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New Biotechnological Reserves

From the series Industry and pharmaceuticals

The trade dispute between the United States and the European Union also affects the pharmaceutical sector, with a likely direct impact on the cost of treatment on both sides of the Atlantic. With the Joint Declaration of August 21st, the White House and the European Commission announced that pharmaceutical products will also be subject to a maximum tariff of 15%. Generic drugs, including their chemical ingredients and precursors, are excluded and should not be subject to duties. Generic medicines, which are no longer protected by patents and are much cheaper than branded ones, make up the majority of medical prescriptions in the United States. A 2023 Food and Drug Administration (FDA) report estimated their share at 91%. Tariffs will therefore only affect branded products, which are more innovative, expensive, and still enjoy patent protection.

The production of a drug is usually spread across a number of different companies and manufacturing sites. Before reaching the pharmacy shelf in its packaging, a medicine will have passed through several countries. The US non-profit organisation Pharmacopeia, which tracks the supply chain of prescription drugs, has calculated that Europe is the production location of the active ingredients of 43% of branded medicines prescribed in the United States. Thirty-five percent of generic drugs, meanwhile, come from India [The New York Times, August 23rd]. The administration of tariffs turns out to be extremely complicated.

War of capital

The tariff war has, however, overshadowed another economic aspect of global imperialist competition – capital export, which is a fundamental hallmark of imperialism. In the pharmaceutical industry, there is a substantial flow of capital from major Western companies to Asia and particularly to China, which inevitably contributes to the Dragon’s growth as a scientific superpower. In the United States, China's technological and scientific rise has long been denounced as a threat to American supremacy. Recently, Mark McClellan, a medical economist, former FDA commissioner, and current director of the Duke-Margolis Institute for Health Policy at Duke University, stated in the Financial Times that China is running ahead of the US in biotechnology innovation, raising concerns for American national security. There are unquestionably some risks associated from a military standpoint and a biosecurity standpoint with the most advanced cellular and gene technologies [Big Pharma Is Increasingly Reliant on Chinese Biotech Advances, Financial Times, July 23rd]. An argument has been made for using the Section 232 regulation for the imposition of tariffs, which gives the president the power to bypass Congress. Section 232 has not been applied against Europe, but the Chinese issue is another matter.

However, the wave of multi-million-dollar agreements between Western biopharmaceutical companies and Chinese firms does not involve the import of pharmaceutical products but relates to investments in research and development (R&D) and the purchase of commercial exploitation rights for highly promising drugs that are still in the early stages of testing. The Western companies are buying innovation.

Economic and scientific ties between Chinese and US companies have for years been subjected to attempts at restriction by the United States. The New York Times recently reported that a draft executive order is under discussion in the Trump administration; the measure could impose severe restrictions on the purchase of licences for experimental treatments invented in China. There appears to be strong pressure to implement a decisive crackdown against what they view as an existential threat by China to US biotechnology [US Drugmakers Warn White House of Chaos as Trump Weighs Curb on China, NYT, September 12th]. Investing in Chinese research penalises American start-ups. Big Pharma counters that R&D costs in China are much lower than in the United States (and Europe).

The hunt for replacements

The analytics company IQVIA has estimated that the world's fifteen largest pharmaceutical groups have accumulated an $800 billion reserve for merger and acquisition (M&A) activity. The expiry of patent protection on many successful, very expensive, and high-revenue drugs is approaching, paving the way for cheaper generic and biosimilar medicines. According to EvaluatePharma, the monopoly position granted to drugs worth a total of $180 billion in annual sales, i.e., 12% of the global market, will end in 2027 and 2028 [Financial Times, July 9th]. For example, the patent for Merck’s (US) Keytruda, a monoclonal antibody used for the immunotherapy of various cancers, will expire in 2028. In 2024 it generated $29.5 billion in revenue and is one of the best-selling drugs in the world.

Healthcare industries are faced with the need to replace their blockbusters with other innovative drugs, most of which originate in small emerging biopharmaceutical companies, with less than $200 million spent on R&D and less than $500 million in annual revenue [IQVIA]. In 2023, 57% of new drugs approved in the United States came from small companies [The Economist, May 4th, 2024]. In the field of cell and gene therapies (CGT), most innovations originate in academic institutions or in small to medium-sized enterprises that conduct the majority of early-stage trials. In the last five years, 79% of launched CGTs originated in emerging biopharmaceutical companies. Almost half of these treatments were later acquired by larger companies, which have the industrial capacity and financial strength to support the costs of the subsequent phases of testing and development through to the complex approval processes and commercialisation [Strengthening Pathways for Cell and Gene Therapies, IQVIA, March 2024].

The hunt for miracle drug candidates is global and has, for several years, focused on reserves of innovation in China.

