The first seven months of 2025 saw robust dealmaking in China’s biopharma and healthcare sector, even as global headwinds tempered some activity. Chinese companies emerged as major partners for international pharma, especially through licensing agreements, while domestic financing and mergers showed a mixed picture. A surge in cross-border partnerships marked this period, reflecting China’s transformation into a source of innovation for the global industry. In fact, China’s share of global biotech licensing value soared – in Q1 2025, about 32% of worldwide out-licensing deal value came from China, up from 21% in 2023–24. This dramatic rise underscores how Chinese biotechs are “reshaping the U.S. biopharma landscape”, as one analyst put it. While oncology deals dominated (by volume and value), significant activities spanned other therapeutic areas as well, including metabolic diseases, autoimmune conditions, and to a lesser extent CNS and infectious diseases.

Several factors drove these trends. Western pharma companies, facing looming patent cliffs and pricing pressures, turned to China for fresh pipelines at relatively lower cost. Chinese innovative assets often command smaller upfront payments (around 60–70% lower) and more modest total deal sizes (40–50% less) compared to Western peers. This cost advantage, combined with China’s maturing R&D capabilities and government support, made Chinese biotechs attractive partners. At the same time, China’s biotech sector was coming off a difficult 2022–24 period of funding drought, so many firms welcomed overseas partnership as a lifeline. Taken together, these dynamics produced a flurry of deals in H1 2025, particularly cross-border collaborations, even as pure M&A activity remained cautious due to regulatory and geopolitical uncertainties.

Mergers & Acquisitions (Domestic and Cross-Border)

M&A activity in China’s pharma/biotech sector was steady but relatively subdued compared to the licensing boom. Globally, the year started with optimism as Q1 2025 biopharma M&A value climbed 101% over Q4 2024. Much of that was driven by a few large international acquisitions – for example, Johnson & Johnson’s $14.6 billion purchase of U.S. neuropsychiatric firm Intra-Cellular Therapies in Q1 was a standout CNS deal. However, outside such megadeals, caution soon set in. In China, large-scale acquisitions were limited, partly because companies and investors favoured less risky partnerships. Cross-border M&A involving Chinese targets remained rare, as dealmakers faced policy headwinds (e.g. uncertainties around U.S. trade tariffs and national security reviews) that made outright acquisitions more complex. Instead, both Chinese and foreign players often opted for licensing or joint ventures over takeovers.

Domestic M&A within China’s healthcare sector did see some strategic consolidation, though mostly in the form of bolt-on acquisitions or divestitures of non-core assets. A notable trend was multinational pharma divesting mature product lines in China, acquired by local firms or investment groups. For instance, in late 2024 UCB sold its established neurology and allergy drug portfolio in China (including epilepsy drugs Keppra and Vimpat, and allergy medicine Zyrtec) to a consortium of Chinese and Gulf investors for $680 million. This divestment, which also included a manufacturing plant, exemplified how foreign companies are partnering with local players to commercialise older products amid pricing pressures in China. The trend continued into 2025, with other Western firms leveraging Chinese partners for distribution of vaccines and off-patent brands. Such moves reflect the increasing reimbursement and competitive pressures in China’s market for mature drugs, which have reduced returns on in-house sales efforts.

Meanwhile, outbound acquisitions by Chinese companies overseas remained modest. Official data show that across all industries Chinese enterprises announced ~$19.6 billion of overseas M&A in H1 2025 (up ~79% year-on-year), but healthcare did not feature any blockbuster takeovers in that figure. Chinese pharma-biotech firms mostly focused on minority investments and partnerships abroad rather than buying foreign companies outright. This caution stemmed from both Chinese capital controls and foreign scrutiny. Notably, U.S. regulators and lawmakers have continued to scrutinise deals with China for national security implications. The regulatory climate (e.g. the proposed U.S. “BIOSECURE” legislation restricting certain China ties) introduced extra diligence for cross-border M&A, likely discouraging major acquisitions and steering dealmaking toward licensing agreements instead.

