward cutting-edge biologics. And the price? Still a bargain. Over the past five years, licensing deals in the U.S. have averaged $84.8 billion. In China? Just $31.3 billion. Even with U.S.China tensions running high, these intellectual property deals are exempt from tariffs. As Stifel's Tim Opler points out, The law applies to goods. It explicitly excludes IP.
Don't expect this to slow down. Roughly one-third of all licensed assets in 2024 so far have come from Chinaand analysts think that could hit 50% soon. Nuvation Bio (NYSE:NUVB) just acquired AnHeart Therapeutics for its China-developed cancer drug taletrectinib, approved in the U.S. last week. Deals like this don't just cut coststhey accelerate go-to-market. It's a wakeup call, says Chen Yu of TCGX. U.S. pharma isn't just buying molecules. It's buying time. And China's biotech engine might be the fastest route to the next blockbuster.
This article first appeared on GuruFocus.
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