Tariffs Won't Stop Drug-Candidate Licensing From China Biotechs

By Louis Garguilo, Chief Editor, Outsourced Pharma

Perhaps there are some pockets of commerce between China and the U.S./Europe that tariffs cannot touch.

One sector potentially isolated from tariffs specifically is in biopharma R&D. At the least, this is an area way upstream of the current tariff focus on manufacturing.

That's important to note, because according to Global Data, the total deal value of U.S. licensing of innovator-drug candidates from Chinese biopharma companies has surged 280% since 2020.

In 2024 alone, Western pharma companies in-licensed 28% of their innovator drugs from Chinese biopharma companies.

Just between 2023 and 2024, the total deal value of these licensing agreements involving Chinese biopharma licensors has surged 66%, from $16.6 billion in 2023 to $41.5 billion, according to GlobalData’s Pharma Intelligence Center Deals Database.

As we’ve come to expect, greasing that drug discovery wheel has been an increase in Chinese government investments in biopharma innovation.

And from what I’ve heard firsthand as well as has been reported, Phase 1 and 2 clinical trials in China have become faster, more affordable – but perhaps most importantly – much improved from an execution and quality-data standpoint.

This progress has Western biopharma increasingly encouraged to snap up Chinese biotechs’ efforts, and they are “importing” drug candidates to our markets with more alacrity.

Timing, as in all things, is important.

Biopharma companies globally are turning to China licensing agreements as an increased component of pipeline-building strategies at a time when U.S. biopharma funding and activity by many accounts has been in a decline for a number of years.

Both these components have some on edge. While I started by stipulating tariffs won’t budge this trend off is trajectory, this new paradigm has not gone unnoticed by the U.S. government. We’ll return to this in a moment.

What’s Coming In From China?

According to GlobalData’s Pharma Intelligence Center Deals Database, the top three therapy areas involving innovator drug licensing in 2024 (totalling $22.2 billion) were oncology, immunology and metabolic disorders in 2024.

Examples include December 2024, when Merck expanded its oncology pipeline by licensing LM-299, a Phase II PD-1/VEGF bispecific antibody, from LaNova Medicines. That deal was worth up to $3.28 billion.

In January 2024, Novartis signed a $4.35 billion deal with Shanghai Argo Biopharma, securing an exclusive licence outside Greater China for a Phase I/IIa cardiovascular asset and a global licence for another Phase I asset, with options for two more. The agreement reflects large pharma leveraging small interfering RNA (siRNA) and RNA technology for targeted therapeutics, says GlobalData.

We can add AstraZeneca, GSK, and Johnson & Johnson, as The Wall Street Journal recently pointed out.

From Global Data: “Biopharmaceutical companies increasingly focus on licensing monoclonal antibodies and antibody-drug conjugates (ADCs), expanding their portfolios with advanced targeted therapies. Monoclonal antibody licensing from China rose 43% to $11.3 billion, while ADC licensing grew 10% to $10 billion in 2024.”

In a few weeks, I'll present readers a prime biotech example for consideration. It’s a detailed narrative of a U.S.-based start-up that was investor founded specifically to advance GLP-1 programs purchased in China.

A key point is that biotech will predominantly task U.S.-based CDMOs to produce clinical material for later stage trials, and ultimately commercial product.

In other words, U.S.-based CDMOs will be producing more drug substance and product in their facilities – from programs that originate in China.

More potential drugs for patients. More manufacturing in the U.S.

Tariffs be damned?

U.S. Government Is Worried

But here comes the calvary. In the form of the U.S. Congress.

GlobalData points out that U.S. biopharma companies may face restrictions acquiring Chinese drug candidates if drug licensing is part of the White House’s America First Investment Policy memorandum.

That  document (déjà vu all over; see BIOSECURE Act) accuses China of unfair trade practices, and nominally looks to affect the slowing down if not cutting off of the activity we speak of above.

To be clear, as stated in the memorandum, it is “intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.”

Not yet, anyways

Nonetheless, sensing danger, in 2022 Congress created The National Security Commission on Emerging Biotechnology to study the competitive global environment for U.S. biotech.

In its recent report, the commission advises that Congress should invest at least $15 billion to support biotech research over the next five years and take other steps to bolster manufacturing in the U.S., while barring companies from working with Chinese biotech suppliers.

Let’s do some dissecting here in light of our above discussion.

U.S.-based pharma and biotech are acquiring promising pipeline assets to further develop for the U.S. and other Western markets, and in many cases plan to do so utilizing U.S.-based CDMOs.

That would appear to suggest more biopharma-related manufacturing in the U.S., and potentially more new drugs for patients.

Shouldn't we expend our energy on nurturing an environment for investment and the creation of new CDMOs in the U.S. to handle the additional work these biopharma organizations are bringing in from overseas assets?

Why would the government impose punitive actions for the act of bolstering drug pipelines?

End On Those Tariffs

GlobalData reminds me not to look too narrowly regarding the premise licensing IP into the U.S. is tariff protected. 

I'm reminded our drug industry and overall healthcare system could indeed get hurt be tariffs. A 20% tariff on Chinese goods and a potential 25% tariff on pharmaceuticals could further increase costs, ultimately leading to higher drug prices, says GlobalData.

That could “disrupt cross-border partnerships and reshape how US companies access Chinese drug candidates.”

Perhaps the real question is whether this is a zero-sum game.

Do potential new drugs emerging from China and taken in by Western biopharma companies disadvantage research and development organizations in the U.S.?

That's a tough argument to make.

More promising drug candidates – from anywhere – developed and manufactured safely at our CDMOs by U.S. sponsors seems quite advantageous to our national reshoring efforts, and I'd submit our entire biotech industry as well.