In summary, M&A in early 2025 was characterised by pragmatism. We saw fewer headline-grabbing acquisitions in China’s biopharma space, with companies preferring to trade assets or form alliances rather than attempt risky buyouts. Portfolio optimisation was a theme – global pharmas shed older China businesses to local hands, and Chinese firms concentrated on core innovative areas (often through partnerships). The major growth in deal activity came via collaborations and licensing rather than mergers, as discussed next.

Licensing and Partnership Deals: China as a Global Partner

Licensing and R&D partnerships were the centrepiece of deal activity in China from January to July 2025. In particular, Chinese biotechs struck an unprecedented number of out-licensing deals, granting overseas companies rights to develop and commercialise China-origin drugs. By the end of June, U.S. and other Western drugmakers had signed 14 licensing agreements worth up to $18.3 billion for Chinese assets, a huge leap from just 2 such deals in the same period a year before. This “accelerating pace” of China-to-West deals is reshaping pipelines: roughly one-third of new drug candidates licensed by big pharma in 2024 came from China, and analysts predicted this could rise to 40–50% going forward. In H1 2025 alone, Chinese firms were involved in about 80 outbound licensing deals – an astonishing number – including several record-breaking transactions.

Oncology led the way. Oncology drugs (especially cutting-edge modalities like bispecific antibodies and antibody–drug conjugates) were the hottest commodities in China’s licensing boom. In fact, one executive noted the “hot zone” for deals was “oncology, particularly antibodies and ADCs”, whereas companies outside these areas struggled to find buyers. Major examples underscore this trend:

• Pfizer & 3SBio (May 2025): Pfizer committed up to $6 billion for rights outside China to 3SBio’s cancer immunotherapy SSGJ-707, a PD-1/VEGF bispecific antibody. Importantly, the deal included a record-setting $1.25 billion upfront payment, the largest ever for a Chinese-origin therapy.

• AstraZeneca & CSPC (June 2025): AstraZeneca announced an R&D collaboration with CSPC Pharmaceutical valued at over $5 billion. This deal centred on AI-driven drug discovery – AZ is gaining access to CSPC’s AI platform and a portfolio of preclinical cancer candidates.

• GSK & Hengrui (July 2025): GSK agreed to pay up to $12 billion in a broad alliance with Jiangsu Hengrui, covering around a dozen oncology programmes.

• Verdiva Bio & Sciwind (Jan 2025): Sciwind Biosciences licensed out global rights (ex-Asia) to its GLP-1 analogue ecnoglutide for metabolic disease to U.S.-based Verdiva Bio for $70 million upfront, with milestones exceeding $2.4 billion.

These deals reflect a clear strategic shift: Chinese biopharma is now exporting innovation at scale. A decade ago, Chinese companies mainly licensed in Western drugs; now license-out deals dominate in value. By 2024, nearly half of China’s licensing transactions were outbound. H1 2025 continued that trajectory, with Chinese firms offering up novel drug candidates (often early clinical stage) to global partners hungry for innovation.

Outside oncology, there was also meaningful deal activity in other therapeutic areas, though on a smaller scale. For example, in CNS, China’s role was more limited – no Chinese CNS drug deals approached the scale of oncology agreements. Similarly, infectious disease deals were relatively few, with vaccine collaborations mostly focused on established products.

It’s also notable that many licensing deals now use creative structures such as the “NewCo/JV model,” where a Chinese company spins off a drug asset into a new offshore company with foreign investment. This merges licensing with equity investment and helps bypass certain foreign investment hurdles.

Inbound licensing (foreign → China) also continued, albeit at a cooler pace than outbound deals. Chinese pharmas remain eager to in-license proven global drugs, though the volume has declined from previous peaks.

Venture Funding and Private Financings

Amid the flurry of partnerships, venture funding for Chinese biotechs in early 2025 was mixed. The private financing environment in China remained challenging after the highs of 2020–21. Many startups were cash-starved entering 2025, following a significant downturn in biotech venture investment through 2022–24. That said, the first half of 2025 did see a steady trickle of new financing rounds, and a notable uptick by mid-year.

