China's Innovation-Driven Pharmaceuticals: Decoding the Dynamic Pricing Equation for Global Licensing Success

Since the reform of China’s drug review and approval system in 2015, Chinese innovative drugs have undergone unprecedented profound transformation and rapid growth, driven by both innovation momentum and policy dividends, successfully joining the first tier of global pharmaceutical innovation.Currently, the global pharmaceutical industry is accelerating into its “China Moment.”— not only highly favored by capital in the domestic market,Chinese Innovative Drugs MoreLeveraging cost-effectiveness and innovation advantages,On the international stageBecome the focal point of global BD transactions.

To clarify the core pricing challenges of innovative drug assets in this process, a recent event organized byVCBeat, GTJA Capital, and Niukou CapitalCo-hosted by“China Innovative Medical Assets Reception Room” Trading Roundtable · Issue 1, bringing together leading investors, entrepreneurs, and legal experts from the industry to focus on"Capital, Assets, and Rules: Decoding the Dynamic Pricing Equation for Innovative Drug Assets"This topic was explored in depth. The viewpoints from the live broadcast have been edited and summarized for our readers.

According to a research report from China Post Securities, the total value of license-out deals for Chinese innovative drugs in the first half of 2025 has approached $66 billion, surpassing the total value of business development (BD) transactions for the entire year of 2024. Amid this momentum, nearly every biotech company hopes its assets will be favored by multinational corporations (MNCs), thereby achieving leapfrog development. How to secure an ideal valuation for these assets in transactions has become a pressing challenge facing all biotech firms.

Liu Dan stated that the predominant exit strategy in overseas capital markets is not IPO, but rather M&A and asset transactions. Consequently, European and American markets have developed mature psychological price ranges for assets at different R&D stages and with different technological pathways, based on relative value dimensions. From an absolute perspective, biotech companies estimate the potential value of products under their ownership by combining market forecasts from their marketing and sales teams with DCF valuation models, thereby deriving an “absolute” valuation. However, this absolute valuation serves only as a reference; the final transaction price is ultimately determined through negotiation between buyers and sellers.

Yu Qingzhen explained that innovative drugs from U.S. pharmaceutical companies are typically priced in China at 1.5–3 times their U.S. prices, whereas Chinese innovative drugs sold in the U.S. can command prices 10–30 times higher than those in the domestic market. Therefore, when valuing innovative drug assets, two core aspects must be prioritized: first, conduct assessments from the perspectives of multinational corporations (MNCs), buyers, and investors to comprehensively evaluate the project’s global competitiveness and global market rights; second, take into account the competitive tiering and time windows—In large markets, focus only on the top five; in niche segments, focus only on the top two., which means that innovative drug assets must demonstrate First-in-Class and Best-in-Class potential, with their safety, efficacy, and ability to meet clinical needs validated.

Deng Liang pointed out that in recent years, the positioning of Chinese biotech companies has undergone a key shift—becoming a primary source of pipelines for multinational corporations (MNCs), while their pricing systems are rapidly aligning with those of the U.S. market. On one hand, Chinese biotech firms are advancing R&D at a faster pace, with significant data-driven advantages; in some areas, they have even surpassed their U.S. counterparts. On the other hand, an increasing number of Chinese biotech companies are engaging global financial institutions to participate in transaction pricing and term negotiations, thereby advancing collaborations in accordance with global standards. It can thus be foreseen thatThe pricing gap between innovative drug assets in China and their overseas counterparts will narrow significantly.

Liu Tingting stated that early-stage assessments by investment firms and letters of intent have outlined a pricing framework for innovative assets,From the legal perspective, it influences the pricing floor at a granular level.—The integrity of intellectual property rights, the remaining term of patent protection, and any gaps in infringement risk identified in freedom-to-operate (FTO) analyses... Each of these issues can directly lead to a corresponding downward adjustment in the transaction consideration. Furthermore, for cross-border transactions, dynamic variables such as national healthcare reimbursement policies, centralized procurement rules, tariff standards, and the scope of sanctions must be incorporated into discounted cash flow (DCF) valuation models. Through appropriate transaction terms, compliance and policy risks can be translated into controllable valuation fluctuations, thereby fundamentally preventing value destruction of the assets.

Zhang Hong explained that, taking our self-developed products as an example, inHardness of Clinical DataIn this regard, the ARTEMIS platform technology developed by Estrella and its parent company has been applied to Phase I and Phase II clinical trials for different indications, with data showing that it has achieved fully effective therapeutic outcomes.Significant clinical value and efficacy, proven by data, are the cornerstone of pricing.

