Summary of Key Points
The export of Chinese innovative drugs has presented a stark contrast: on one hand, overseas licensing transactions are booming (global buyers are competing for early-stage Chinese drug pipelines, with transaction amounts exceeding 100 billion yuan in Q2 2026); on the other hand, there is a frequent occurrence of cooperation terminations (returns). Some returned projects, such as NovoChemics' obinutinib, have successfully re-entered the market through further development, but most projects do not get a second chance. The industry is gradually accepting returns as the norm, focusing more on the clinical value and market potential of the assets themselves.
Detailed Analysis
The Contrast Between Booming Transactions and Frequent Returns
- The Booming Side: The world is eager to acquire Chinese innovative drugs—French biotech founders travel to Beijing by high-speed train to Lianyungang for due diligence, and local intermediaries help connect multinational companies with these assets. Online signings have become the norm, with popular molecules like ADCs and GLP-1 being in high demand, breaking transaction records repeatedly.
- The Cold Side: Many major collaborations ended in the first half of the year—Genmab terminated its acquisition of ProfoundBio's bispecific antibody project due to poor risk-benefit ratios; Merck abandoned its global licensing agreement for Hengrui's PARP1 inhibitor (a €1.4 billion deal that fell through); Yiming Angko withdrew its overseas rights to two pipelines for only $35 million. The details behind these returns are often obscured by confidentiality agreements, but they are usually related to clinical data or changes in buyers' strategies.
The Case of Obinutinib: A Success Story
NovoChemics' obinutinib is a notable example:
- Reason for Return: In 2023, it was returned under a "facilitated termination" clause by BeiGene (due to strategic changes and the FDA halting Phase II clinical trials due to liver damage), causing the company's stock price to plummet (18% on the STAR Market and 27% on the Hong Kong Stock Exchange).
- Self-Saving Measures: The company internally assessed the asset's value (positive Phase II results and reversible liver damage) and re-engaged with the FDA, obtaining Phase III approval in September 2024 (focusing on a more challenging indication for progressive multiple sclerosis, requiring $500 million and 1,500 participants).
- Second Licensing: NovoChemics partnered with Zenas, a company founded just five years earlier, for a total of $2 billion. Although the upfront payment was lower ($100 million vs. $125 million), Zenas was able to accelerate clinical trials quickly—speed is crucial for innovative drugs.
The Challenges of Re-Licensing
Re-entering the market is much more difficult than the first time:
- Losing the Capital Appeal: Initial licensing deals were based on potential, but returns require new data (e.g., additional efficacy evidence or alternative indications) to convince buyers.
- Limited Second Chances: 70% of projects fail clinically, and 10% are terminated due to policy changes or competition; only a few promising projects can be further developed.
- Return Rates vs. Actual Terminations: In 2020, out of 62 transactions, 25 were terminated (40%), but these may have been temporary suspensions or natural endings; only when the original developer wants to retrieve the assets for continued development does it count as a "true return."
Multinational Companies' Bulk Purchases
Multinational companies (like Merck) prefer to acquire multiple early-stage projects at once:
- Approach: They buy 3-5 projects at once and then evaluate them internally, keeping the best ones and returning the rest.
- Implications: Returns do not necessarily indicate poor quality; it's part of portfolio management. The original developers do not have to pay the upfront fee again (compensating for opportunity costs).
- Strategies: They may demand higher upfront fees or require buyers to provide clinical data for free to facilitate further development.
Acceptance of Returns as the Norm
The industry's attitude towards returns has changed:
- Financial Markets Are Less Reactive: In the past, returns were seen as a flaw in the assets, but now they are considered part of portfolio management (stock prices fluctuate but do not plummet).
- Future Trends: Projects will be traded like second-hand assets (intermediaries reselling them at lower prices), but transactions remain cautious. The total number of returns may increase, but the proportion of best-in-class projects might decrease.
- Core Logic: With returns becoming the norm, the focus shifts from selling stories to the actual value of the drugs—clinical evidence, data, and market potential.
Conclusion
The export of innovative drugs is no longer a one-way process; returns are common. However, as long as the assets have real value, there are still opportunities for further development. For companies, the key is to produce strong clinical data and manage risks effectively. For investors, it's important to distinguish between genuine returns (indicating poor assets) and strategic changes that may lead to temporary suspensions, focusing on the potential of the drugs themselves.