Investing a whopping 464.3 billion yuan, multinational giants are frantically vying for Chinese innovative drugs.

On July 28th, #Hengrui Medicine issued an announcement stating that it has granted the global exclusive rights (excluding the Chinese mainland, the Hong Kong Special Administrative Region, the Macao Special Administrative Region, and Taiwan region of China) of the HRS - 9821 project and the exclusive option for the global exclusive license of up to 11 projects (excluding the Chinese mainland, Hong Kong, Macao, and Taiwan regions of China) to the multinational pharmaceutical company GlaxoSmithKline (GSK) on a paid - basis.

GlaxoSmithKline (GSK) will pay Hengrui Medicine an upfront payment of $500 million. In the future, the potential total amount of milestone payments based on successful development, registration, and sales may reach up to $12 billion.

Announcement from Hengrui Medicine

Affected by the positive news, both the A - shares and H - shares of Hengrui Medicine soared.

GlaxoSmithKline (GSK)'s acquisition of Hengrui's new drugs is just a microcosm of multinational pharmaceutical companies' competition for Chinese innovative drugs.

In the first half of this year, multinational pharmaceutical companies spent a whopping 464.3 billion yuan, setting off a wave of "buying frenzy" for Chinese innovative drugs.

The "Buy - Buy - Buy" Mode

In the first half of this year, multinational pharmaceutical companies started the "buy - buy - buy" mode in China.

In May, Pfizer purchased the global rights (excluding the Greater China region) of the PD - 1/VEGF bispecific antibody SSGJ - 707 under 3SBio.

For this, 3SBio will receive a non - refundable and non - deductible upfront payment of $1.25 billion, as well as up to $4.8 billion in development, regulatory approval, and sales milestone payments.

The $1.25 billion upfront payment set a record for the overseas expansion of domestic innovative drugs.

Statistics of transactions over $1 billion in the first half of 2025

According to media statistics, in the first half of 2025, there were 18 transactions worth over $1 billion.

In January, #Innovent Biologics granted the global exclusive rights for the development, production, and commercialization of IBI3009, a new - generation antibody - drug conjugate (ADC) targeting Delta - like ligand 3 (DLL3), to Roche. It will receive an upfront payment of $80 million, up to $1 billion in potential development and commercialization milestone payments, and a tiered royalty (sales commission) based on future global net sales.

In March, #YuanSi Peptide granted the use right of its Synova™ original technology platform to AstraZeneca. The latter will pay an upfront payment of $75 million and near - term milestone payments, with a total of up to $3.4 billion in R & D and commercialization milestone payments, and will pay a tiered royalty based on global sales.

YuanSi Peptide granted the use right of its Synova™ original technology platform to AstraZeneca

In June, #RemeGen granted the exclusive rights for the development and commercialization of Telitacicept outside the Greater China region (the Chinese mainland, Hong Kong, Macao, and Taiwan) to Vor Biopharma. The latter will pay a consideration worth a total of $125 million. In the future, it should also pay up to $4.105 billion in milestone payments for several potential indications and pay a high - single - digit to double - digit sales commission based on the actual annual net sales.

Two prominent characteristics can be seen from these transactions:

Firstly, the transaction amounts are relatively large. $1 billion is just the starting point, and the highest exceeds $6 billion.

Secondly, the transaction parties are concentrated among the top players. Pfizer, Roche, and AstraZeneca are all among the top ten pharmaceutical giants globally.

Thirdly, the technological content is high, focusing on the most active areas of global pharmaceutical R & D such as oncology, autoimmune and metabolic diseases, and weight loss, covering cutting - edge technological routes such as ADCs and original technology platforms.

A pharmaceutical industry insider shared a set of data at a recent public meeting: The proportion of external procurement pipelines of multinational pharmaceutical companies from Chinese enterprises has been increasing year by year. It was 10% in 2020, reached 29% in 2023, and 31% in 2024.

Proportion of external procurement pipelines of multinational pharmaceutical companies from Chinese enterprises

This indicates that Chinese innovative drugs are increasingly recognized by multinational pharmaceutical companies.

As of the end of June, in addition to the above 18 transactions worth over $1 billion, there were another 34 overseas transactions with a total amount exceeding $64.7 billion (464.3 billion yuan).

It should be noted that the total transaction amount of innovative drugs in China in 2024 was only $52.3 billion.

In just half a year, the transaction volume of innovative drugs this year has already exceeded that of the whole of last year.

The crazy scramble of multinational pharmaceutical companies has contributed a great deal.

Buying Is Better Than Making

Why do multinational pharmaceutical companies spend money to buy innovative drugs?

In the pharmaceutical industry, it is called BD (Business Development Transaction).

BD means business development, referring to the commercial behavior of pharmaceutical companies to achieve resource integration, pipeline supplementation, market expansion, or risk - sharing through cooperation, licensing, mergers and acquisitions, technology transfer, etc.

The buying and selling of products or technologies is the most common form of BD.

This is determined by the particularity of the pharmaceutical industry.

As we all know, the R & D of innovative drugs is called a "nine - dead - one - alive adventure", with high difficulty, high risk, long cycle, and strong professionalism.

On average, it takes 10 - 15 years and an investment of $2 - 3 billion for an innovative drug to go from early R & D to final listing, and the success rate at the clinical stage is less than 10%.

