Major US pharmaceutical companies are increasingly licensing drugs from Chinese biotechnology firms to replenish their pipelines and combat impending patent expirations for key products. This shift is driven by the high cost and time involved in traditional drug development, which can reach $2.2 billion and take up to eight years from initial human trials to approval. By licensing compounds that have already undergone early testing in China, Western companies gain access to promising treatments, clinical data, and manufacturing plans, significantly accelerating their development timelines.
Chinese companies benefit from these arrangements by receiving upfront payments and additional funds based on clinical, regulatory, and commercial milestones. For example, GSK's 2025 deal with HutchMed included $500 million upfront and potentially up to $12.5 billion in future payments. Similarly, Summit Therapeutics paid $500 million upfront in 2022 for rights to Akeso's ivonescimab, a bispecific antibody that has shown superior performance compared to existing treatments like Keytruda in some trials.
This trend is particularly crucial as blockbuster drugs, such as Merck's Keytruda, which generated $31.7 billion in sales in one year and faces patent expiration in December 2028, approach the end of their patent protection. While a large number of licensing deals with Chinese labs have been announced, totaling $135.7 billion in potential value, only about $7 billion has actually been paid out upfront. The average upfront payment has risen from $52 million three years ago to $172 million in 2026, reflecting the increasing attractiveness of Chinese compounds and the urgency for Western companies to secure new drugs. The cost of some treatments can vary significantly between the US and China, with a drug potentially costing up to $475,000 in the US but as little as $140,000 in China due to different pricing mechanisms.
