As drug giants grow cautious, can Chinese biotech firms still cash in on licensing deals?

Out-licensing deals have overtaken IPOs as the primary lifeline for cash-starved Chinese drug makers, analysts say Record-breaking cross-border deals helped make some formerly loss-making Chinese biotech companies profitable in the first half of the year, but multinational drugmakers are now signalling plans to tighten deal budgets. Analysts said deals with global partners had overtaken initial public offerings and pre-IPO fundraising as the main funding option for cash-starved Chinese biotech firms wanting to advance the discovery, clinical development and regulatory approval of new drugs. Yet questions remained over whether reliance on overseas licensing income was sustainable in the long run. “Chinese biotech assets remain highly cost-effective relative to global peers,” said Cui Cui, head of healthcare research for Asia at Jefferies, adding that if major pharmaceutical companies became more selective about their expenditures to acquire new drugs, “Chinese biotech assets may look even more attractive”. “This is quite sizeable when compared to the IPO proceeds,” said Tony Ren, head of Asia healthcare research at Macquarie Capital.

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