Monthly data indicate dozens of private financings were completed. For example, in January 2025 alone, 24 privately-held Chinese drug makers raised funds, with 22 deals disclosing a total of about $490 million raised. Activity dipped in February and the spring months, reflecting investor caution, but improved again as summer approached. By July 2025, Chinese biopharmas announced 23 venture funding deals (17 with disclosed amounts), totalling roughly $481 million. This resurgence in July suggests that investor sentiment was warming, likely boosted by the high-profile licensing successes that signalled confidence in the sector’s prospects.

Overall, H1 2025 venture funding remained below peak levels, but there were still significant raises for the most promising companies. Early-stage and innovative platform companies – such as those in AI-driven drug discovery or advanced biologics – attracted the largest rounds. The largest financings during Jan–Jul 2025 were on the order of $50–100 million – for instance, one notable deal in May was a $50 million Series B+ to a biotech aiming to cure hepatitis B. A handful of other startups focusing on cell therapy, novel antibodies, and AI modelling secured similarly sized Series B/C rounds. However, mega-financings ($100M+ raises) were scarce compared to prior years, reflecting a more valuation-conscious climate.

An important trend was the increased role of domestic capital. With many global investors pulling back from Chinese biotech, local RMB-denominated funds and state-backed investors stepped in to fill some of the gap. Shanghai, Beijing, and regional government funds were active in smaller rounds, though these often came with stringent conditions and lower risk tolerance. Company executives noted that raising money became much harder – the “VC gravy train” had “officially ended” – forcing startups to either seek strategic partnerships (hence the licensing rush) or accept tougher terms from state funds. Indeed, many Chinese biotechs “don’t have a choice” but to out-license overseas now, because venture funding alone can no longer sustain the hundreds of early-stage firms launched during the boom years.

It’s worth noting that IPOs remained sluggish in early 2025, so venture investors had few exit opportunities. Only a handful of Chinese biotechs went public in H1 2025 (mainly on Shanghai’s STAR Market or in Hong Kong), and global IPO markets for biotech were also muted. This further contributed to the cautious funding environment. Still, the successful deals and partnerships by top-tier private biotechs in China have started to boost investor confidence again. By mid-2025, there were signs that market sentiment was improving – Hong Kong biotech indices were recovering and private investors were re-engaging, encouraged by the validation that big licensing deals provided. If these trends continue, the second half of 2025 may see more fundraising momentum for quality Chinese biotech ventures.

In summary, venture financing in Jan–Jul 2025 was cautious but not closed. A decent number of companies managed to raise capital, albeit at generally lower valuations and volumes than a few years ago. Crucially, the surge in strategic dealmaking provided an alternative funding pathway – via upfront payments from partners – for many biotechs, partially offsetting the VC slowdown. This rebalancing from pure venture funding to partnership-driven funding is likely to persist as the biotech ecosystem in China matures.

Regulatory and Policy Developments Impacting Deals

The deal landscape in early 2025 was shaped by several regulatory and policy developments. Both Chinese domestic reforms and international policies influenced how and why deals were done.

China’s Regulatory Reforms: In H1 2025, China rolled out a series of reforms to further encourage innovation and tighten compliance in healthcare. Notably, authorities finalised anti-corruption guidelines for the healthcare industry and anti-monopoly guidelines targeting pharma. The anti-corruption drive (part of a nationwide campaign) had an indirect effect of pushing multinational firms to use third-party distributors or partners, rather than large in-house sales teams – a factor behind the partnerships for vaccine sales, such as Pfizer–Keyuan for Prevnar 13 and GSK–Zhifei for Shingrix. The new anti-monopoly rules signalled closer scrutiny of pharma M&A and pricing practices, which may have made companies more cautious about large mergers and encouraged alternative deal structures like licensing and joint ventures to grow business without tripping antitrust wires. At the same time, draft measures to strengthen data exclusivity for drug clinical trial data were introduced in March 2025. This move to enhance IP protection – for example, preventing rapid generic copying of novel drugs – is expected to bolster the value of innovative drugs in China, thereby incentivising both foreign investment and local development deals. In essence, China’s regulatory evolution in 2025 – towards global alignment on IP and stricter compliance – created a framework that favours innovation-focused partnerships while weeding out unsustainable practices.

