The year 2025 saw the total value of China's innovative drug outbound BD (business development) transactions reach $135.7 billion, a year-on-year increase of 161%. This marked the first time China surpassed the United States, accounting for 49% of the global License-out total. From a starting scale of $3 billion for the full year of 2020 to a single-quarter transaction volume exceeding $60 billion in 2026, the global valuation of China's innovative drug assets is undergoing rapid reassessment.

However, behind the industry's euphoria of frequent multi-billion-dollar deals lie significant challenges masked within the announced figures. These include inflated reported values, persistently high historical return rates, a lack of pricing power due to homogeneous competition, and geopolitical policy uncertainties, all of which constitute hurdles under the wave of overseas expansion.

Explosive Growth Coupled with Profit Realization: Full Release of Overseas Industry Value

Over the past five years, China's innovative drug outbound BD has transformed from a peripheral supplement to a core pillar. In 2020, there were only 30 transactions totaling $3 billion, indicating the industry was still in its infancy. By 2025, the year saw 157 completed overseas licensing deals, with the total amount soaring to $135.7 billion, including $7 billion in upfront payments, representing a more than 40-fold growth in scale over five years.

The explosive trend continued into the first quarter of 2026, with a single-quarter transaction volume surpassing $60 billion, nearly half of the 2025 annual total. Among the global Top 10 License-out transactions, eight were Chinese, with three mega-deals exceeding $10 billion already materialized. Chinese assets have become a core source for pipeline supplementation by global pharmaceutical companies.

The most critical and symbolic change is that BD revenue has, for the first time at the industry level, replaced primary market financing as the core cash flow source for Biotech firms. Data shows that in the first three quarters of 2025, the total upfront payments from License-out deals amounted to $4.55 billion, exceeding the $3.19 billion raised in the primary market for innovative drugs during the same period. Similarly, in 2024, BD upfront payments of $3.16 billion also surpassed that year's innovative drug R&D financing for the first time.

Changes on the profitability front also corroborate the industrial value of going global. In 2025, four leading innovative drug companies—BeiGene, Innovent Biologics, RemeGen, and InnoCare Pharma—simultaneously turned profitable. This marked the first instance in the history of China's innovative drug development where leading companies collectively achieved profitability, with BD revenue combined with the global commercial ramp-up of core products serving as the common key driver.

Among them, BeiGene reported first-quarter 2026 revenue of 10.544 billion yuan, a 31% year-on-year increase, and provided clear profit guidance for the full year: revenue of 43.6-45.2 billion yuan and operating profit of 4.8-5.5 billion yuan. This made it the first Chinese innovative drug company to issue annual profit targets, signaling that leading firms have crossed the critical inflection point of commercial profitability.

However, beneath the prosperous aggregate data, disparities and risks within the industry are becoming apparent. In reality, not all companies can reap the benefits of overseas expansion. A significant gap exists between the paper wealth announced in transaction disclosures and the actual revenue reflected in financial reports. The historical specter of high return rates persists, and industry differentiation and consolidation are accelerating.

Challenges Emerge Behind the Prosperous Data: High Returns, Low Realization, and Homogenization

The eye-catching figures of tens or even hundreds of billions of dollars frequently announced in BD transactions are also often the most inflated part. A typical License-out deal's total value comprises four components: an upfront payment, development milestones, sales milestones, and sales royalties. Among these, only the upfront payment is a relatively certain income post-signing. The remaining payments are highly dependent on clinical progress, regulatory approvals, and commercial performance, with significant uncertainty regarding their full realization.

Looking at companies with disclosed financial reports, the pace of BD realization varies considerably. For the EGFR×HER3 ADC project between Baili Heng and Bristol-Myers Squibb, announced at a total value of $8.4 billion, only about $1.6 billion had been recognized cumulatively in financial reports by the end of 2025, indicating the realization is still in its early stages.

Among leading companies, for the $6.05 billion PD-1/VEGF bispecific antibody deal between 3SBio and Pfizer, the $1.25 billion upfront payment was received in full. 3SBio recognized approximately 2.89 billion yuan in revenue from this, driving its annual revenue up 251.8% year-on-year and net profit up 311.5%. Hansoh Pharma's BD income has entered a stage of normalized realization. In 2025, its total overseas licensing value reached $4.54 billion, with a cumulative total exceeding $9 billion over three years, and the ratio of financial report recognized amount to announced total value exceeded 50%.

Furthermore, return risk warrants attention. According to statistics, among the 62 License-out deals in 2020, at least 25 have been terminated, resulting in an overall return rate of approximately 40%. The return rate for deals signed in 2021-2022 has declined but remains around 20%.

2025 also witnessed several notable return cases. These include Pfizer terminating its MLSN ADC collaborations with Harbour BioMed and Yilian Biotech, citing only commercial strategic reasons; CSPC Pharmaceutical Group's Claudin18.2 ADC being returned by Elevation due to unmet expectations in US Phase I clinical data; and Kelun-Biotech's SKB315 being terminated by Merck & Co. due to a crowded field and approval of similar products. Analyzing return reasons, buyer strategic adjustments account for about 40%, unmet clinical data expectations for 30%, changes in competitive landscape for 20%, with the remainder being factors like compliance.

Correspondingly, secondary market expectations have undergone a comprehensive shift. The stock price catalyst effect of BD announcements is rapidly diminishing. 2025 saw multiple cases where major deal announcements were followed by stock price declines instead of gains. For instance, Innovent Biologics shares fell after announcing a $11.4 billion collaboration with Takeda; Jacobio Pharmaceuticals shares dropped over 13% after revealing a $2 billion deal with AstraZeneca; and Jiangsu Hengrui Medicine's $12 billion transaction with GSK only led to a brief spike before a rapid retreat.

From an internal industry perspective, the lack of pricing power resulting from homogeneous competition is another major challenge for China's innovative drug overseas expansion. Currently, the structural contradiction in China's innovative drug pipeline is stark: me-too follow-on drugs account for as high as 69.4%, while genuine first-in-class (FIC) drugs constitute only 21.2%.

Data shows that from 2016 to 2025, a total of 151 FIC innovative drugs were born globally, with China contributing only 8. The concentration of numerous companies on popular targets has led to highly homogeneous pipelines within the same therapeutic areas and development stages, directly resulting in weak bargaining power. This is also reflected in the pricing discount rate for Chinese innovative drug assets. Statistics indicate that in 2022, pricing for Chinese assets at the same stage was only 55% of that for comparable overseas assets. This figure saw a slight increase to 60% in 2025, but overall pricing remains below the global average.

Examining the therapeutic areas, the phenomenon of homogenization and intense competition is equally prominent. In 2025, large-value transactions were highly concentrated in three areas: ADC, bispecific antibodies, and GLP-1. The total value of representative ADC deals alone reached $22.6 billion, bispecific antibodies exceeded $16.4 billion, and GLP-1 and metabolic-related deals surpassed $14.5 billion. The short-term boom in hot sectors tends to attract a herd mentality, subsequently exacerbating overcapacity and price wars.

Final Remarks

Currently, the wave of China's innovative drug overseas expansion is at a critical stage of rapid scale expansion. The vast opportunities of the global market and the practical challenges of the industry coexist. The leap in transaction volume is merely the starting point for industrial advancement. Domestic pharmaceutical companies still need to focus deeply on pioneering innovation, strengthen the foundation of clinical value, and hone global commercialization capabilities. Building long-term core competitiveness amidst industry differentiation and consolidation is essential to steadily advance the global value of China's innovative drugs.