16 deals for innovative drugs so far, mostly by US-based companies targeting early stage antibody-based therapeutics within I&I and oncology

Some thoughts on how we got here and where this is headed:

This is a continuation of 2024 (~57 deals) - its now an established playbook for US / EU companies to go to China for cheaper 'me-toos' or 'me-betters'. And while still heavily oncology focused, we're unsurprisingly seeing a lot more I&I / CV-metabolic deals (the hot areas today)

The rationale is:

• US / EU companies can cut early development timelines since Chinese companies can get human POC data much faster
• It alleviates a scarcity / pricing issue for buyers - if something like PD-L1 x VEGF get hot overnight, and there are only a few US players, most will get priced out
• But if several Chinese companies spin up around these hot targets, then buyers looking for a deal now have options and leverage. It allows them to place an early bet without overcommitting limited resources

It is worth noting that deal sizes have ticked up alongside awareness of this strategy + demand / competition for Chinese assets

While this entire trend is fairly new, one thing that has changed over the past few years is the stage of assets in these deals.

Everything is early-stage now. This is the market responding to FDA guidance that China-only data isn't sufficient for regulatory approval

Tyvyt was a poster child for this, where Lilly and Innovent ran the Ph3 ORIENT-11 solely in China, only to be rebuffed by the FDA

The dominant strategy thus quickly shifted from reducing late-stage dev timelines to reducing early-stage ones - which is where we are today

Another trend has been experienced US management teams getting the band back together via a NewCo model, where on day 1 the new US entity will have (a lot) of funding + in-licensed one or more Chinese assets. The Chinese company gets 10-30% ownership of the NewCo to participate in the upside (and establish a proprietary relationship) + standard u/f & milestones

Overall Pharma is sourcing about 1/3 of in-licensed molecules from China (per Stifel), an astonishing rise considering it was basically 0 as of 2019

It is worth repeating that so far most of these deals are for me-too or me-better assets, rather than anything truly first-in-class - but we'll see how that evolves.