InHeight of Technical BarriersIn terms of technological differentiation, Estrella’s approach effectively mitigates the risk of cytokine release syndrome, thereby delivering superior safety and efficacy. Rather than engaging in direct competition with existing CAR-T therapies in the same therapeutic arena, we have strategically targeted niche markets such as HIV-associated lymphomas and central nervous system (CNS) lymphomas, successfully addressing areas of significant unmet medical need. Given the high-risk profile of these patient populations and the limitations of current treatment options, Estrella’s products offer unique and scarce therapeutic value, positioning us more favorably in pricing negotiations.

AtBreadth of Market ApplicationsIn this regard, Estrella’s technology can cover a “broader patient population,” including patients who are refractory to existing FDA-approved CD19 CAR-T therapies, as well as high-risk groups such as those with AIDS-related lymphoma and central nervous system (CNS) lymphoma. Meanwhile, Estrella’s proprietary technology enables patients to receive treatment at “community hospitals,” thereby avoiding many of the contraindications associated with conventional CAR-T therapies. This significantly lowers the threshold for treatment, expands the pool of eligible patients, increases the accessibility radius of the therapy, and enhances market penetration, thereby boosting its value.

In summary, the explosive growth of Chinese innovative drug license-out deals in 2025 has not only presented biotech companies with critical decisions regarding bidding strategies and the timing of negotiations and collaborations, but also propelled “asset valuation” to the forefront of industry discourse. According to expert perspectives, the pricing of innovative drug assets has long moved beyond single-model approaches; it is now a comprehensive calculation involving multiple variables, including model-based projections, legal risks, intrinsic asset strength, market dynamics, and the unique advantages of Chinese assets. Only by accurately solving this multivariate equation can biotech firms secure ideal valuations in license-out transactions and achieve leapfrog development.

Amidst a shift in pricing logic, and driven by multiple positive changes in policy, industry, and performance, pricing logic exhibits dynamic characteristics as R&D progresses. From early exploration and preclinical studies to Phase I, II, and III clinical trials, and finally to marketing approval applications, the core value drivers and pricing strategies differ significantly at each stage.

First, early-stage projects, due to limited data, rely more on team experience and industry benchmarking for pricing.

As a partner at GTJA Capital with first-hand experience in drug R&D, Dr. Yu Qingzhen pointed out, “Early-stage investment is about “betting on the founder”, it is essential to assess whether team members have a track record of success or backgrounds in major pharmaceutical companies. Secondly, data should be evaluated by leveraging animal studies to benchmark the candidate against leading drugs with the same target and model, determining whether it addresses the limitations of existing therapies and demonstrates superior safety and efficacy.”

Drawing on practical experience, Zhang Hong from Estrella noted that the decision to divest early-stage projects should align with a company’s cash flow needs. “If a startup urgently requires funding to support R&D, it may opt for a one-time buyout. However, if there is confidence in the technology’s scalability, a long-term collaboration model is often preferred. For instance, our licensing deal from nine years ago involved a modest upfront payment, but the milestone payments and sales royalties over nearly a decade have provided sufficient cash flow to sustain the company’s steady growth.”

Secondly, clinical pricing is data-centric, with asset value increasing geometrically at each stage of advancement.

Deng Liang, a partner at Huagai Capital’s early-stage fund, stated, “If Phase I data demonstrate a favorable safety profile, it will attract the attention of multinational corporations (MNCs). However, pricing should be benchmarked against overseas peers with similar development progress, and the competitive landscape must be assessed. If the lead over competitors is only six months, the premium potential is limited; if the lead extends to two years, there is room to negotiate more favorable terms.”

"Phase II data is the key watershed for pricing,"Upon entering Phase II, the asset premium capacity grows geometrically.“We insist on advancing to Phase II before pursuing licensing, as the efficacy data will be more robust at that stage, thereby strengthening our negotiating leverage with major buyers,” emphasized Zhang Hong.

Finally, for assets nearing the commercialization stage, pricing places greater emphasis on their ability to achieve successful market launch.

Liu Dan from Pivotal (Biwo Investment Capital) stated, “At this stage, it is necessary to assess the commercialization potential of assets in the hands of partners—for example, whether multinational corporations’ (MNCs) channel capabilities can achieve higher peak sales, and how market access policies in different regions (such as medical insurance reimbursement and volume-based procurement) impact revenue sharing.” Liu Tingting from AllBright Law Offices added, “During the New Drug Application (NDA) phase following the completion of clinical trials, key focus should be placed on verifying manufacturing compliance and patent landscape. If the manufacturing system complies with Good Manufacturing Practice (GMP) standards and patent coverage is comprehensive, pricing advantages can be further consolidated.”