Mines of molecules

In 1986, China launched the 863 Program, supporting fifteen scientific and technological sectors – including biotechnology – to stimulate the development of advanced technologies, particularly in genetic engineering, vaccination, and gene therapy [How Innovative Is China in Biotechnology?, ITIF, July 30th, 2024]. Meanwhile, four important innovation clusters have emerged, grouping together over 8,500 biotechnology and biopharmaceutical companies: the Bohai Rim Cluster, located in Beijing, Tianjin, and Jinan; the Yangtze River Cluster, in Shanghai, Suzhou, and Hangzhou; the Mid-West Cluster, in Wuhan and Chengdu; and the South China Cluster, in Shenzhen, Guangzhou and Xiamen [BioCentury China Summit – McKinsey Biopharma Report, November 2023].

In China, the fruits of more than a decade of investment in health biotechnology are ripening. However, analysis believe that companies suffer from a lack of funding [Financial Times, May 27th, 2024]. For Western multinationals, endowed with substantial liquidity, there is an opportunity to purchase potentially successful drugs still in the early stages of development at advantageous prices. The acquiring companies enter into R&D collaboration agreements, finance further clinical trials, and secure the licence for exclusive future commercial exploitation in markets outside China.

Chinese innovations in the field of next-generation cancer therapy have attracted particular interest, such as advanced CAR-T (Chimeric Antigen Receptor T-cell) immunotherapy and the promising new class of ADCs (Antibody-Drug Conjugates). According to Evaluate, over 50% of the clinical pipeline for ADCs and CAR-Ts is of Chinese origin or involves collaborations with China [EvaluatePharma, 2025 Preview].

The rush to the East

A study published in Nature analysed transactions and R&D partnerships in the biopharmaceutical field between AbbVie, AstraZeneca, Bristol-Myers Squibb, Eli Lilly, GSK, Johnson & Johnson, Merck, Novartis, Roche and Sanofi, and Asian companies, particularly Chinese ones. In the period 2020-25, Big Pharma companies collectively committed over $150 billion, of which more than $17 billion were upfront payments, with additional payments contingent on achieving certain objectives. Western companies are enriching their portfolios with drug candidates from China, while simultaneously contributing to the growth of the Chinese biotech sector.

The value of licences acquired for products of Chinese origin has increased tenfold since 2020, when it amounted to approximately $3 billion. In 2024, about 55% of licensing agreements involved oncology [China’s Increasing Flow of Innovative Assets Into Big Pharma R&D Pipelines, Nature, September 1st]. However, other therapeutic areas are also growing, such as those for autoimmune and inflammatory diseases, which constituted 25% of licensing agreements in 2024.

In terms of numbers of agreements and advance payments, Europe is slightly ahead of the USA. Nature analysed 48 deals signed in 2024 between Western and Chinese companies, broken down by the buyer’s geographic region. These included licences, mergers and acquisitions, and new ventures based on products developed in China. Of the licensee companies, 48% were European and 46% were from the United States [Analysis of China-to-West Pharmaceutical Licensing Deals in 2024, April 2025]. The rush to the East does not seem to be slowing down. According to IQVIA, 61 licensing deals were announced with Chinese biotech companies in the first six months of 2025, with a total potential value of $48.5 billion, exceeding the $44.8 billion for the whole of 2024. This year, US Big Pharma firms are leading in acquiring Chinese innovations, with 37 deals signed, 61% of all those announced.

The threat of the Chinese scientific superpower is not, for now, curtailing the acquisition campaign of the pharmaceutical multinationals, not even the US firms.

Lotta Comunista, September 2025

THE HUNT FOR CHINESE INNOVATION

buyer licensor drugs in development potential value
AstraZeneca (UK) CSPC multiple pathologies 5.3
CSPC dyslipidaemias 2.0
Ecogene obesity, diabetes 2.0
Gracell Biotechnologies* anti-tumour (CAR-T) 1.2
GSK (UK) Jiangsu Hengrui Pharma immunology, respiratory, anti-tumour 12.0
Hanson Pharmaceuticals anti-tumour (ADC) 3.0
BMS (US) SystImmune anti-tumour (ADC) 8.4
Pfizer (US) 3Sbio antitumour (bispecific antibodies) 6.0
Merck (US) LaNova Medicines antitumour (bispecific antibodies) 3.3
Jiangsu Hengrui Pharma dyslipidaemia 2.0
Novartis (Switzerland) Argo Biopharma dyslipidaemia (siRNA) 5.2
BioNTech (Germany) Biotheus* antitumour (bispecific antibodies) 1.0
Duality Biologics antitumour (ADC) 1.5
Regeneron (US) Hansoh Pharma obesity, diabetes 2.0
Novo Nordisk (Denmark) United Biotechnology obesity, diabetes 1.8
Roche (Switzerland) MediLink Therapeutics antitumour (ADC) 1.0
Innovent Biologics antitumour (ADC) 1.0

Selection of agreements, worth at least $1 billion, concluded since 2023 between major Western pharmaceutical companies and Chinese biotech firms. The purchasing company invests in the research and development of one or more highly promising drugs and secures future commercialisation rights outside China. The potential value of the agreement includes the upfront payment by the acquiring company and subsequent payments conditional on achieving certain objectives in the drug’s research, testing and development. Note: *) AstraZeneca and BioNTech have acquired the entire company.

Sources: company/corporate communication, financial press.

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