This is the first of two articles focused on 2023 life sciences deals in China. The second article, which is coming soon, looks at trends in M&A.
In 2023, there were 240 reported life sciences licensing deals in China, an increase of almost 50% compared to 2021.
That includes 70 out-license deals involving Chinese companies licensing drugs and technologies to foreign companies,1 with a disclosed aggregate deal value surpassing US$35 billion.2
It also includes 170 in-license deals involving Chinese companies licensing drugs and technologies from other Chinese companies or from foreign companies.3 This represents a 32% increase compared to 2021 — and a 58% increase compared to 2022 (more than making up for the 2022 dip in deals).
Most of the in-license deals in 2023 were between Chinese companies. In-license deals involving foreign companies included companies from the United States, the United Kingdom, Japan, Switzerland, South Korea, and Sweden.
In this report, we look at the trends reflected in the top 10 China out-license deals and top 10 China in-license deals by total deal value.
1. Average deal value among the top 10 out-license deals exceeded $2.3 billion, and average deal value among the top 10 in-license deals exceeded $488 million.
Upfront payments were substantial in out-license deals, and large pharmaceutical multinational companies (MNCs) were frequent buyers. This reflects the increasing confidence of MNCs in the quality of preclinical and clinical drug candidates being developed by Chinese companies and their data. Notable repeat players in the top 10 out-license deals include GSK and AstraZeneca. Top deals included either worldwide rights or worldwide outside of China/Greater China rights.
Goodwin represented several companies involved in out-license and in-license deals ranked in the top 10 based on total deal value, including C4 Therapeutics, Inc., KBP Biosciences, and Duality Biologics.
2. The top 10 out-license deals were primarily for preclinical or early-clinical-stage assets. The top 10 in-license deals were for assets more evenly spread out across the developmental stages.
Most of the top 10 out-license deals were for assets in the earlier stages of clinical development (preclinical, phase I, or phase I/II). Strong preliminary data and competition for top assets, particularly in hot areas such as antibody drug conjugates (ADCs), were key drivers. The top 10 in-license deals, in contrast, were for assets that were more evenly distributed across the developmental stages, although they were weighted toward earlier stages as well.
3. ADCs emerged as the most popular drug modality for China out-license deals. Small molecules were at the forefront for in-license deals, followed by recombinant and antibody drugs.
In the domain of the top 10 out-license deals, ADCs stood out as the most favored class of drug assets, which reflects the robust ADC pipelines of Chinese companies and the growing share of global ADC trials in China. ADCs have become an area of strong interest for many leading MNCs either looking to strengthen their positions or establish footholds in the space. These trends have converged, with many significant ADC deals between Chinese ADC companies and leading MNCs struck in 2023.
Designed for cancer treatment, ADCs are big molecules composed of monoclonal antibodies (mAbs) covalently linked to cytotoxic payloads via a chemical linker. The antibody moiety, typically based on immunoglobulin G (IgG), binds itself to the target antigen on the cancer cell. Once the ADC is internalized, the cytotoxic payload is liberated either upon encountering the low-pH conditions of the lysosome or through the degradation of the lysosomal enzymes. The released payload acts on targeted cancer cells with the specific antigen and eliminates them. The targeting ability of ADCs minimizes the impact on nontargeted cells lacking the specific antigen of interest.
In the realm of the top 10 in-license deals, small molecules took the lead in popularity, with antibodies, peptides, proteins, and cell therapies following closely behind. Additionally, oncology prevailed across therapeutic spheres, with tumor treatment the predominant indication.
4. Publicly traded companies play a pivotal role in the licensing dynamics in China.
Among the top 10 out-license deals, nearly all licensees were pharmaceutical companies publicly traded on international stock exchanges, while the distribution among licensors is balanced.
Among the top 10 China in-license deals, publicly traded pharmaceutical companies dominated the landscape of licensors licensing their assets to Chinese companies, while the distribution among licensees is balanced.
Looking Ahead
Numerous factors are contributing to the uptick in China licensing activity. Over the past three years, there has been a rapid increase in China R&D spending, which has been growing faster than the worldwide average. Out-license transactions are a testament to the results of this period of heightened R&D investment in China. They have also been a key mechanism utilized by Chinese companies to gain access to markets outside of China and to raise capital in a difficult capital-raising environment. Additionally, Chinese companies are developing a growing number of promising drug candidates, generating strong interest from foreign companies that are feeling increasingly confident in licensing and collaborating with Chinese companies. These trends are reflected in the rising popularity of out-license deals for ADCs developed by Chinese companies. The manufacturing process for ADCs is operationally complex, and China has played a crucial role in driving innovation in this area.
What can we expect for 2024? That remains to be seen. Drawing insights from the data at hand and observations, we can note a few observations. We anticipate the out-license trends to continue in 2024. Out-license deals are expected to increase. On the other hand, we expect the number of in-license deals to remain flat or decrease due to reduced willingness to fund early-stage clinical development and bear early-stage risk.
[1] 2023年中国创新药license out交易TOP15, Pharmcube, December 17, 2023, [https://perma.cc/49P9-4ARG].
[2] 2021 年中国创新药license in交易TOP10, Pharmcube, December 15, 2021, [https://perma.cc/E9B5-NDNJ]; 2021 年中国创新药license out交易TOP10, Pharmcube, December 28, 2021, [https://perma.cc/29MH-KVWH]; 2022年中国创新药license in交易TOP10, Pharmcube, December 14, 2022, [https://perma.cc/ME2X-9X4A]; 2022年中国创新药license out交易TOP10, Pharmcube, December 16, 2022, [https://perma.cc/WW4E-HMW8]; See also Pharmcube, supra note 1 and 2.
[3] 2023年中国创新药license in交易TOP15, Pharmcube, December 22, 2023, [https://perma.cc/A6A7-VYUL].
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