U.S. pharmaceutical companies are increasingly turning to China to source next-generation medicines. In the first half of 2025 alone, they signed 14 licensing agreements with Chinese drugmakers—deals potentially worth $18.3 billion—compared to just two such deals during the same period last year, according to GlobalData.
The partnerships reflect a strategic pivot as American drugmakers seek to replenish their pipelines ahead of an impending patent cliff. Nearly $200 billion worth of U.S. drugs are expected to lose patent protection by 2030.
Betting Big on Affordable Innovation
Licensing deals are proving an efficient way to access high-quality drug candidates at relatively low cost. “They are finding very high-quality assets coming out of China and at prices much more affordable than comparable products in the U.S.,” said Mizuho analyst Graig Suvannavejh.
The average total value of licensing agreements over the past five years highlights the disparity: $84.8 billion in the U.S. versus $31.3 billion in China. These deals typically involve modest upfront payments—sometimes as low as $80 million—followed by larger milestone-based payouts tied to development and commercial goals.
China Emerges as a Biotech Powerhouse
As China’s investment in pharmaceutical R&D surges, its influence in global drug development has also expanded. Citeline data reveals that China now accounts for nearly 30% of global drug development activity, while the U.S. share has dipped slightly to around 48%.
Chinese biotechs are licensing promising experimental drugs to U.S. firms, targeting high-demand areas such as obesity, heart disease, and cancer. According to Jefferies analysts, there’s also a marked shift from traditional small-molecule drugs toward more advanced therapies, including targeted oncology treatments and first-in-class medicines.
“Chinese biotechs are moving up the value chain by the day,” said Tony Ren, analyst at Macquarie Capital. “They are challenging their Western peers.”
Licensing Surges as M&A Slows
The boom in licensing deals comes at a time when traditional mergers and acquisitions are slowing. M&A activity has dropped 20% year-over-year, with only 50 transactions recorded so far, according to DealForma.com.
Licensing, in contrast, is gaining momentum. Brian Gleason, Head of Biotech Investment Banking at Raymond James, noted that about one-third of all licensed assets by large pharmaceutical companies in 2024 came from China. He expects this figure to rise to 40–50% soon. “I think it’s only accelerating,” he said.
Geopolitics and Policy Add a Complicating Layer
Despite rising tensions between the U.S. and China—including ongoing trade disputes and a Made in America push under President Trump—licensing activity continues to thrive. As reported by reuters.com, however, uncertainty looms as the U.S. administration investigates whether to impose tariffs on the pharmaceutical sector, citing national security concerns.