In summary, innovative drug assets exhibit distinct pricing logics and core considerations at different stages of research and development. It is important to note that price is not the sole factor for biotech companies when selecting partners; the capabilities and resources of partners are crucial for enhancing clinical success rates and realizing long-term value.More importantly, biotech companies should approach negotiations rationally, avoiding a blind pursuit of short-term high prices. Instead, they should prioritize establishing and maintaining long-term collaborative relationships. This strategy not only advances the development of their product pipelines but also builds trust during negotiations, thereby securing greater room for premium pricing.

Looking further, the pricing of innovative drug assets is not an isolated event; macroeconomic factors such as geopolitical dynamics and secondary market volatility are influencing cross-border transactions and asset valuations through policy transmission and capital flows. Since the beginning of this year, the Hong Kong-listed innovative drug sector has surged by 200%, marking a dramatic shift from freezing point to boiling point.This surge in interest is significantly influencing primary market pricing through capital transmission.

“The transmission cycle from the secondary market to the primary market is approximately 6–12 months,”Projects currently approaching the IPO stage have clearly benefited.“, making fundraising easier and driving valuations even higher, although the trickle-down effect on early-stage projects remains insignificant,” said Liu Dan from Pivotal Capital. Deng Liang from Huagai Medical also observed that “the boom in the secondary market has prompted some companies that had previously shelved their IPO plans to restart the process,”Valuations in the primary market are also beginning to align with overseas benchmarks.”

Gaotejia Investment’s Yu Qingzhen pointed out, “The LP structure in China’s primary market has also changed., there may be certain discrepancies between the valuations of Chinese pharmaceutical companies and overseas valuation systems. Currently, state-owned capital accounts for 70%–80% of limited partners (LPs) in the primary market. Due to the need to align with investment attraction initiatives, the closing cycle for projects has been extended from the original three months to 6–12 months.”

Furthermore, the geopolitical impact is more profound and complex. Attendees generally agreed that while policies such as drug price controls and manufacturing reshoring may indeed trigger market concerns in the short term, China’s innovative pharmaceuticals will retain strong competitiveness in the long run due to their cost and efficiency advantages.

Deng Liang of Huagai Medical analyzed this, stating, “Drug price policies have a greater impact on off-patent drugs and are unlikely to shake the pricing system for innovative drugs. Last year, Novartis and AstraZeneca’s moves to build factories in the United States not only failed to reduce costs but actually increased their manufacturing costs,”This underscores the importance of global asset acquisition, in which Chinese innovative drugs hold a significant position.”

Estrella Zhang Hong cited an article in the February 2025 issue of The Wall Street Journal, pointing out that “Chinese biotech companies are developing new drugs faster and at lower costs, a competitive advantage driven by market forces.”High-quality assets will ultimately hold value."Short-term disruptions from non-market factors cannot alter the long-term positive development trend of China's innovative drug industry."

Amid a complex macroeconomic environment, Liu Tingting from AllBright Law Offices pointed out from a legal perspective that enterprises can leverage legal instruments, such as transaction structure and clause design, to mitigate or reduce policy risks. “First, regarding transaction structure, consider the feasibility of selecting production base locations, technology imports and exports, and outbound direct investment (ODI) filings to avoid substantive administrative barriers to transactions. Second, concerning consideration design, reasonably incorporate milestones such as medical insurance inclusion and policy changes into payment conditions to dynamically adjust pricing. Third, in terms of contractual provisions, account for geopolitical factors within force majeure and termination clauses, clearly defining corresponding risk-sharing mechanisms and subsequent handling arrangements.”

Amidst the global wave of pharmaceutical innovation, China is demonstrating unprecedented vitality and influence. The successful holding of this issue of “China’s Innovative Medical Asset Lounge” not only facilitated rich knowledge exchange and profound insights through the interactive dynamics of “capital, products, and regulations,” but also provided valuable reference and guidance for innovation and development across the entire pharmaceutical industry.

As noted by the distinguished guests, the pricing of innovative drug assets is a dynamic process characterized by the multidimensional interplay of technology, market forces, capital, and legal frameworks. The key to decoding this pricing equation lies in “balancing risk and return, and aligning supply and demand with value.”In the future, as technology continues to advance and the market constantly evolves, the pricing of innovative drug assets will face greater challenges and opportunities. We look forward to hearing more insights from industry experts in our upcoming live discussions, working together to drive the sustained development and progress of the biopharmaceutical sector.