R & D process of innovative drugs

For multinational pharmaceutical companies, for some specific new drugs, it is better to buy them than to develop them on their own.

Buy what others have but we don't!

In the pharmaceutical industry, technology iterates rapidly. Although large - scale pharmaceutical companies have many R & D pipelines, it is still difficult to cover all tracks.

Some niche tracks are often the breakthrough points for disruptive innovation and the key to determining the leading position in the industry.

If multinational pharmaceutical companies only rely on internal R & D, they may miss out on cutting - edge directions.

On the contrary, through BD transactions, they can fill their own R & D shortcomings and quickly enter new tracks.

Buy what others have better!

Even if multinational pharmaceutical companies have already made arrangements in a certain therapeutic area, when the candidate drugs of competitors show significant advantages in efficacy, safety, or administration methods, acquisition may be the best choice.

The core competitiveness of innovative drugs lies in the differentiation of clinical value. If there is a "generational gap" in key indicators between competing products, even if their own products have entered the late clinical stage, they may face the risk of being eliminated as soon as they are launched.

At this time, by acquiring better technologies or products, they can not only eliminate potential competitive threats but also upgrade their own pipelines with the advantages of the other party.

More importantly, acquisition can also shorten the time to market, seize the market window period, and reap economic benefits in advance.

In November 2011, Gilead Sciences announced that it would acquire Pharmasset for a total of $11 billion at a price of $137 per share, a premium of 97%.

At that time, Pharmasset only had 82 employees.

The reason why Gilead spent a huge amount of money on the acquisition was actually that it took a fancy to the oral hepatitis C virus treatment drug that the latter was developing, which had just entered the Phase III clinical stage.

Two years later, Pharmasset's Sovaldi product was launched, with revenues of $139 million in that year and annual sales of $10.283 billion in 2014.

Sovaldi achieved annual sales of $10.283 billion

In October 2014, another new drug, Harvoni, from Pharmasset was launched, with sales of $2.127 billion in that year and $13.864 billion the next year.

Through the acquisition, Gilead Sciences entered the hepatitis C treatment field and obtained huge returns.

Its market value soared from less than $30 billion before the acquisition to $160 billion in 2015.

The acquisition price of $11 billion was really a bargain.

A senior executive of a multinational pharmaceutical company revealed in a media interview that the proportion of external R & D pipelines of the company reached 60%.

In the past decade, the number of global pharmaceutical transactions increased from 358 in 2015 to 743 in 2024, and the total transaction amount jumped from $56.9 billion to $187.4 billion.

BD transactions are getting hotter and hotter.

Going Global by Hitching a Ride

Why do multinational pharmaceutical companies favor Chinese innovative drugs?

Mizuho Securities pointed out in a report:

Multinational pharmaceutical companies have discovered that there are many high - quality innovative drug assets in China, and the prices of these assets are cheaper than similar products they can find in the United States.

To put it simply, they are high - quality and cheap.

High - quality is the prerequisite and foundation.

As of August 2024, a total of 910 new drugs were launched in China.

In 2024 alone, the number of domestically developed Class 1 new drugs launched reached 40.

As of August 2024, a total of 910 new drugs were launched in China. Image source: Titanium Media

There are also a large number of R & D pipelines on the way to the market.

Data shows that as of August 2024, the number of new drug pipelines under research in China reached 5,380, accounting for more than one - third of the global total, covering multiple fields such as oncology, metabolism, autoimmunity, cardiovascular diseases, and antiviral.

At the 43rd J.P. Morgan Healthcare Conference in early 2025, the former director of the U.S. Food and Drug Administration (FDA) revealed:

In 2024, more than 50% of the molecules in the INDs (Investigational New Drug applications) approved by the FDA were from China.

Crudely speaking, this is a "large - scale R & D approach". The more drugs are under research, the more high - quality ones there will be, and the more targets there will be for multinational pharmaceutical companies to buy.

Cheapness is an added bonus.

Compared with developed markets in Europe and the United States, China has a large population base. The recruitment cost of patients with indications such as tumors and rare diseases is low, the salaries of innovative drug R & D personnel are low, the R & D efficiency is higher, and the cost is lower.

A relevant report released by McKinsey in 2023 pointed out that the R & D cost of Chinese innovative drugs is only 30% or even 20% of that of their U.S. counterparts.

Chinese innovative drugs, which are both high - quality and inexpensive, are naturally favored by multinational pharmaceutical companies.

Total amount and upfront payment amount of Chinese innovative drug BD transactions

Since the development of Chinese innovative drugs is booming, why do many enterprises still grant the rights of new drugs to multinational pharmaceutical companies?

Is it a loss to sell to multinational pharmaceutical companies?

Similar questions are not uncommon.

In fact, when Chinese pharmaceutical companies "sell", it is not a simple "one - shot deal". Instead, they grant the rights to multinational pharmaceutical companies to obtain upfront payments, milestone payments (development/sales), and sales commissions.

The advantage of doing this is that Chinese pharmaceutical companies can quickly recover funds, inject "fresh water" into subsequent R & D, lock in long - term benefits, and convert the market value of products into continuous cash flow.

More importantly, many Chinese pharmaceutical companies choose to retain domestic rights and only grant overseas rights. They can hitch a ride on the latter's large - scale global marketing and distribution network to promote the internationalization of their products.