���[Drug] companies in China have refined a shrewd money-saving strategy: engineer novel drugs at a fraction of the cost borne by American firms, then license or sell them to US drugmakers while they are still early in development,” wrote Scott Gottlieb, former commissioner of the US Food and Drug Administration, in a Washington Post opinion article on September 22, 2025.
Analysts note that out-licensing early-stage drugs shifts the risk of later-stage failure to foreign buyers and reflects that R&D data from China is now more accepted overseas.
However, this strategy, dubbed “selling sprouts” in the industry, has been raising questions. In November 2023, Guangdong-based BioTheus sold its anti-lung cancer BNT327 to German company BioNTech for a US$55 million up-front payment and around US$1 billion in milestone and marketing commissions. A year later, BioNTech acquired BioTheus in a share swap valued at US$950 million.
Then, in June, US pharma firm BMS and BioNTech struck a US$11.1 billion deal for the same drug as its core asset, creating a nearly US$9 billion premium.
The case is not an exception. In August 2023, Hengrui Pharma from Jiangsu Province sold its respiratory monoclonal antibody pipeline SHR1905 to US firm One Bio, with an upfront payment of US$25 million. When UK giant GSK acquired One Bio months later, renaming it Aiolos Bio for its core asset AIO-001 (formerly SHR-1905), the deal reached US$1.4 billion.
“Chinese pharma firms seem to profit handsomely from these business development deals, but they often lose out by abandoning their products’ far greater potential value,” said Chu Lei, a research fellow at Healthcare Executive, a Beijing-based online platform that tracks listed pharmaceutical firms, told NewsChina.
One of the reasons is lack of experience. “Many Chinese companies neither fully understand their own pipelines nor study their overseas target markets deeply enough, leaving them at a disadvantage when they negotiate out-licensing deals,” Zhou Shuhua, chief analyst of Citeline, a UK-based pharmaceutical and med-tech think tank, told NewsChina.
But survival pressures play an even bigger role. In 2015, China launched sweeping reforms in the healthcare sector to spur innovation. Policies streamlining the approval process, expanding financing for startups and upgrading quality standards for novel drugs fueled massive R&D investment.
Capital flooded in, especially after Hong Kong established a new stock market board in 2018 to encourage tech startups to raise funds. The Shanghai Stock Exchange launched a similar board called the STAR Market in 2019. Chinese companies can choose to be listed on one or both.
“With the availability of quick money, overlapping pipelines were created, driven by capital flows,” Zhou said.
Take the anticancer PD-1 and PD-L1 inhibitors, for example. In 2021 alone, 150 pharma firms registered more than 600 clinical trials for these medicines, nearly 200 of which reached phase III, according to db.yaozhi.com, which tracks clinical trials.
However, investors soon lost patience. Returns were slow due to public hospitals’ limited access to innovative drugs, which is crucial for steady cash flow, and the glut of similar products. According to the Tianfeng Securities report, pharma companies raised only US$4.2 billion on the primary capital market in 2024, down from the US$16 billion peak in 2021.
An industry insider said that his company spent 2 billion yuan (US$281m) over 11 years on developing a new drug, plus 300 million yuan (US$42.1m) each year for further trials, but annual sales never exceeded 200 million yuan (US$28.1m). With revenue barely covering personnel costs, they had “no option but to depend on external funds,” the insider said.
China’s low operating costs is another advantage. “China has an army of relatively low-paid scientists able to churn out new compounds,” Gottlieb wrote in his September article. Clinical trials in China and Australia are also much cheaper than in the US and Europe, according to Clinical Leader, a USbased clinical trial consultancy. It says that in China’s case, faster recruitment and streamlined regulations also add to its advantages.
In 2023, Chinese pharma firms netted more than 21 billion yuan (US$2.95b) in up-front payments through license-out, nearly doubling revenue raised by IPOs, according to PharmCube that same year.
In 2024, Chinese firms signed 90 overseas licensing deals worth over US$50 billion, Wang Xiaoning, director-general of the Department of Drug Price and Tendering Procurement under the NHSA, said at a July press conference.
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