One of America's largest pharmaceutical companies this week said it will partner with a Chinese drugmaker to test some of its experimental drugs and discover new ones, a deal that could mark the next phase of coordination across continents.
Bristol Myers Squibb on Tuesday announced the potential multi-billion dollar partnership with one of China's top drugmakers, Hengrui Pharma. The companies will work together to develop about a dozen drugs, including four that Bristol discovered and will send to China for Hengrui to run the early-stage clinical trials. The pair of companies will also collaborate to discover new drugs.
"It's a huge signal," said Michael Baran, head of private investments at healthcare-focused hedge fund Affinity Asset Advisors and a former partner at Pfizer Ventures. He said U.S. drugmakers have partnered with Chinese companies to develop drugs before, including Amgen's 2019 collaboration with BeOne.
But Bristol's deal is significant because it is more reciprocal, he said. It raises the prospect that more U.S. drugmakers could increasingly carry out early drug development in China as they try to bring treatments to market more quickly, and that Chinese companies could start to become global powerhouses.
The logo of the pharmaceutical company Bristol-Myers Squibb, (BMS) is seen on the facade of the company's Munich headquarters on March 10, 2026 in Munich (Bavaria, Germany).
Mattias Balk | Picture Alliance | Getty Images
Bristol and Hengrui will each contribute assets and will work together on developing new drugs, making China look less like a source of one-off molecules and more like a part of pharma's global research and development operating system, Baran said.
American and European biopharmaceutical companies like Pfizer, Merck and AstraZeneca have been increasingly turning to China to find their next potential blockbusters. A little more than half of large pharmaceutical companies' licensing deals have come from China so far this year, up from 39% all of last year and 5% in 2022, according to data from DealForma, which tracks agreements in the sector.
Up until now, the playbook has mostly been for large drugmakers to license drugs that were discovered and underwent early testing in China, or essentially take experimental drugs out of China. Some U.S. companies like Eli Lilly have partnered with Chinese companies to discover and develop new drugs.
Bristol's deal differs because it sends several experimental medicines to China.
A worker checks the position of a feeding tray in a pharmaceutical manufacturing truck at the Hengrui Biomedical Industrial Park in Lianyungang, East China's Jiangsu province, Dec. 13, 2021.
Cfoto | Future Publishing | Getty Images
Lieven Van der Veken, a senior partner at McKinsey, said Bristol's partnership differs from others in some key ways. It's similar to a deal Hengrui recently inked with GSK that gives the British drugmaker access to some of Hengrui's experimental drugs. But with this agreement, Bristol is acknowledging it has drugs it can develop faster and for less money in China. And it's working together with Hengrui to come up with new ideas.
"More and more companies are looking at this as a global mesh model where you basically say China is not a threat or a separate source of innovation, we've got to tap into it back in and out," said Van der Veken, global leader of QuantumBlack, AI by McKinsey. "You have to be participating. You have to be present. And people have tried to do it with local teams, people have tried to do (venture capital)-based investments. This is just the next level."
Chen Yu, founder and managing partner at crossover fund TCGX, was an early leader in bringing Chinese drugs to the U.S. He said the industry is now at a transformative moment where more of the early work is moving to China, where twice as many drugs can be studied in half the time and at one-third of the cost.
"For the last 25 years, U.S. investors and entrepreneurs have had the luxury of not having to think about anybody else," Yu said. "That's not going to be the future."
By the end of the decade, Yu thinks the notion of conducting early-stage drug discovery in the U.S. may seem as realistic as making the iPhone in the U.S. He sees the early stages of drug development eventually going the way of textile manufacturing, which largely moved to China.
Mid- and late-stage trials will still need to be conducted in the U.S. in order to secure approval from the Food and Drug Administration, he said, but running the initial studies in China could help companies introduce drugs more quickly than they can today.
Some companies are already conducting more of their early work in China. AstraZeneca is carrying out most of its early studies for an experimental cell therapy in the country, said Ruud Dobber, who leads AstraZeneca's biopharmaceuticals business. And he "absolutely" expects the British drugmaker to do more across its pipeline.
People disagree on whether China's rise helps or hurts the U.S. biopharmaceutical industry. Some, like Yu, say making drugs faster and cheaper will help the people who need them. Others, like industry advocacy group the Biotechnology Innovation Organization, argue China's rise could come at the expense of U.S. companies.
One thing they agree on: China is here to stay as a force in drugmaking.
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