Geopolitical Factors: U.S.–China trade and policy tensions also loomed over dealmaking. Early 2025 saw talk of a potential U.S. pharmaceutical import tariff and continued “Made in America” pressure from the Trump administration. This introduced uncertainty in cross-border operations, though importantly licensing deals for R&D-stage drugs were largely insulated (since tariffs apply to goods, not IP). In fact, experts noted that intellectual property collaborations would likely continue unhindered, as they do not fall under tariff measures. However, the mere prospect of trade restrictions meant companies had to factor in supply chain and IP ownership considerations during due diligence. Deal structures increasingly aimed to mitigate these risks – for example, locating joint venture entities in neutral jurisdictions, or ensuring critical API supply can be localised if needed. Additionally, U.S. national security reviews of Chinese investments (and vice versa Chinese reviews of foreign investments) added a layer of compliance checks. While no major biopharma deals were blocked on security grounds in H1 2025, the climate meant that cross-border deals underwent heightened scrutiny and careful structuring. Companies and their advisors proactively addressed issues like data sharing, tech transfer, and governance to avoid regulatory roadblocks.

Government Support and Market Access: On a positive note, China’s pro-innovation policies continued to support deal activity. The Hong Kong Stock Exchange’s listing regime for pre-revenue biotech remained an important avenue for raising capital and validating companies, indirectly facilitating collaborations. Mainland China also maintained programmes to expedite drug reviews and encourage domestic development of novel drugs, which increased the attractiveness of local assets to foreign partners. For instance, China’s share of global drug development had reached nearly 30% by early 2025 – an outcome of years of regulatory reform – meaning many more high-quality drug candidates (especially first-in-class therapies) were emerging from Chinese labs. This growing pipeline of innovation, supported by policy, directly led to more deal opportunities. On the flip side, pricing reforms via the national drug reimbursement list negotiations continued to squeeze margins for older drugs in China, reinforcing the strategy of multinationals to partner or divest those portfolios and reinvest in innovative areas.

In summary, policy developments in 2025 both facilitated and framed the dealmaking boom. China’s internal reforms largely encouraged innovation and disciplined the market, thereby improving the environment for strategic deals on novel drugs while prompting exit of less competitive assets. International policy noise injected some caution, but did not derail the fundamental interest in collaboration – in fact, Western companies and Chinese firms took a pragmatic approach, structuring alliances to navigate any political hurdles. Trade policy risks are now an explicit part of deal risk assessment, yet the mutual benefits of Sino-foreign biopharma partnerships have thus far kept deal flow strong despite the political cross-currents.

Strategic Outlook

The January–July 2025 period underscored China’s rising importance in global biopharma dealmaking. Deal activity was broad-based – spanning M&A, licensing, and venture funding – but the clear standout was the explosion of licensing partnerships connecting Chinese innovation with global markets. Oncology remained the star segment, driving the largest transactions, though other fields like metabolic diseases also gained traction. CNS and infectious disease deals were less prominent but still part of the landscape, with expectations that these areas could see growth as China’s capabilities expand. Regulatory and policy shifts played a dual role, eliminating certain barriers and risks on one hand while requiring more astute deal structuring on the other.

Looking ahead from mid-2025, the trends observed suggest a sustained strategic realignment: multinational pharmas will continue to scout China for high-quality, cost-effective drug candidates to fill their pipelines, and Chinese biotechs will increasingly design their R&D with global partnerships in mind. The result is a more integrated Sino-international biotech ecosystem, where licensing mega-deals, creative joint ventures, and targeted M&A all contribute to growth. In the near term, some volatility may persist – for instance, if macro conditions or policies shift – but the first half of 2025 has demonstrated a resilient momentum. China’s biopharma sector has firmly taken its place on the world stage, and dealmakers on all sides are adjusting their strategies to this new reality. As one industry expert noted, it appears to be “sooner rather than later” that Chinese biotech assets will command even higher value and greater trust globally, given the validation seen in these early-2025 deals. The deals of Jan–Jul 2025 have, in effect, set the tone for an increasingly collaborative and globally connected future in healthcare innovation.

(chinoy.shann@biopharmaapac.com)