China biopharma deals rise with Summit, Merck

Somewhat-known biotech company stunned the biopharmaceutical industry last spring when it declared an “unprecedented” achievement: its experimental cancer drug looked simpler than Merck‘s Keytruda in a clinical trial. The corporate, Summit Therapeutics, licensed the drug from Chinese company Akeso Inc. 

In October, a gaggle of life science investors announced they were putting $400 million into creating an organization called Kailera Therapeutics that may develop experimental obesity drugs it bought from Chinese company Jiangsu Hengrui Pharmaceuticals.

Then in a matter of days in December, Merck disclosed it might license a possible competitor to Summit’s drug and a separate experimental obesity pill – each from Chinese firms. 

Suddenly, U.S. firms are racing to search out medicines in China. Almost 30% of Big Pharma deals with at the least $50 million up front involved Chinese firms last 12 months, up from 20% the 12 months before and none only five years before, based on data from DealForma. 

“That is stunning to me,” said Chen Yu, founder and managing partner at crossover fund TCGX. “That is stunning.” 

Yu said 20 years ago, few biopharma firms were taken with China because they considered it a small market. His former firm Vivo Capital pioneered the concept of bringing U.S. medicines to the Chinese market.

Today, the movement is moving into the wrong way. He never imagined the proliferation that is happening now. 

Investors and industry insiders offer a couple of reasons for the trend: Chinese firms are creating higher molecules than ever before – and more of them. They will start testing those compounds in humans sooner and at a cheaper price than within the U.S. Buyers have discovered a business model to essentially import the drugs through licensing deals. Enterprise funding in China has also dried up, forcing biotech firms to do deals. 

One thing all of those people within the industry agree on? This trend is not going away.

What’s less clear is what the event means for the U.S. biotech sector. 

Some people contend it’s terrible for American startups if large pharmaceutical firms can discover a promising drug in China for a fraction of the worth. Others argue competition makes everyone higher, and American firms will ultimately reap the rewards of bringing medicines to the market. Either way, the influx could reshape the landscape of the U.S. biopharma industry. 

“It’s sort of a watershed moment where the pharma industry is like, ‘We do not really want to purchase U.S. biotechs necessarily,'” said Tim Opler, a managing director in Stifel’s Global Healthcare Group. “We are going to if it is sensible, but we should purchase perfectly good biotech assets through licensing deals with Chinese firms.” 

Bain Capital Life Sciences began making China a priority around 2018, said Adam Koppel, a partner on the fund. The private equity firm saw the Chinese government and the life sciences industry making a deliberate effort to evolve from its historical give attention to copycat and fast-follower drugs that mimicked leading drugs to creating latest chemical matter that China could export to the remainder of the world. 

Since then, Bain has struck six biopharma deals in China. It bought an experimental asthma drug from Hengrui in 2023 and co-launched an organization called Aiolos with a $245 million Series A funding round. GSK acquired the corporate three months later for as much as $1.4 billion. 

Koppel sees more large pharmaceutical firms growing comfortable with drugs coming out of China as they work with more of them and see their outcomes, he said. Buyers had held back partially because they fearful data from China wasn’t representative of a world population and U.S. regulators would not accept it. 

“As they’re seeing assets then come out, they’re seeing things which might be having success, and eventually, as things get approved and used available on the market, I feel that that concern will grow to be lessened,” he said. 

That narrative was on display when Summit Therapeutics last 12 months said its experimental cancer drug beat Merck’s mega-blockbuster Keytruda in a head-to-head study, a feat no other drug has completed. Summit’s trial was conducted exclusively in China, making people query if the outcomes would delay elsewhere. 

When Summit’s leaders were looking for a drug they may develop, they made it a degree to look in China because co-CEO Bob Duggan had read more latest medicines were coming from the country. However it was late 2022, and the FDA had just rejected a couple of applications for drugs that were studied only in China, including one from Eli Lilly.

When Summit announced it was licensing the cancer drug ivonescimab from Akeso, people questioned how Summit could do the deal knowing that the FDA would never accept it, said Summit’s co-CEO and President Maky Zanganeh.

“And suddenly after us, loads of people opened their eyes,” she said.

Ivonescimab had already undergone early studies and was in late-stage trials in China when Summit struck the licensing deal. Summit is now running three global Phase 3 trials to satisfy the FDA’s desire for drugs to be studied in diverse groups of individuals. 

Summit’s strategy could grow to be more common. Investors and other industry insiders said considered one of the draws about doing deals with Chinese biotech firms is they will find molecules which have already undergone early studies at a cheaper price than within the U.S. So the U.S. businesses know what they’re getting, and so they can probably get it for less.  

Gilead spends loads of time in China on the lookout for assets prefer it does within the U.S. and Europe, the corporate’s Chief Financial Officer Andrew Dickinson told CNBC. Gilead has seen a “substantial shift” in the standard and quantity of assets being developed in China and being offered to U.S. biopharma firms.

“The transformation over the past five years is real and impressive,” Dickinson said. 

It helps that more Chinese firms have to do deals now. The quantity of enterprise funds raised by the Chinese biotech industry cratered to simply $1 billion last 12 months from a peak of $6.3 billion in 2021, based on data provided by TCGX’s Yu. 

“Why would we do any early-stage development within the U.S. anymore?” Yu said. “Why would not we just get clinical proof of concept in China after which bring it over to the U.S. for the expensive clinical development once we actually know the drug works? And I feel that might be a really revolutionary latest way for our industry to grow to be more efficient.”

That is a possibility – or risk – for the U.S. biopharma industry, depending on who you ask. Some, like Yu, see it as a strategy to bring down the worth of pharmaceuticals. Others worry it could hobble U.S. firms if Merck and other large pharmaceutical firms pass on acquiring American startups in favor of licensing assets from China.

The day in December that Merck announced it was licensing an experimental obesity pill from China’s Hansoh for as much as $2 billion, shares of U.S. company Viking Therapeutics plunged 18%. Viking is seen as an acquisition goal because it’s developing drugs within the red-hot obesity space, and suddenly it looked like one possible suitor had chosen to spend its money elsewhere. 

People see parallels to what happened in the bogus intelligence space when China’s DeepSeek declared it had created a model that was just pretty much as good as U.S. models for much lower than American firms are spending. 

President Donald Trump or U.S. policymakers could see the same trend in biotech as a threat and intervene to stop these deals, what Yu calls the “stroke of a pen” risk. Lawmakers last 12 months floated the Biosecure Act that may have restricted U.S. firms from working with Chinese contract manufacturers. 

Washington has already embraced protectionist policies in other competitive areas like artificial intelligence and semiconductors. It’s possible that would extend to life sciences. 

“The deeper message from DeepSeek is that we now have competition within the high sciences generally, and furthermore that China is making major investments to develop scientific assets,” said Stifel’s Opler.

Put one other way: the race in biopharma is on.