By Sriparna Roy and Sneha S K
(Reuters) -U.S. drugmakers are licensing molecules from China for potential new medicines at an accelerating pace, according to new data, betting they can turn upfront payments of as little as $80 million into multibillion-dollar treatments.
Through June, U.S. drugmakers have signed 14 deals potentially worth $18.3 billion to license drugs from China-based companies. That compares with just two such deals in the year-earlier period, according to data from GlobalData provided exclusively to Reuters.
That increased pace is expected to continue as U.S. drugmakers look to rebuild pipelines of future products to replace $200 billion worth of medicines that will lose patent protection by the end of the decade, analysts, investors, a banker and a drug company executive told Reuters.
“They are finding very high-quality assets coming out of China and at prices that are much more affordable relative to perhaps the equivalent type of product that they might find in the United States,” said Mizuho analyst Graig Suvannavejh.
The total cost of licensing agreements, including low upfront payments and subsequent larger payouts, averaged $84.8 billion in the U.S., compared with $31.3 billion in China over the past five years, according to GlobalData.
A licensing agreement grants a company the rights to develop, manufacture, and commercialize another company’s pharmaceutical products or technologies in exchange for future target-based, or “milestone”, payments while mitigating development risks.
China’s share of global drug development is now nearly 30%, while the U.S. share of the world’s research and development has slipped 1% to about 48%, according to pharmaceutical data provider Citeline’s report in March.
Chinese companies have licensed experimental drugs to U.S. drugmakers that could be used for obesity, heart disease and cancer, reflecting abundant Chinese government investment in pharmaceutical and biotech research and development.
While small molecules, like oral drugs, have been the most commonly licensed, there has been a notable shift toward novel treatments such as targeted cancer therapies and first-in-class medicines, Jefferies analysts said in a note in May.
“Chinese biotechs are moving up the value chain by the day. They are… challenging their Western peers,” said Macquarie Capital analyst Tony Ren.
The growth is happening even as the U.S. and China have wrangled over tariffs and U.S. President Donald Trump pushes a made in America agenda.
That has cut into traditional mergers and acquisitions, which are down 20%, with only 50 such transactions so far this year, according to data from DealForma.com database.
